Settlement Opportunity

[LadyPenelope]

I haven't got the figures with me (I'm at work) but I was paid a salary on which I paid PAYE, NI which would have eaten up some up the 20% allowance.

At a guess:
23000 @ 20% = 4600
40000 @ 40% = 16000
20,600

Interest at say 4% x 6 years = 24%. 24% x 20600 = £4944.

£20600 + £4944 = approx. £25600. Since £25k was the original figure quoted I am not sure where the extra £4.5k has come from. Hmmm...It's a settlement figure so it won't be on gross. Calculations based on gross were part of HMRC's threat in the original letter, if you remember. My guess is that it's IHT since Al Capone mentioned that a friend of his had received a calc with IHT on it.

When I called the HMRC lady she was checking her original figure and had to query it with her manager. This might be the question of whether or not to charge IHT.

Again, please note the calcs are back of a fag packet. I used to be an chartered accountant but changed career. Until I get the paperwork I can't confirm anything. This might give people a few percentages to estimate their bill, which was what I was desperate to do, because until you know that, it is a little hard to know if your finances will really be screwed by all this cr*p or not. I really wish they didn't use 2nd class post.

[Rob79]

I haven't got the figures with me (I'm at work) but I was paid a salary on which I paid PAYE, NI which would have eaten up some up the 20% allowance.

At a guess:
23000 @ 20% = 4600
40000 @ 40% = 16000
20,600

Interest at say 4% x 6 years = 24%. 24% x 20600 = £4944.

£20600 + £4944 = approx. £25600. Since £25k was the original figure quoted I am not sure where the extra £4.5k has come from. Hmmm...It's a settlement figure so it won't be on gross. Calculations based on gross were part of HMRC's threat in the original letter, if you remember. My guess is that it's IHT since Al Capone mentioned that a friend of his had received a calc with IHT on it.

When I called the HMRC lady she was checking her original figure and had to query it with her manager. This might be the question of whether or not to charge IHT.

Again, please note the calcs are back of a fag packet. I used to be an chartered accountant but changed career. Until I get the paperwork I can't confirm anything. This might give people a few percentages to estimate their bill, which was what I was desperate to do, because until you know that, it is a little hard to know if your finances will really be screwed by all this cr*p or not. I really wish they didn't use 2nd class post.

I'd be interested in seeing the calculation.

You are entitled to see the calculation and to challenge it if necessary. Paying tax on a guesswork figure is not recommended.

[LadyPenelope]

I'd be interested in seeing the calculation.

You are entitled to see the calculation and to challenge it if necessary. Paying tax on a guesswork figure is not recommended.

I know, thanks Rob. Hoping the brown envelope turns up tomorrow, and hoping that it will include a breakdown of the calculation. As we all know, they are on shaky legal ground to even ask for the money. Since they are sending it second class I daresay I won't get it until Monday/Tuesday, especially since they are in the North and I'm in the South. Aargh!

[Rob79]

I know, thanks Rob. Hoping the brown envelope turns up tomorrow, and hoping that it will include a breakdown of the calculation. As we all know, they are on shaky legal ground to even ask for the money. Since they are sending it second class I daresay I won't get it until Monday/Tuesday, especially since they are in the North and I'm in the South. Aargh!

I interpret the settlement opportunity as being an exercise in exchanging information and HMRC producing a calculation.

Once you are sure the calculation is accurate and accords with a sensible interpretation of the loans/income as taxable items, the exercise moves into agreeing the amount to pay.

If you do agree an amount to pay, i.e. accept the settlement, then HMRC can demand the money and would be on very solid ground.

Make sure that any discussion on the settlement opportunity is on a "without prejudice" basis as this gives you the right to pull out of discussions even at the very last minute.

I also have it on very good authority (HMRC) that they carefully plan demands etc to arrive on Friday/Saturday.

[LadyPenelope]

I interpret the settlement opportunity as being an exercise in exchanging information and HMRC producing a calculation.

Once you are sure the calculation is accurate and accords with a sensible interpretation of the loans/income as taxable items, the exercise moves into agreeing the amount to pay.

If you do agree an amount to pay, i.e. accept the settlement, then HMRC can demand the money and would be on very solid ground.

Make sure that any discussion on the settlement opportunity is on a "without prejudice" basis as this gives you the right to pull out of discussions even at the very last minute.

I also have it on very good authority (HMRC) that they carefully plan demands etc to arrive on Friday/Saturday.

OK, thanks for the clarification. I have heard about this plan to make sure demands arrive at weekends and indeed the original letter arrived on Saturday. What I don't understand for the life of me is why?

Is it for their benefit, so people don't ring them up until they've had a chance to calm down?

Or is it for the taxpayer's benefit so that they can have additional (i.e. when not at work) time to work out how to make the payment arrangements/decide how to proceed?

Or another reason I haven't thought of?

[Rob79]

OK, thanks for the clarification. I have heard about this plan to make sure demands arrive at weekends and indeed the original letter arrived on Saturday. What I don't understand for the life of me is why?

Is it for their benefit, so people don't ring them up until they've had a chance to calm down?

Or is it for the taxpayer's benefit so that they can have additional (i.e. when not at work) time to work out how to make the payment arrangements/decide how to proceed?

Or another reason I haven't thought of?

It's part of a physiological war to make people feel that their lives are being ruined by dabbling in tax avoidance and wouldn't it be better to just pay the tax and get on with living.

Crude but effective.

[DonkeyRhubarb]

Or another reason I haven't thought of?

Ruin your weekend. Hit you when can't get hold of any professional advisors.

Another favourite time is just before Xmas.

[LadyPenelope]

It's part of a physiological war to make people feel that their lives are being ruined by dabbling in tax avoidance and wouldn't it be better to just pay the tax and get on with living.

Crude but effective.

Ruin your weekend. Hit you when can't get hold of any professional advisors.

Another favourite time is just before Xmas.

Oh. Horrible, horrible people HMRC.

So, tomorrow then. Er, yay!

[jbryce]

It's also suspiciously close to the value it would be if HMRC were treating the amounts paid as net of tax - and grossing them up.

Look back a couple of pages - Rob79 suggested this is what might be happening (and was promptly shot down for saying so).

.....Oh lord. Has anyone asked HMRC this? I'm still waiting for them to get back to me - although they said I could calculate the amount owed as the total amounts gross of tax.
So if I received X in loans I would be paying tax on X.

Given that we are being dragged over the coals, grossing the amounts up would just be 'grossly' unfair.

[Rob79]

http://www.financeandtaxtribunals.go...02/TC04027.pdf

It's worth reading this short (7 pages) case.

Essentially the taxpayer relied upon an accountant who was subsequently found to be very naughty indeed. The accountant was routinely adjusting his clients' income between self employment and companies and over claiming expenses. HMRC raided his premises and he was subsequently barred from being an agent.

HMRC wrote to all clients telling them what happened and inviting them to revisit their tax returns with a view to settling. The taxpayer in the case did not indicate she wanted to settle but subsequently made various adjustments to her return although she was very clear that much of the detail and analysis was beyond her capability of understanding.

The tax and interest was subsequently agreed and paid.

HMRC then wanted penalties for her being careless. She objected on the grounds that she was unaware of the illegal practices of the accountant and that a penalty on her was unfair.

Appeal rejected.

The FTT thought that she should have taken more care to understand her position and in particular ignoring the offer to settle was a key element.

Some parallels with various contractor schemes but more instructive about how HMRC are seeing this sort of situation as a revenue raising activity.