BN66 - Round 2 (Court of Appeal)

[Vallah]

TYNWALD, Tinvaal
QUESTION PAPER
Pabyr Feyshtyn
DOUGLAS, 15th March 2011, at 10.30 am
FOR ORAL ANSWER5.
The Hon Member for Onchan (Mr Karran) to ask Her Majesty‟s Attorney General -
With regard to the police raid on the offices of Montpelier Tax Consultants and Trust Company in September 2010 using search warrants that were quashed by the Isle of Man High Court on 11th January 2011, resulting in the entry, search and seizures being declared unlawful -
(i) why the search warrants were declared unlawful and quashed;
(ii) what role was played by his Chambers in the whole process;
(iii) what information, advice were given or representations made by his Chambers in the furtherance of obtaining the search warrants;
(iv) what information, documentation or representation was received from the UK or elsewhere to persuade his Chambers to give such advice or to make such representations;
(v) which Manx legislation had been breached to justify the raid;
(vi) whether the information being sought in the raid was specific and related to named individuals specified on the search warrants or whether it was a „fishing expedition‟; and
(vii) who had personal responsibility in his Chambers for the decision making process that resulted in the defective warrants; and what disciplinary action has been taken against those responsible?
The Tynwald Court Proceedings are broadcast live and the AG said that he would not comment on matters 1 - 6 as they are sub judice and with respect to matter 7 it was his responsibility and he was not aware of any disciplinary proceedings against him. So, it looks like this Question will re-surface at a later date.

As an aside, I had an invitation from the CIOT in the IOM regarding the following:

"This lecture will provide a general overview of search and seizure powers of investigating authorities for domestic and international purpose, with a specific focus on Isle of Man powers." I wonder what prompted this! I think I'll definitely be attending, along with most of the rest of the IOM financial community.....

[Ganymede]

Good or Bad ?

From Montpelier de brief following Court Of Appeal Hearing......

'The Justices in closing made two important comments ':-



1. The parties may need to appear again if the Justices are considering a referral to the European Court.

2. The partes should not expect a quick decision but likely pre Christmas

Wonder what's happened with the JP's to alter that thinking ........

Is it good or bad for us ? My vote is GOOD !!

[OnYourBikeGB]

From Montpelier de brief following Court Of Appeal Hearing......

'The Justices in closing made two important comments ':-



1. The parties may need to appear again if the Justices are considering a referral to the European Court.

2. The partes should not expect a quick decision but likely pre Christmas

Wonder what's happened with the JP's to alter that thinking ........

Is it good or bad for us ? My vote is GOOD !!

Does anyone know how they come to a decision? I presume they work separately to reach their own findings, but is there a stage after that where they discuss between themselves to see if any of them can be swayed by other arguments? Maybe we have a fairly entrenched split. Pure speculation, but I hope it's because you need steel balls to go against the (misled) will of parliament. I vote GOOD too!

[DonkeyRhubarb]

Does anyone know how they come to a decision? I presume they work separately to reach their own findings, but is there a stage after that where they discuss between themselves to see if any of them can be swayed by other arguments? Maybe we have a fairly entrenched split. Pure speculation, but I hope it's because you need steel balls to go against the (misled) will of parliament. I vote GOOD too!

It doesn't help that there are 2 cases.

We don't know if both cases are contributing to the delay or if one has already been decided.

By the way, only PwC's case can be referred to Europe.

[Alan Jones]

Theoreticla Long Shot

The OTS report published last week gave some interesting facts/statistics about IR35.

From recollection is stated that as a result of the intro of IR35 or more correctly after a number of years of living with IR35 the contractor PSC market has settled down to reveal that 90% of contractors who continue through PSC’s ignore IR35 or believe they “pass” the not a “deemed employee” test. With a mere 10% paying the deemed schedule E IR35 tax.

On basis that most contractors who joined schemes such as BN66 were driven away from their PSC’s because of the uncertainty then why NOT settle the current dispute on the following basis.

The weighted average overall tax (tax and NI) paid by contractors (both those passing and failing IR35) operating through a PSC is say 33% (this figure can be calculated much more accurately than my “back of fag packet” calc) i.e. the contractor has an overall net return of 67% after tax/NI/fees etc.

Assuming a contractor’s return through the BN66 scheme was 83% THEN why can’t HMRC accept a tax payment of 83 – 67 = 16% .

Yes there is tax to pay but would you agree to pay this now rather than risk paying a lot more in a few years time.

[Toocan]

Assuming a contractor’s return through the BN66 scheme was 83% THEN why can’t HMRC accept a tax payment of 83 – 67 = 16% .

Yes there is tax to pay but would you agree to pay this now rather than risk paying a lot more in a few years time.

How about because tax is levied by statute, and the statute says that the DTA scheme was legal and above board. HMRC had no entitlement to any extra tax based on their own rules.

I think comparing the OTS report to Judge Parker’s judgement; it can only help our case.

Are you offering to sail this boat down the river Mr Jones? I wonder how much of that 16% you intend to try to grab?

[Tax_shouldnt_be_taxing]

Fag Packets

The OTS report published last week gave some interesting facts/statistics about IR35.

Assuming a contractor’s return through the BN66 scheme was 83% THEN why can’t HMRC accept a tax payment of 83 – 67 = 16% .

Yes there is tax to pay but would you agree to pay this now rather than risk paying a lot more in a few years time.

Alan, welcome back...

At the risk of creating a firestorm on the Forum I will step aside from any reactive rebuttle of what you say. So I have considered your notion as best I can from a "tax agnostic" position.

IR35 as pretty well everyone (other than the last Labour HMT mob) knows is pretty well flawed. So in that case, the possible tax liability is not far off what you suggest. So far, so good. The Scheme (which BTW was not a BN66 scheme since BN66 only made it so retrospectively and I don't want to go over the conundrum of 'what if I go back in time and kill my dad before I was born' story), was not illegal. Parker does not say so. TE63 does not say so. And actually until someone can rule without let or hindrence says otherwise, was legal. So on that basis as Toocan states, Statute applies (or at least it should) versus soft targets such as "aggressive", "artificial" and the like.

So 1 of 3 possibilities arise. It was legal in Statute. It was illegal in Statute or it falls into the soft sand of "artificial".

Now I don't discount your "fag packet figures" idea. After all BN66 appears to have been drafted on the same "Government Health Warning" label. But first let's understand what is the current SOP. BN66 is a nuclear option. IR35 is still law (not sure why) and CN's have been issued demanding tax and interest. The latter I cannot figure out since 5 separate Tax Calculators (inc HMRC's) show a lesser amount with everything considered than the CN's. HMRC take note.

I'm not one to rule out any "settlement" arrangement on any matter. But first there are some minor points to get confirmation on. First is that IR35 is balls. Second is to confirm Self Employment status of scheme users. Third is to recognise that BN66 is flawed and fourth is to give leave of absence to consider where the middle ground is. The latter requires Hector to confirn that the Scheme was legal or not and depending on that the fight continues or not.

So the notion that 16% should be the tax demand is not for me a problem as is. But it's what it is 16% of. Is it a % of legally obtained income and is therefore an HMRC windfall? Is it a % of a drafted figure? Is it a % of an HMRC cockup?

I can see the theory Alan and I for one won't kill the idea as it stands. BUT, the difference you calculate assumes all playing fields are equal. They are not. Until HMRC conceded the folly of their ways and BN66 I don't see how the gap can be closed.

After all and coming back to Toocan, if you do something legal and declare what you do then why should you be hit with a retrospective tax and penalties? It's HMRC that are trying to fudge the issue not us. But I do see the logic (or theory as you say) in squaring the the circle. There is either a win or lose outcome via the Courts or a settlement. Can't see any other avenues. But for the latter to work there are conditions that need to apply as proposed above and that means a BN66 climb down by HMRC. If that notion was viable I doubt we'd be here right now.

In a pure light, if the Scheme was legal then why have an extra tax demand? Surely not on the basis of Public Policy. What of Statute? But also come one and come all to put some reason into the solution. There are 2 phrases that may apply here. "Speak softly and carry a big stick" and "in order to defeat your enemy you must first become their friend". Which applies to you Alan? And for that matter which applies to HMRC or us?

Alan, forgive me, but I don't trust you and don't side with you - nothing personal as such. There's too much history here. But the theory you propose has logic but alas has flaws in it the same as BN66 itself.

If a settlement was ever derived then it would require an HMRC leap of faith I doubt they would take since it first starts with the acceptance that BN66 is wrong and that is what we're fighting.

It's worth reading up on Detante viz a vis the Cuban Missle Crisis though to see what can be done behind the scenes to negate the nuclear option. I finish where I started.

[DonkeyRhubarb]

Sorry but I can't see HMRC ever accepting a partial settlement.

[Tax_shouldnt_be_taxing]

Sorry but I can't see HMRC ever accepting a partial settlement.

DR, agree. But there's either a win-lose to someome or a settlement as the only viable outcome. And with BN66 and the legal challenge, the latter does not seem probable. But that's for HMRC to decide. They can and they could take IR35 into account amongst other factors and come up with a viable figure not withstanding the legality of the scheme.

But thus far they have simply applied the nuclear option and that is wrong. Roll on the CoA ruling.

We could all "spit ball" amounts to pay on any number of conditions. But until the fundamental issue of BN66 is dealt with I doubt anything other than the nuclear option launched by the last Government stands.

All ideas welcome, but I for one don't accept being labelled a tax evader in the press and have BN66 used to denegrade me to a person acting in some subterfuge way. If HMRC want to retract IR35 and renounce BN66 both as balls, then I would be willing to engage in dialgue to come to a settlement. But Statute of what was done comes up the priority tree and HMRC need to accept that they were off duty during this. Then find a solution.

It's all well speculating on a partial settlement, but BN66 does not allow for this. So Alan, yes, the notion has some logic, but BN66 does not support that. The drafters and Ministers who pushed BN66 through pushed the nuclear button not us. If partial settlement was an option it should have been on the table then. If it is in the future then HMRC can redact their position on this in the Courts.

The theory of a settlement sounds fine, but HMRC must redact IR35 and BN66 in some way or another before the option is viable. And as DR says, there's no notion of this happening. And my CN's don't suggest that option.

[Leyther70]

Whilst I agree with everything TSBT said, morals apart I am sure I am not the only one who would welcome a settlement and sooner rather than later, for 10 years this has been a noose around my neck, that represents a 1/4 of my life and to be rid of this now would be a major weight of me and my family, and worth paying something for.

However we are all in this together and I remain fully committed to the cause, if any such offer was forthcoming I would only support it if the majority also did, otherwise we fight on.