Recent use of offshore loan schemes - anyone approached HMRC?

[Wombat14]

I would appreciate any thoughts on my own situation, which is similar (albeit slightly worse) to that of Mug27.

In my case I got my first contract in 2012, and signed up to one of these schemes for the same silly reasons. The contract finished in the latter half of 2013 (and I have used my own limited company since then) so I have already filed one tax return for 2012-13, declaring use of the scheme, and will soon be filing a second for 2013-14.

I was a bit uneasy about the whole thing (though not uneasy enough to avoid getting myself into this situation) and have saved the money that I think HRMC will want. I'm tempted to just pay up for both years, which I assume would involve filing a revised return for 2012-13. But part of me thinks I'm handing over a bunch of cash unnecessarily, since I can just wait for an APN and perhaps one day get the money back. Is there any plausible likelihood of getting hit with some sort of legal fee or a penalty (aside from the interest) if I hang on to the cash and wait years for a final conclusion? Am I doubly a fool for not already having settled the matter, or is there nothing to lose by waiting?

[DonkeyRhubarb]

But part of me thinks I'm handing over a bunch of cash unnecessarily, since I can just wait for an APN and perhaps one day get the money back. Is there any plausible likelihood of getting hit with some sort of legal fee or a penalty (aside from the interest) if I hang on to the cash and wait years for a final conclusion?

Was the scheme DOTAS registered and did you put the scheme reference number (SRN) on your tax return?

HMRC can only issue an APN if the scheme was registered and they've opened an enquiry or raised an assessment.

I don't think anyone can answer your question about the likelihood of penalties, although I think there is more of a risk with the post-2011 schemes.

[Wombat14]

Yes, the scheme has a DOTAS number, the SRN was included in my 2012-13 tax return (along with the loan amount) and HMRC have opened an enquiry for that year.

I'm inclined towards paying up for 2012-13 but I'm a bit concerned about penalties, and I can't find any guidance on the HMRC web site. If it's a modest percentage I could live with it, but if they turn round and say "Great, thanks, that will be £x for the unpaid tax/NI and an extra 500% fine on top" it would be problematic.

[DonkeyRhubarb]

Yes, the scheme has a DOTAS number, the SRN was included in my 2012-13 tax return (along with the loan amount) and HMRC have opened an enquiry for that year.

I'm inclined towards paying up for 2012-13 but I'm a bit concerned about penalties, and I can't find any guidance on the HMRC web site. If it's a modest percentage I could live with it, but if they turn round and say "Great, thanks, that will be £x for the unpaid tax/NI and an extra 500% fine on top" it would be problematic.

There is a list of SRNs which (supposedly) may receive APNs here:
https://www.gov.uk/government/upload..._July_2014.pdf

You could approach the office which issued the enquiry saying that you are considering settling and asking for a settlement figure. By coming forward voluntarily, they may settle for tax+interest.

With most of the assessments I've seen, HMRC has treated the loans as "other" or "foreign" income, rather than employment income, and has just charged tax not NI. Some of the post-2011 schemes got around the disguised remuneration legislation by having the users as self-employed (sole traders) rather than employees. In this case HMRC may be more likely to charge additional NI (class 4).

[MrO666]

There is a list of SRNs which (supposedly) may receive APNs here:
https://www.gov.uk/government/upload..._July_2014.pdf

You could approach the office which issued the enquiry saying that you are considering settling and asking for a settlement figure. By coming forward voluntarily, they may settle for tax+interest.

With most of the assessments I've seen, HMRC has treated the loans as "other" or "foreign" income, rather than employment income, and has just charged tax not NI. Some of the post-2011 schemes got around the disguised remuneration legislation by having the users as self-employed (sole traders) rather than employees. In this case HMRC may be more likely to charge additional NI (class 4).

I wonder how HMRC intend to target people who were users of the 'self-employed schemes'. One would assume that there's no mention of anything on the users self-assessment (other than being self employed), so I for one don't really see how HMRC are going to reliably get the information. A random SA enquiry would pick up the income, but once that 12 month general SA enquiry window closes, then I don't see how HMRC would be able to identify those particular users, as there's probably nothing on their self-assessments (DOTAS, employer etc) which would allow them to be identified.

Not saying it's impossible at all, just that I don't see an easy way for HMRC to do this.

[jbryce]

I wonder how HMRC intend to target people who were users of the 'self-employed schemes'. One would assume that there's no mention of anything on the users self-assessment (other than being self employed), so I for one don't really see how HMRC are going to reliably get the information. A random SA enquiry would pick up the income, but once that 12 month general SA enquiry window closes, then I don't see how HMRC would be able to identify those particular users, as there's probably nothing on their self-assessments (DOTAS, employer etc) which would allow them to be identified.

Not saying it's impossible at all, just that I don't see an easy way for HMRC to do this.

Do they care? Those schemes died pretty quickly. HMRC have killed of contractor schemes, dead, and got a pretty large boost to HMG coffers.

It might have been painful - but this will have ensured that new schemes will be unavailable for contractors and remain the preserve of the rich.

[ASB]

HM Revenue & Customs: Understanding penalties - agents and advisers this might help a little on potential penalties.

[Wombat14]

Thank you all for your thoughts; much appreciated! I shall do some more research and have a ponder on what to do next.

[jbryce]

Yes, the scheme has a DOTAS number, the SRN was included in my 2012-13 tax return (along with the loan amount) and HMRC have opened an enquiry for that year.

I'm inclined towards paying up for 2012-13 but I'm a bit concerned about penalties, and I can't find any guidance on the HMRC web site. If it's a modest percentage I could live with it, but if they turn round and say "Great, thanks, that will be £x for the unpaid tax/NI and an extra 500% fine on top" it would be problematic.

...they may follow the spirit of the EBT settlement offer where they do state that penalties would only be applied in extreme cases and that NI will not form part of the calculation.
HMRC have waged a war against EBTs as a means of altering people's attitudes to avoidance. FNs, APNs etc. are pretty scary weapons.....

[DonkeyRhubarb]

Post-2011 settlement

HM Revenue & Customs: Settlement opportunity: tax on contractor loans

"Enquiries for different arrangements

If you receive an enquiry notice relating to a different arrangement you've used after the tax year ending 5 April 2011 then you can ask HMRC to discuss paying the tax to resolve these years too. HMRC may not be able to settle on the same basis as the earlier years but this will depend on how you used the arrangements and the law in place at the time."