BN66 - Round 2 (Court of Appeal)

[Vallah]

I agree. The differences are:
1) more contractors are using Limited Companies than are using offshore arrangements, hence the chances of being fingered are smaller;
2) IR35 is a known and current set of rules, not something which might be invented and applied retrospectively;
3) HMRC's success rate with IR35 cases is tiny;
4) a Limited Company is wholly under one's own control;
5) more and more client-side agencies are refusing to entertain offshore arrangements;
AND
6) the Huitson case revealed that Montpelier's arrangements were already being investigated at the time I joined their scheme and this was concealed from me, hence I no longer trust them (or anyone else!) to act in my best interest.

That's fair enough, but what's to stop people using offshore schemes, and investing the tax savings? Worse case scenario, the Montpelier situation happens again, and you have to repay the tax plus interest. If the money has been invested wisely, there's no problem in paying it back. Best case scenario, the scheme simply gets shut down, and you've then got a nice little nest egg that you can do what you like with.

If it was me I'd be using one scheme until it ceased to be effective, then I'd switch to another. Why aren't people affected by the Montpelier case and BN66 simply registering with another scheme, then putting that tax aside in case the Montpelier appeals fail? Given how longs it's taken to get this far, at least they'd be delaying problems for a few more years. EBT schemes look far more difficult to challenge retrospectively in my opinion anyway.

[Emigre]

I agree. The differences are:
1) more contractors are using Limited Companies than are using offshore arrangements, hence the chances of being fingered are smaller;
2) IR35 is a known and current set of rules, not something which might be invented and applied retrospectively;
3) HMRC's success rate with IR35 cases is tiny;
4) a Limited Company is wholly under one's own control;
5) more and more client-side agencies are refusing to entertain offshore arrangements;
AND
6) the Huitson case revealed that Montpelier's arrangements were already being investigated at the time I joined their scheme and this was concealed from me, hence I no longer trust them (or anyone else!) to act in my best interest.

Certainly I can understand the sentiment arising from the concealment. The problem is that HMRC opened the enquiries and did nothing else. There is no evidence that they asked any questions certainly during the earlier years. In the absence of any real challenge to the arrangements I'm not sure that there should/would have been much obligation by Montpelier to say much.

As for the LtdCo vs offshore debate your points are well made. I'm not sure in MY mind though that there isn't a risk of "retrospection" in IR35 in the sense that if and when an investgation arises HMRC can and will review all contracts going back, in reality, as far as they like to make determinations. Its this uncertainty that sent me looking for what I felt was a more certain solution.

HMRC have brought this mess onto themselves and I feel that BN66 was all about being in denial of the mess they have caused.

[PlaneSailing]

That's fair enough, but what's to stop people using offshore schemes, and investing the tax savings? Worse case scenario, the Montpelier situation happens again, and you have to repay the tax plus interest. If the money has been invested wisely, there's no problem in paying it back. Best case scenario, the scheme simply gets shut down, and you've then got a nice little nest egg that you can do what you like with.

If it was me I'd be using one scheme until it ceased to be effective, then I'd switch to another. Why aren't people affected by the Montpelier case and BN66 simply registering with another scheme, then putting that tax aside in case the Montpelier appeals fail? Given how longs it's taken to get this far, at least they'd be delaying problems for a few more years. EBT schemes look far more difficult to challenge retrospectively in my opinion anyway.

If you asked me 6 months ago, I'd have said 'no chance'. But
I've got to say, the budget this year makes me think I should
pile into an EBT and make as much as possible to pay off any
BN66 alledged debt.

I'm not entirely sure that's what HMRC/HMT had in mind at all.

[Vallah]

If you asked me 6 months ago, I'd have said 'no chance'. But
I've got to say, the budget this year makes me think I should
pile into an EBT and make as much as possible to pay off any
BN66 alledged debt.

I'm not entirely sure that's what HMRC/HMT had in mind at all.

I think everybody on here is duty bound to make life as difficult and as a big a pain in the arse for HMRC as possible.

[PlaneSailing]

Certainly I can understand the sentiment arising from the concealment. The problem is that HMRC opened the enquiries and did nothing else. There is no evidence that they asked any questions certainly during the earlier years. In the absence of any real challenge to the arrangements I'm not sure that there should/would have been much obligation by Montpelier to say much.

As for the LtdCo vs offshore debate your points are well made. I'm not sure in MY mind though that there isn't a risk of "retrospection" in IR35 in the sense that if and when an investgation arises HMRC can and will review all contracts going back, in reality, as far as they like to make determinations. Its this uncertainty that sent me looking for what I felt was a more certain solution.

HMRC have brought this mess onto themselves and I feel that BN66 was all about being in denial of the mess they have caused.

You're not wrong. And the architect of both of these ridiculous
rules is Mr. Timms. After IR35 being sprung as a waste of time he's
tried to save face with BN66.

I hope his God allows him to sleep well at night.

[Emigre]

First there were PSCs where people used ltd cos as they should be used with probably minimal and immaterial abuse where people paid a share of the nation's tax burden. The number of PSCs probably ran into hundreds of thousands.

Then came IR35. Those that clearly fell within IR35 did one of three things, either joined an umbrella, stayed as a ltdco and ran the gauntlet of IR35, or found some other tax planning. Those who weren't sure, due to the subjective nature of IR35 (aka uncertainty) invariably went for other tax planning.

Welcome Montpelier et al. 3,000+ people found DTA schemes paying lower levels of tax. Some found EBTs and loans.

Finally, HMRC wake up and close the DTA schemes to those still involved with the result that many simply hopped straight into the EBT/loan schemes which now have perhaps 10,000 users. When they close those? Come on, I know its Friday, its not that difficult!

So, in the space of one Govt we have gone from everyone paying a reasonable amount of tax to more than 10,000 (just on loans) paying very little. Why? Two reasons, uncertainty in the tax legislation and aggressive tax rates designed to raise funds so that Govt can pay the idle more than their fair share of revenues.

The ossillations in the cycle are getting bigger. The only way of bringing things back into line is to bring back certainty and reduce higher rates of tax to a level that higher rate payers agree is fair. Their assessment of fair will depend on their confidence regarding what the Govt spends the revenues on.

I believe we are all prepared to pay our fair share of tax, that is what we used to do. The problem is that NL have a very different view of "fair" and just like true dictators and despots have enforced their view of fair onto us. Defending oneself is a natural reaction.

[Morlock]

Certainly I can understand the sentiment arising from the concealment. The problem is that HMRC opened the enquiries and did nothing else. There is no evidence that they asked any questions certainly during the earlier years. In the absence of any real challenge to the arrangements I'm not sure that there should/would have been much obligation by Montpelier to say much.

from http://www.bailii.org/ew/cases/EWHC/Admin/2010/97.html...
"HMRC first wrote to the Claimant regarding his use of the tax avoidance scheme on 4 December 2003, but HMRC informed him that it was likely to challenge the validity of the claim only on 16 June 2004."

2006
Me: "Is this scheme currently being investigated by the Inland Revenue?"
Montpelier Representative: "No."

[Emigre]

from http://www.bailii.org/ew/cases/EWHC/Admin/2010/97.html...
"HMRC first wrote to the Claimant regarding his use of the tax avoidance scheme on 4 December 2003, but HMRC informed him that it was likely to challenge the validity of the claim only on 16 June 2004."

2006
Me: "Is this scheme currently being investigated by the Inland Revenue?"
Montpelier Representative: "No."

I'm not sure there's any point in us debating this issue but if I was told on 16 June 2004 that HMRC were likely to challenge the validity of the scheme, and had done nothing to confirm that by 2006, I would assume they had discovered that the law favoured the taxpayer which I believe we now know to be the case as a result of the disclosure of TE63.

[DownButNotOut]

I agree. The differences are:
1) more contractors are using Limited Companies than are using offshore arrangements, hence the chances of being fingered are smaller;
2) IR35 is a known and current set of rules, not something which might be invented and applied retrospectively;
3) HMRC's success rate with IR35 cases is tiny;
4) a Limited Company is wholly under one's own control;
5) more and more client-side agencies are refusing to entertain offshore arrangements;
AND
6) the Huitson case revealed that Montpelier's arrangements were already being investigated at the time I joined their scheme and this was concealed from me, hence I no longer trust them (or anyone else!) to act in my best interest.

my thoughts exactly. I reverted back to a ltd company in July 2008. I feel like my fingers have been well and truly burnt. Whatever the out come of this mess I don't trust anybody else in my financial affairs.

[BarneyCool]

If it does go Pete Tong

Does anybody know if you can you offer your pension pot as settlement/ part settlement or indeed if it is the only asset that you have of any real value will they take it off of you?