Loans from EBTs and other Trusts

[pastalista]

As I understood it, although BN66 IS retrospective, hector always (wrongly) protrays it as “clarification”?
I’m sure BN66 thread has a more detailed background/explanation

No, you are quite right. BN66 refers to legislation created in (I believe) 1988. They issued their "clarification" in 2008. The point I was making is that I'm unsure whether Hector needs this to look backwards at the loans. When I was investigated (which was well before 09/12/10) Hector hated the loan schemes including the forex loans.

They kept insisting that PAYE was due on all years where those schemes had been used hence my comment. With mass action against them they may think twice (I was on my own) but I wouldn't be banking on it.

Pastalista

[Emigre]

I guess Hector could claim that it was the intent of Parliament that IR35 be applied to the self-employed as well as to those in limited companies, the actual wording of the legislation being "an honest mistake" m'lud. This allows for a dusting off of the Tardis and another pile of angry innocents.

Then of course they would "look through" the structure, a la Ramsay, and tell us that we aren't self-employed but de facto employed and now owe tax of think of a number, double it, add 55% for Hartnett's expenses fund, don't forget the interest and penalties because you thought you'd get away with it. You should end up with a figure that bears no relation to the law or reality, and the prospect of the residue of life in the Poorhouse. Of course, before that, your own MP as well as those in authority will tell you how sympathetic they are to your cause and do absolutely nothing about the travesty of justice even though they have it within their power to actually resolve it equitably - bring back LJ Denham.

If you managed to follow that through, in your darkest hour you will be invited to serve for Queen and Country as a memebr of HMRC.

[pastalista]

I guess Hector could claim that it was the intent of Parliament that IR35 be applied to the self-employed as well as to those in limited companies, the actual wording of the legislation being "an honest mistake" m'lud. This allows for a dusting off of the Tardis and another pile of angry innocents.

Then of course they would "look through" the structure, a la Ramsay, and tell us that we aren't self-employed but de facto employed and now owe tax of think of a number, double it, add 55% for Hartnett's expenses fund, don't forget the interest and penalties because you thought you'd get away with it. You should end up with a figure that bears no relation to the law or reality, and the prospect of the residue of life in the Poorhouse. Of course, before that, your own MP as well as those in authority will tell you how sympathetic they are to your cause and do absolutely nothing about the travesty of justice even though they have it within their power to actually resolve it equitably - bring back LJ Denham.

If you managed to follow that through, in your darkest hour you will be invited to serve for Queen and Country as a memebr of HMRC.

Actually, you could be onto something there. Hector is boosting the investiagtion arm of the organisation. Maybe we could all apply for the jobs in a "poacher turns gamekeeper" kind of way. After all, we know what we're talking about don't we? We know all the sneeky tricks that the cheating contractor fraternity get up to. And we can be really unsympathetic when we want to be (or at least I can).

Now, do you think Hector would pay to an offshore remuneration trust with a sole trader back end plus a "generous" expense allowance? Oh, and a maybe a car.

Pastalista

[Churchill]

Actually, you could be onto something there. Hector is boosting the investiagtion arm of the organisation. Maybe we could all apply for the jobs in a "poacher turns gamekeeper" kind of way. After all, we know what we're talking about don't we? We know all the sneeky tricks that the cheating contractor fraternity get up to. And we can be really unsympathetic when we want to be (or at least I can).

Now, do you think Hector would pay to an offshore remuneration trust with a sole trader back end plus a "generous" expense allowance? Oh, and a maybe a car.
Pastalista

Don't forget the BiK...

[Emigre]

Actually, you could be onto something there. Hector is boosting the investiagtion arm of the organisation. Maybe we could all apply for the jobs in a "poacher turns gamekeeper" kind of way. After all, we know what we're talking about don't we? We know all the sneeky tricks that the cheating contractor fraternity get up to. And we can be really unsympathetic when we want to be (or at least I can).

Now, do you think Hector would pay to an offshore remuneration trust with a sole trader back end plus a "generous" expense allowance? Oh, and a maybe a car.

Pastalista

HMRC are not averse to playing offshore on their own account when it suits them...

I'm sure that some our fraternity on CUK have also contracted at HMRC whilst on one scheme or another. There's usually an agent between the two parties which would prevent HMRC knowing...



HM Revenue and Customs' deal with offshore property firm 'damages its reputation' | Business

[pastalista]

HMRC are not averse to playing offshore on their own account when it suits them...

I'm sure that some our fraternity on CUK have also contracted at HMRC whilst on one scheme or another. There's usually an agent between the two parties which would prevent HMRC knowing...



HM Revenue and Customs' deal with offshore property firm 'damages its reputation' | Business

If you controlled the investigations, where would you do your deals?

[DonkeyRhubarb]

A bit of advice to anyone under investigation

Learn from the BN66 case.

Don't let HMRC dictate the pace of the investigation. If you do they'll probably drag it out for years.

The longer it goes on, the more revenue will be at stake and the more likely they are to try something underhand.

This case involving Aberdeen Asset Management took many years to even get to 1st tier tax tribunal.
Aberdeen Asset falls foul of tax tribunal over its £7m scheme Tax avoidance scheme falls foul of the tribunal - Herald Scotland | Business | Markets & Economy

As was pointed out by the High court Judge in the BN66 case, there is nothing stopping taxpayers forcing the issue and demanding closure from HMRC.

If you leave HMRC to their own devices they will move at a snail's pace.

Another reason to force their hand is, once legal proceedings have commenced at a tax tribunal, Parliament would not be able to legislate with retrospective effect.

Now, you may think that the current Government wouldn't use retrospection legislation anyway but what if Labour get back in in a few years time and your investigation is still ongoing?

Your scheme promoter probably won't want to force the issue because this could shorten the life of the scheme but this may not be in your best interest.

[pastalista]

Learn from the BN66 case.

Don't let HMRC dictate the pace of the investigation. If you do they'll probably drag it out for years.

The longer it goes on, the more revenue will be at stake and the more likely they are to try something underhand.

This case involving Aberdeen Asset Management took many years to even get to 1st tier tax tribunal.
Aberdeen Asset falls foul of tax tribunal over its £7m scheme Tax avoidance scheme falls foul of the tribunal - Herald Scotland | Business | Markets & Economy

As was pointed out by the High court Judge in the BN66 case, there is nothing stopping taxpayers forcing the issue and demanding closure from HMRC.

If you leave HMRC to their own devices they will move at a snail's pace.

Another reason to force their hand is, once legal proceedings have commenced at a tax tribunal, Parliament would not be able to legislate with retrospective effect.

Now, you may think that the current Government wouldn't use retrospection legislation anyway but what if Labour get back in in a few years time and your investigation is still ongoing?

Your scheme promoter probably won't want to force the issue because this could shorten the life of the scheme but this may not be in your best interest.

I quite agree. Hector is quite happy to drag his feet over these things and the whole change of government thing is quite likely given the cuts that are being made.

The scheme promoters are definitely not going to push the point as they can make considerably more income by not pushing. The "protection" being offered by them is minimal in that they will assess (solely in their opinion) the "likelihood of winning the case" before deciding what action to take. This means that you could be entirely without defence straightaway.

I cannot see that these schemes are viable now. I think that limited is the only way to travel from now on.

Pastalisa

[ChimpMaster]

DR and Pasta

I'm in a confusing position here. The scheme I was with a couple of years ago has had a number of its members investigated, probably as a test case. The scheme company itself is not under investigation, just these members are.

The initial letters (including I think Schedule 36 notices) from HMRC were sent out over 2 years ago, and there has been no progress since.

I have been wondering whether it's best for me to stick my hand up now and accept the HMRC challenge, or just lie low and see what the outcome is.

Given your experience, what would you do in my situation?

[DonkeyRhubarb]

DR and Pasta

I'm in a confusing position here. The scheme I was with a couple of years ago has had a number of its members investigated, probably as a test case. The scheme company itself is not under investigation, just these members are.

The initial letters (including I think Schedule 36 notices) from HMRC were sent out over 2 years ago, and there has been no progress since.

I have been wondering whether it's best for me to stick my hand up now and accept the HMRC challenge, or just lie low and see what the outcome is.

Given your experience, what would you do in my situation?

The problem these days, since the disclosure regime (DOTAS) came in, is it's very hard to determine if HMRC are serious or not because it's virtually automatic that every return gets put under enquiry (Code of Practice 8 - COP8). HMRC are sitting on literally tens of thousands of SA returns where they've opened an enquiry under COP8. Many of these enquiries will go nowhere but don't expect HMRC to be proactive in closing them. I know of people whose returns were put under enquiry 5 years ago and they've heard nothing since !!!

HMRC will prioritise investigations. I don't know what the criteria are but I would hazard a guess that the following will be important factors:

1) The total tax revenue lost through the scheme. Where several promoters have offered the same scheme, as was the case with BN66, they will be looking at the aggregate tax loss. (With BN66 it was of the order of £200M)

2) Is the scheme still operating ie. is it an ongoing problem that needs to be addressed more urgently. Coupled with this they'll be looking at whether its use is escalating ie. increasing numbers of users. (With BN66 there were 2500 users and it was still growing.)

If a scheme ranks high on both these counts then there is greater reason for concern.

You didn't say whether your returns had been put under enquiry (COP8). If not, I'm assuming it was a loan type thingy where the promoter advised you it didn't need to be declared as income ie. no need to include a DOTAS number on your returns. Normally, HMRC only has 12 months from the 31st Jan filing deadline to open a COP8 but my guess is they'll argue they're entitled to use "discovery" to override this in cases where nothing was included on the return.

It's a difficult call to make. My previous post was more concerned with people who had returns under enquiry. If you are not on HMRC's radar at all then this might not apply.