Loans from EBTs and other Trusts

[nick4notax]

I agree ret-tax is not ideal. But every word on the taxation statute has a single aim: to enforce taxation to occur. Over the years, certain behaviors have rightfully been encouraged (saving, retirement funding, investment in certain areas), and this has caused tax law to become complex enough to leave unintended loopholes. For tax law specifically, an exception must be made. If you are in breach of the spirit, if not the letter of the law, you are still in breach. Otherwise tax is effectively lawless (to the tune of £13 trillion). It becomes exactly the "pick 'n mix" scenario you describe. Not retrospectively taxing is more a slippery slope to lawlessness than vice-versa.

Sorry, but I find that logic quite staggering. Retro-tax is never acceptable when it is to the detriment of citizens. You are right; it is not ideal. I would say it is an abuse of power; no one in their right mind would ever elect any party to government when they support and promise to practice the habit of back-dating the applicability of it's new laws, regardless of how many individually ruinous outcomes it may cause. We cannot be judged on the spirit of the law! That very subjectivity is precisely why laws require accurate and specific content. Views on their "spirit", especially when spirit appears to contrast with their wording, must simply be that; a view. Judgements must be made according to the letter of the law, for all purposes not just tax. Lawlessness and history's numerous anarchistic examples of such all begin with abuses of power and people. After all one of the eight most popular reasons for the fall of Rome concerns crippling taxation

On a more serious note, the law clearly affords us the freedom to structure our affairs so as to reduce the tax liability as far as legally possible. Prior to the '08 law change, our tax structures have yet to be proven wrong and this IS a very important issue. All we have done is follow the law. Please understand we all face ruin and have endured years of this torturous situation when we have done nothing wrong, in the eyes of the pre-'08 law of the land. Surely you cannot support any mechanism which seeks to destroy any citizen so unfairly, for simply seeking to enjoy what legal precedent entitles us to?

Thanks for listening and that will be my last post on this conversation.

[normalbloke]

I agree ret-tax is not ideal. But every word on the taxation statute has a single aim: to enforce taxation to occur. Over the years, certain behaviors have rightfully been encouraged (saving, retirement funding, investment in certain areas), and this has caused tax law to become complex enough to leave unintended loopholes. For tax law specifically, an exception must be made. If you are in breach of the spirit, if not the letter of the law, you are still in breach. Otherwise tax is effectively lawless (to the tune of £13 trillion). It becomes exactly the "pick 'n mix" scenario you describe. Not retrospectively taxing is more a slippery slope to lawlessness than vice-versa.

I paid tax according to the 'taxation statutes' at the time. The actual amount will vary according to the particular statute and a persons particular circumstances. If that's disputed by HMRC, then that's what we have Tribunals and courts for. It's normally called a Justice System. No court or Judge has to-date told me I was breaking any law or any 'spirit of any law' that I followed at the time. Spirit of the law is surely subjective? If not, it would be defined in the law. (It surely depends on your particular political persuasion, moral compass or how hard up the Treasury is).

I did not hide any income and declared it fully. If I had been taken to court and lost at the time then fair enough. I think all of us that entered into the scheme would have accepted that. It's the fact we never got to that stage which is the issue. 8 years down the line the goalposts moved way back. That's not justice in my view. You can say what you like, but I still think I had a right to be judged on the law as it stood at the time. If you don't, then look after yourself in the future, because the British Justice system wont.

[OneUnited]

Come on guys lets not allow one troll to cause this amount of concern.

We have had them in the past and I am sure we will have them in the future, if we ALL don't reply to him he will get tired and go somewhere else.

I see my plea has not been heard.

Replying to him is his only lifeline

[normalbloke]

I see my plea has not been heard.

Replying to him is his only lifeline

Its called trying to educate the ill-informed.

[webberg]

Yes but the law must treat an IT bod on £80k pa the same as a leader of industry on millions. It cannot do this without ret tax. As mentioned, I think it's unfair if you were not given an opportunity to exit your extreme avoidance schemes before the retrospective period began, but my point is, there simply isn't any other way of effectively collecting tax in a complex world than to ret tax. IR35 is designed to deter de-facto employees from being lightly taxed as companies. The principle behind it is sound. I have no axe to grind that I've been paying ltd company tax while others in complex trust or llp schemes have been paying less. Fact is, I'm a service provider with multiple clients. It's justifiable for me to be a ltd. What isn't is to have multiple layers of trusts\llps\holding companies\etc. The latter only has a single purpose - the avoidance of tax and responsibility to society that made your career possible.

This will be my first and last response to the above comment and some others from this poster.

Retrospective taxation is a very dangerous weapon for politicians and every year the Treasury Committee report into the Budget makes it very clear that instances of its use have to be confined to the very worst excesses (loopholes if you like) as otherwise the uncertainty created in the tax system leads to nervousness amongst investors, particularly incoming investment from outside the UK. These days there is also a recognition that tax relief for certain areas can create a tilted playing field within the EU that is likely to be jumped upon with great glee and political embarrassment.

Thus retrospective taxation is generally considered a bad thing for political and economic reasons.

The fault lies with the politicians. Firstly, they have created a massively complicated tax system because their focus is upon short termism and getting elected rather than have a coherent and simple system. Secondly, they have failed to appreciate the medium and long term consequences of knee jerk policy making. IR 35 is a spectacular piece of misjudgement that forced changes in an industry that was settled. The same could be said of film schemes. Thirdly, they have largely failed to uphold their side of the tax covenant. People would pay a "fair" tax if they could trust that it would be spent in a "fair" way. Whilst we all have hobby horses about how money should be spent by the State, most would feel that people trusted to make decisions should be above expenses fiddling and writing law that protects themselves from retrospection. Instead we get a "do as we say" and not a "do as we do" situation. Any wonder they cannot be trusted.

Some fault lies with greedy people, that is undeniable.

Some fault lies with organisations with an agenda that requires headlines at the expense of accuracy. The $13 trillion number is I think from a UN think tank? There is no analysis of whether that figure is after tax has been paid or not. There is no indication that differences in tax and banking systems has been taken into account. There is no analysis of how much of that value is from regimes with mostly effective tax systems (western Europe and what might be called first world countries) and those whose systems are not fit for purpose. (I recall seeing reports that in some countries the taxpaying population is 3% of the total population and that some elected members of that country's parliament report income that is less than their official salary whilst owning vast assets).

To move away from geo politics and the desire for certainty in the economy and make things more personal.

The UK Government made bad law with unintended consequences. It allows some of those consequences to remain (lower contractor rates) and attacks others (lower tax take). That is an inconsistency that is made worse by a dilatory and incompetent approach from the relevant tax authority which looks and feels like retrospection when in fact it's just a failure to do the job they're meant to do.

The position is made worse because the regulatory system allows "IFA's" with limited knowledge and oversight to hold themselves out as "experts" in tax and other areas. More intervention to remove the obvious ringers here would have been better and prevented a lot of today's problems. Only now is it recognized that these people were not fit for purpose. That's too late for many people and an attempt to recover costs and loss via a mis-selling claim is easily avoided by "phoenixing" into a new entity.

So contractors were faced with calls for lower rates by employers, that means lower overheads (tax is one), easier administration etc. Faced with a new system (IR35) and making guesses as to the future, why not go a poorly regulated "expert" who promised low cost, guaranteed results? Would it be reasonable to expect a Government agency, responsible for managing the system, to have acted with more haste and intervention? Instead by sitting on their hands and allowing a problem to grow, HMRC is at least complicit in the problems now being faced.

So retrospection is not and never has been a good idea.

Good and timely management of the rules both in making and applying them is needed and in that the politicians and machinery of Government has let down the contractor community.

I have a lot of sympathy for contractors (and others in similar situations) who can justifiably feel that they are victims here. True retrospection as seen in s58 is adding insult to injury.

[administrator]

Please cojak let stone circle stay. And the appaling lack of moderation, by letting uninformed attacks on us stay, to carry on. And then attacking us when we respond. Admin may think you are a good mod - but no-one else does.

Mate, I know you get a bit twitchy at times but personal attacks on someone who does a hell of a lot to keep this place up and together is not acceptable. I don't expect you to apologise as it took over a year and 50 emails to squeeze one out of you last time - and even then I think you had your fingers crossed when you wrote the email

You may have little respect for the majority of the other inhabitants of this planet but have a bit of respect for the mods on here who suffer enough as it is.

Anyway, ignored your request to let stonecircle stay. I don't see the point in going over all of this again.

[administrator]

I was going to say some of what webberg said but he has already put it better than me. The Gov were aware of these schemes. They could have shut them down at any time or brought in legislation. Then not only do they try and do this but they bring in retrospective tax. Very dangerous. Very poor show. Especially when the more privileged have got away with far more.

[DonkeyRhubarb]

I have some sympathy for HMRC. IR35 wasn't their brainchild. They were just left to deal with the fallout.

Likewise these APNs. Government came up with the idea; HMRC has to do the dirty work of implementing it.

[normalbloke]

I have some sympathy for HMRC. IR35 wasn't their brainchild. They were just left to deal with the fallout.

Likewise these APNs. Government came up with the idea; HMRC has to do the dirty work of implementing it.

Didn't HMRC's legal team come up with BN66/s58 though? For that, they will never be forgiven or have my sympathy.

[eek]

I have some sympathy for HMRC. IR35 wasn't their brainchild. They were just left to deal with the fallout.

Likewise these APNs. Government came up with the idea; HMRC has to do the dirty work of implementing it.

I wouldn't give HMRC any sympathy. S66 and APNs are due to HMRCs inability to do anything at anything like the speed of the rest of the tax avoidance industry. DOTAS was supposed to allow them to identify and close loopholes quickly. 10 years later they are now using APNs to collect money from schemes that should have been stopped within 1 or 2 years of them starting...