Loans from EBTs and other Trusts

[ASB]

My personal view (ducks for cover) is that I don't have a huge problem with retrospective legislation.

But it needs context. It should, if it is to be implemented, be prospectively retrospective (bit of an oxymoron I know).

By this, if chancellor stood up and said "I put on notice now that any schemes found to be ineffective will be backdated to today" then I am reasonable comfortable.

It is certainly immoral to retrospectively tax by virtue of specific legislation to "clarify" what the law meant. It is doubly so to take that back beyond any announcement of intent (and to be fair on that subject PMG did announce in something like 2008 "back to today").

However, it still doesn't sit entirely comfortably. Natural law suggests certainty of action; for obvious reasons. Actions should be judged by the law at the time. After all the penalty regime for being wrong is part of the equation when one makes the decision.

Where I get a much bigger problem with retrospective legislation is that it completely lets our legislators off the hook. If they can just fix it with a time machine then any incentive to legislate concisely and with clarity has suddenly disappeared.

The problem such as it is only arises because of thier inability to legislate in a sensible manner and to over complicate things in the first places. It is entirely irrational to, in effect, blame Joe Public for their staggering incompetence.

[OnYourBikeGB]

", ret tax is an important tool in the fight against the burgeoning kleptocracy we consider our lawful democracy."



I'm only saying this once more. We broke no laws yet are getting punished. Aye..it's a fine upstanding 'lawful democracy' we live in.

Anyway.... ......

You got to admit though, he / she has got a way with words! In a Dr Seuss nonsensical but rhythmic sort of way.

[DonkeyRhubarb]

You got to admit though, he / she has got a way with words! In a Dr Seuss nonsensical but rhythmic sort of way.

A career in politics awaits him/her.

Or PR for HMRC.

[jolly fellopian]

I accept that the philosophy I propounded requires that the Executive, Judiciary and Administrative branches of Government work together in a way not seen to date. Is that Utopian or looking for improvement?

I agree ret tax should not be used as an excuse to make bad law with gaping holes. Improvement isn't Utopian, correct. But closing every tax loophole very much is. Can never, will never happen.

Retrospection is a breaking of that covenant (and arguably denies the Separation of Powers position that is the very core of democracy).

No, ret-tax is still a law like any other. It is a catch-all for those who engineer extreme methods to avoid paying tax. Schemes where the ONLY conceivable intention was to avoid tax, where no public-good can accrue, eg no personal-savings, pension, encouraging investment in certain industries, etc. As you say, it is only being targeted at the most blatant, egregious cases, hence doesn't grant govt or anyone else new powers over the judiciary. Separation of powers is still very much intact.

[webberg]

I agree ret tax should not be used as an excuse to make bad law with gaping holes. Improvement isn't Utopian, correct. But closing every tax loophole very much is. Can never, will never happen.



No, ret-tax is still a law like any other. It is a catch-all for those who engineer extreme methods to avoid paying tax. Schemes where the ONLY conceivable intention was to avoid tax, where no public-good can accrue, eg no personal-savings, pension, encouraging investment in certain industries, etc. As you say, it is only being targeted at the most blatant, egregious cases, hence doesn't grant govt or anyone else new powers over the judiciary. Separation of powers is still very much intact.

I already know I'm going to regret this.

Retrospection in tax (and other areas) is rightly restricted to situations that are extreme, unusual and where there is a threat to the public good. In some cases the UK Government (and others) has argued that the "public good" includes the protection of its tax base. This has followed taxpayer challenge on retrospection but always in cases where the INTENTION of legislation was clear but the drafting was not.

Taking advantage of poor drafting is perhaps rightly closed down, even retrospectively, in some circumstances.

To a lesser degree the tax law re-write project (1996 to 2010) which had the intention of clarification of intent and purpose and simplification of language, but crucially without changing the meaning of the law, has thrown up a few areas of retrospection. There was a case recently (Shirley v HMRC 2014 UKUT 1023) in which the extent to which a re-written law could or should be interpreted by referring back to the old law.

The case was centred on the taxation of foreign dividends. HMRC ran a calculation that produced a higher tax charge than the taxpayer considered the rules allowed. The judge did think that the rewritten rules did produce a different result from the original but that was a price that had to be paid for simplification even if unintentional.

There was no "public good" defence put up, then or later. Parliament/HMRC made an error and could not use retrospection (in this case going back to the old legislation) to correct it.

Apply this to the contractor world. Legislation existed from say mid 1990's to perhaps 2007 or 08 when we saw the first attempts at limiting "disguised remuneration". (I'm using that phrase in its widest sense and not as the legislation defines it). That legislation was mostly clear in purpose and outcome. Driven by commercial factors many people sought to be within the legislation (legal) whilst reducing their tax bills. That is not illegal, immoral or otherwise unethical. Contractors were not alone in this. Film schemes, financial products schemes, R&D schemes, property schemes, EIS, etc. etc. All of them did the same.

Starting in perhaps the early 2000's HMG/HMRC decided to limit the effect of such schemes. For most of them it took the form of legal challenge and prospective legislation changes. Some legislation changes were effective on the day of announcement. Some took effect even before the legislation existed, but Parliament made clear that ONLY from the date of announcement would the new rules (whatever they were) operate.

Some legislation said "if you did something years ago but payments/relief is due from today, we will tax/allow that position under the new rules, for all payments/relief AFTER this day". Not quite retrospection but close.

For whatever reason contractors seemed to attract retrospective action. I've read the justification for this from HMG and it's not convincing.

I have sympathy for those contractors who feel persecuted because of this singling out. I do think it unfair that a group using international law to escape tax of perhaps a few hundred million - legally - are denied the same opportunities to defend their position as say a film investor. (Film tax relief is a conservative £6bn of tax).

I do regard the situation as unacceptable and a mis-use of retrospection as none of the key criteria for using that seem to be in place.

The position on loan schemes is different. There contractors feel persecuted as a result of HMRC incompetence and lack of resources. That is not retrospection but feels like it. Crucially however if a contractor feels aggrieved, there is a process of appeals.

We can have a philosophical debate on retrospection. You think it inevitable if people "cheat" the system and I think it a weapon of very last resort where serious threats to the public good arise. Using retrospection as a bandaid for poor law arising from a lack of Parliamentary oversight or attention is not what it's for, but what it appears to be used for.

I suggest however that the rest of the readership here are now bored by this and therefore of you want to PM me I will give you an email address.

[BrilloPad]

I dont see how retrospection can ever be correct. It should be outlawed under the Hague convention.

Didn't someone that that retrospective legilation was only legal in 5 countries in the world? Even Zimbabwe bans it?

[helen7]

By this, if chancellor stood up and said "I put on notice now that any schemes found to be ineffective will be backdated to today" then I am reasonable comfortable.
.

Gordon Brown did exactly that in 2006.

[ASB]

Gordon Brown did exactly that in 2006.

I'm far from convinced he did.

I was thinking of a parliamentary speech (or possibly written answer) by Dame Primarolo as paymaster general. I also have 2008 in my mind and I think she wasn't pmg then so it could have been somebody else.

But yes, it was said in effect "if your scheme is found to fail then this will be backdated until today". I don't find that particularly unreasonable. (Though HMRC ability to drag their heels etc is unreasonable, they should owe a duty of care in my view and that doesn't entitle them to open an enquiry and just leave it there for the next decade - the point is moot though since hmrc did change retrospectively).

**If** that is what was actually implemented then users could have made a defensive choice to exit. There are many ways it could have been dealt with in a reasonable manner which would in effect be prospective from announcement and retrospective to that announcement as schemes were picked off. Of course, they didn't actually pick any of those.

My belief is that a lot of the schemes being challenged would indeed succeed if they were tested on the basis of the laws in force at the time. i.e. in effect succeed up until 2008 and fail thereafter.

Whilst I don't necessarily think retrospection is of itself wrong, it is when it predates announcement of intent.

I believe that everybody has the right to be heard based on the applicable law at the time of action.

[webberg]

I'm far from convinced he did.

I was thinking of a parliamentary speech (or possibly written answer) by Dame Primarolo as paymaster general. I also have 2008 in my mind and I think she wasn't pmg then so it could have been somebody else.

But yes, it was said in effect "if your scheme is found to fail then this will be backdated until today". I don't find that particularly unreasonable. (Though HMRC ability to drag their heels etc is unreasonable, they should owe a duty of care in my view and that doesn't entitle them to open an enquiry and just leave it there for the next decade - the point is moot though since hmrc did change retrospectively).

**If** that is what was actually implemented then users could have made a defensive choice to exit. There are many ways it could have been dealt with in a reasonable manner which would in effect be prospective from announcement and retrospective to that announcement as schemes were picked off. Of course, they didn't actually pick any of those.

My belief is that a lot of the schemes being challenged would indeed succeed if they were tested on the basis of the laws in force at the time. i.e. in effect succeed up until 2008 and fail thereafter.

Whilst I don't necessarily think retrospection is of itself wrong, it is when it predates announcement of intent.

I believe that everybody has the right to be heard based on the applicable law at the time of action.

It was Dawn Primarolo when she was in the Treasury. HMRC use the statement a lot on defending their "right" to act against "abusive" schemes. Unfortunately a lot of subjectivity involved that judgement.

[MMSguru]

APNs

Hopefully this is the right thread for this question. Does anyone know why APNs haven't been issued for loan/EBT users?