Settlement Opportunity

[coder]

Professional Help

Hi

I requested a valuation as part of the "settlement opportunity". One thing I'm wondering is that if I decide the value is acceptable, and am willing to settle, then is it worth doing this through a professional representative or should I just settle it myself?

My concern is that if I do settle I want to ensure that is the end of the matter, and using professional help will hopefully ensure this

Thanks

[gettingangry]

Settlement Time

Had a reply from HMRC regarding settlement terms - bit vague but may be helpful to some...

I can assure you that HMRC are committed to helping our customers settle any outstanding liability in respect of their involvement with Contractor Loan Avoidance. If, you are unable to obtain the funds to settle the outstanding duties from a third party then we may agree additional time to pay, however, as mentioned above, the amount of time that we can allow will depend on your individual circumstances and we may need to ask more questions about your financial situation. As a guide we are considering between 30 days and 2 years to settle any outstanding liabilities, in exceptional circumstance we may allow longer.

I don't think 2 years is going to help

[Rob79]

Hi

I requested a valuation as part of the "settlement opportunity". One thing I'm wondering is that if I decide the value is acceptable, and am willing to settle, then is it worth doing this through a professional representative or should I just settle it myself?

My concern is that if I do settle I want to ensure that is the end of the matter, and using professional help will hopefully ensure this

Thanks

Normally a settlement is done under contract. You offer to pay £x in return for liabilities over period "y". HMRC accept the offer and agree that absent any subsequent discovery of fraud or deliberate default, they will seek no further amounts from you.

Whilst a professional adviser would help, they would not get any better guarantee as the above is pretty much standard practice.

[jbryce]

Normally a settlement is done under contract. You offer to pay £x in return for liabilities over period "y". HMRC accept the offer and agree that absent any subsequent discovery of fraud or deliberate default, they will seek no further amounts from you.

Whilst a professional adviser would help, they would not get any better guarantee as the above is pretty much standard practice.

...for the sake of argument - if we ignore the settlement opportunity (tax+interest) and wait for the FN and then subsequent APN (tax) - will HMRC still consider reasonable time to pay arrangements or will they play hard ball?

?

[Rob79]

...for the sake of argument - if we ignore the settlement opportunity (tax+interest) and wait for the FN and then subsequent APN (tax) - will HMRC still consider reasonable time to pay arrangements or will they play hard ball?

?

jbryce, I've PM'd you.

For the benefit of others.

The inspectorate and the collector of taxes operate pretty much independently, however...

If the Inspector makes a recommendation as to payment terms, the Collector listens.

An APN (derived in any way) creates a liability and if there is no Inspector making a recommendation as to payment, the Collector will be directly involved. Time to pay is available under their general terms of business and the secret is to contact them AS SOON AS POSSIBLE if you will need to take advantage of an instalment plan.

DO NOT WAIT until the due date of whatever demand you have.

[v8gaz]

The one thing I am intrigued by is how bankrupting someone who (now) pays a significant tax amount each year, has never taken any benefits from the state, has a contract that is likely to run for a few more years, is earning well now is going to appear to any same person who sanctions the bankruptcy. After the bankruptcy HMRC will get what I have, a small subset of what they want, leave me with no credit so unable to pass credit checks for rent, or get a mortgage, not allow me to work in the finance industry which is where my skills lie and probably make every other industry suspicious of me. I'll have to get socialbecause I have the bankruptcy.

Its not about what makes sense in your individual case - its about the deterrent effect of your head being impaled on the fencepost.

[dezze]

It's the deterrent effect on others not to do the same.

[AlCapone]

Really interesting last couple of posts and they mimic what my accountant said. It's unusual to see payment terms beyond 2 years although he has seen longer in exceptional circumstances. What's exceptional though? Assuming the APN comes in Jan for my EBT I will prob be able to lay my hands on 20-30k by dipping into my company account. My demands total roughly 200k. Problem with dipping into company reserves is that I will of course stray into the higher tax bracket and subsequently have to pay 40% tax on the money I take. I can see quickly that I'm going to be chasing my tail. My assets extend to a jalopy, bicycles and the usual household stuff. I rent. I have maintenance to my ex and kids. Nobody will lend for a tax debt so it's hard to see any point in doing anything other than wait in the vain hope that something will happen in my favour.

If I call HMRC now I can't see that they're going to suggest any different. They can't bankrupt me until the debt is enforced and as their self stated settlement terms max at 2 years I can't see what value the settlement offer is or that it's worth contacting them.

I'm a ticking time bomb. No way out. All I can do is carry on working and gather as much money as possible but knowing it's not likely to be enough to satisfy them so they'll take what I do have and bankrupt me anyway.

The one thing I am intrigued by is how bankrupting someone who (now) pays a significant tax amount each year, has never taken any benefits from the state, has a contract that is likely to run for a few more years, is earning well now is going to appear to any same person who sanctions the bankruptcy. After the bankruptcy HMRC will get what I have, a small subset of what they want, leave me with no credit so unable to pass credit checks for rent, or get a mortgage, not allow me to work in the finance industry which is where my skills lie and probably make every other industry suspicious of me. I'll have to get socialbecause I have the bankruptcy.

Is 200k the actual settlement figure you have received or is that your own estimate?

[meanttobeworking]

Has anyone asked for a settlement figure and received one? I emailed a request (using the form they referenced in their letter - DO3) five weeks ago (the day the letter arrived) but have had no response or acknowledgement to date. I don't know why I'm surprised really...

[Rob79]

I've been asked by some how the "settlement" process works. As such I've prepared some notes on the general process and modified these to account for some of the circumstances here. These I have laid out below.

A word of caution. I do undertake this sort of thing in my day job. My focus is in tax avoidance schemes which do not usually involve contractors. It is entirely possible that the process HMRC wish to follow may vary from that I've seen and dealt with elsewhere.

Further disclaimer. I am not looking for work. I cannot afford to spend a lot of time organizing a group who may wish to settle nor in the inevitable calculation of liability and negotiation with HMRC, without recompense for time and effort. My day job is keeping very much occupied.

HMRC extend "settlement opportunities" in line with their LSS (Litigation and Settlement Strategy). Usually an offer to settle is made in advance of litigation at the first stage. The terms offered are usually in line with a standard template which says that you get tax relief on the cash you've paid for a scheme but nothing else.

That said, in this case HMRC appear to have no reliable numbers, no template analysis to calculate liability even if they had those numbers and no legal decision backing up an analysis. Their current position is therefore relatively weak.

I have found that in this situation "getting your retaliation in first" is effective. In other words, discuss principles with HMRC such as period, treatment of fees paid, treatment of sums received, treatment of post scheme payments. Then go away and calculate a position based on known information and professional analysis. Present that number to HMRC. The agency is relatively ill informed about contractor schemes, has little hard data and little real idea of technical analysis. Somebody doing this work for them means that they may be inclined to accept parts of the analysis without much more than an arithmetic check.

Ensure that all discussions up to the making of a formal offer are "without prejudice". Do not commit to accepting a figure until you know what it is.

Ensure that "time to pay" arrangements are part of the settlement. To a degree this relies upon individual circumstances but an agreed provision in the settlement is always good to have as the Inspector of HMRC will always trump the Collector of HMRC.

Ensure that the period of the agreement is understood. HMRC is offering settlement for the periods loans were received. Those loans remain outstanding. What happens if and when those loans ware written off or unwound? You do not want to face another tax bill for that, be that income tax or IHT. You need to include unwind in the process.

The process will therefore be to collect your numbers, get a calculation done and speak with HMRC "without prejudice".

Would you get a better deal going via a professional adviser? Probably not. HMRC are obliged to make the same offer to all. Therefore if somebody has paid several tens of thousands for top notch advice and has got a particular analysis agreed, it should be on offer to all.

Would you get a better deal going via a group? Usually it makes little difference. In this instance however where HMRC's position is relatively weak, you might. If as a result of a group settling HMRC now has data and an analysis which they can apply against all those not settling, then they might be inclined to cut a little slack. No guarantee of that and you might instead just get requests for more and more information. As long as you are "without prejudice" you can terminate your involvement in any group settlement discussion (or individual discussion) if you such requests and that should not prejudice you.

There is a deadline on the opportunity. As long as you are in discussion or have at least indicated you'd like to discuss a settlement before that deadline, you will be entitled to its terms.

A group approach does NOT oblige you to accept the terms agreed. The choice of acceptance remains yours.

The downside of groups and settlements is that they tend to go for the lowest common denominator and a settlement may actually be worse than a position arrived at via litigation. Once you have accepted a settlement, you are not entitled to the litigation outcome. That is one of the terms of accepting the "deal".

Be under no illusions here. HMRC DOES NOT NEGOTIATE.

They will arrive at the "right amount of tax" and once there, will not alter their view unless (usually) a judge makes a decision otherwise.

What the "right amount of tax" actually is though is a question of analysis.

Groups normally are organized as having a leading person or small group who collate communications and deal with disseminating results and requests. That group engages the various professionals required and instructs them. It takes feedback from those professionals and keeps the members informed. The steering person/group is NOT responsible for fees to the professionals. Those are the obligations of all. Consequently there is usually a simple constitution setting out the aims of the group, the process, the ways in which the group will operate and terminate. That usually requires a positive action (signing a copy and returning it) and payment of a fee. That fee is used to pay the professionals and meet admin costs. It would be usual for the steering person/group to keep the funds with a third party - normally a solicitor - and pay the professionals only when work is done and invoiced.

Pretty sure that the internet has a template available.

If you join a group, pay your fee and disagree with process, progress, result, it is usually the case that your fee in non refundable. That is the risk you take.

As mentioned, the above is dealing with HMRC. You need to think about how to deal with the trust/promoter who might still have some call on the loans. That requires legal analysis. Whilst I think that there are legal advisers acting for settlement groups, that is outside my experience and I have no views as to whether they could be accommodated in the type of arrangement above.

My apologies for the length of this post.