Settlement Opportunity

[StrengthInNumbers]

Rob u thing NI will apply even with ToAA. loan are income HMRC has so many times already.

[Rob79]

Rob u thing NI will apply even with ToAA. loan are income HMRC has so many times already.

"Earnings" for income tax purposes is defined in tax law. ITEPA stands for "income tax on earnings and pensions act".



"Earnings" for NIC purposes is not the same and although defined in the NIC Acts, it is also subject to a lot of secondary regulation. There is an important case on NIC (McHugh) https://www.supremecourt.uk/decided-...2_Judgment.pdf



In this case, heard at the Supreme Court, payments made to an Unapproved funded retirement benefit fund were claimed by HMRC to be earnings for NIC purposes. They lost. the Court held they were not.



In the context of contractors that leads to a number of points.



1. If the payments by the nominal employer are contributions to a fund, why would they attract NIC at all?

2. Why employers NIC in particular?

3. Why would the NIC analysis change for payments made from the fund?

4. is the underlying assumption that NIC is due, based on law?



Etc. etc.



In addition, the regulations (secondary legislation) under which the practical and administrative side of NIC calculation and collection is governed have to be based in law. The regulations do seem to have a form of priority in determining for NIC, both employers and employees, who should pay. That starts with employers but recognizes that in some cases, there is no employer and therefore goes on to visit the liability elsewhere, usually with the recipient of the funds. That seems to be the basis for HMRC charging NIC on settlements and I'm not convinced that this is correct.



Unfortunately it's complicated and I've not got time to devote to this just now. It's not helped by voices on the Contractor Forum saying that there is definitely no chance of employers NIC being charged to recipients of cash because I think that if the earnings argument fails, there is a very good chance of exactly that happening.

Like I said, if somebody can point me to the piece of law that says "no charge", it would save me some time.

As it is the above represents pretty much where I've got to in my research so far.

[jbryce]

"Earnings" for income tax purposes is defined in tax law. ITEPA stands for "income tax on earnings and pensions act".



"Earnings" for NIC purposes is not the same and although defined in the NIC Acts, it is also subject to a lot of secondary regulation. There is an important case on NIC (McHugh) https://www.supremecourt.uk/decided-...2_Judgment.pdf



In this case, heard at the Supreme Court, payments made to an Unapproved funded retirement benefit fund were claimed by HMRC to be earnings for NIC purposes. They lost. the Court held they were not.



In the context of contractors that leads to a number of points.



1. If the payments by the nominal employer are contributions to a fund, why would they attract NIC at all?

2. Why employers NIC in particular?

3. Why would the NIC analysis change for payments made from the fund?

4. is the underlying assumption that NIC is due, based on law?



Etc. etc.



In addition, the regulations (secondary legislation) under which the practical and administrative side of NIC calculation and collection is governed have to be based in law. The regulations do seem to have a form of priority in determining for NIC, both employers and employees, who should pay. That starts with employers but recognizes that in some cases, there is no employer and therefore goes on to visit the liability elsewhere, usually with the recipient of the funds. That seems to be the basis for HMRC charging NIC on settlements and I'm not convinced that this is correct.



Unfortunately it's complicated and I've not got time to devote to this just now. It's not helped by voices on the Contractor Forum saying that there is definitely no chance of employers NIC being charged to recipients of cash because I think that if the earnings argument fails, there is a very good chance of exactly that happening.

Like I said, if somebody can point me to the piece of law that says "no charge", it would save me some time.

As it is the above represents pretty much where I've got to in my research so far.

....which is quite far.

Can HMRC arbitrarily decide to apply NICs or is that something that would need to be tested in an FTT. The settlement offer makes the point that NICs could be charged if a case was lost at an FTT. That makes sense - but how would they work out the APN value.

Is it just me, or does this all seem very confusing?

[DonkeyRhubarb]

I would expect APN to be tax only. Certainly no interest, and probably no NIC.

[dilemma]

So confused

Hi Guys,

I contracted through Cascade/Penfolds in 2008 for about 8 months. I got a Cop8 letter in 2009 saying I was being audited. I then returned to NZ. I wrote to them about 2010 to ask where it was at and got a reply it was still pending. Then nothing till this settlement letter was sent out in July. I have emailed Cascade a couple of times and they just tell me to ignore it as its a generic fishing letter. BUT I don't know what to do... will an APN end up being a lot more? I was wondering if I should speak to an accountant here but they don't exactly know the UK laws... January is approaching and I'm stuck. I don't have the money so would need to get a loan out or something. Am I better risking it in case I don't get an APN - or do you think it is inevitable?

[MrsB1974]

Hi Dilemma - I'm also in NZ and the time difference is making it difficult to 1) speak to hector to confirm open enquiries, and 2) get into discussions with a tax/accounting firm who could help advise (even just to advise whether hector's calculations for a settlement amount are correct).

Reading this forum I get the feeling that there *may* be a chance hector wouldn't be successful at a tribunal ~ but then the type of people who post on this forum (and I include myself here) are going to be the ones querying the whole settlement thing in the first place and trying to see whether there's a way out. Others will have just gone ahead and settled.

I don't think it's worth engaging with an NZ-based accountant - they won't have the knowledge or relevant experience. Find one in the UK to deal with, if that's what you decide to do.

[MrsB1974]

Is it just me, or does this all seem very confusing?

confused dot com

... which I suspect is all part of hector's strategy to 'encourage' people to settle?!

[MrsB1974]

I would expect APN to be tax only. Certainly no interest, and probably no NIC.

Newbie question, sorry - so anyone who doesn't settle will be served an APN? Unless you're cherry-picked to be taken to tribunal?

Why no interest on the APN? I thought interest was always applied to unpaid/overdue tax, as a deterrent - otherwise we're no worse off than someone who paid their tax in full when it was due?

[AlCapone]

Newbie question, sorry - so anyone who doesn't settle will be served an APN? Unless you're cherry-picked to be taken to tribunal?

Why no interest on the APN? I thought interest was always applied to unpaid/overdue tax, as a deterrent - otherwise we're no worse off than someone who paid their tax in full when it was due?

APNs are new powers that HMRC have been granted to get you to pay tax that is being disputed upfront pending a tribunal. If HMRC go on to win at tribunal THEN you will have to pay any interest due/penalties. If HMRC lose you’ll get the cash back plus interest.

[squirrel]

APNs are new powers that HMRC have been granted to get you to pay tax that is being disputed upfront pending a tribunal. If HMRC go on to win at tribunal THEN you will have to pay any interest due/penalties. If HMRC lose you’ll get the cash back plus interest.

Just to clarify a little, if HMRC lose you MAY get your money back EVENTUALLY ...

The APN in the sticky thread, What an APN looks like, suggests that HMRC will withhold repayment if they lose just in case they want to appeal the decision (apparently, to stop us dishonest, lazy people from spending it). How long has it taken HMRC to get this far? Once they've got our APN money there'll be no rush to take it to tribunal, they can hold on to it for as long as they want...