Pleading the 5th

[webberg]

http://www.financeandtaxtribunals.go...95/TC04320.pdf

The above case is about costs. The costs arise from an earlier decision.

In brief, HMRC alleged negligence which attracted a penalty. The burden of proof for this is on HMRC. They failed to produce any evidence and the case fell apart.

There have been instances in recently (within 12 months) decided film tax scheme cases of HMRC issuing "penalty questionnaires". These say that HMRC needs information to assess whether certain years are able to be assessed and/or whether a penalty is due and if so under what terms.

I think something similar is part of the data asked for under the SO for contractors.

My advice is that HMRC has to prove negligence etc.

Do not therefore offer them evidence of any wrongdoing or carelessness and be careful in how questions are answered.

[jbryce]

http://www.financeandtaxtribunals.go...95/TC04320.pdf

The above case is about costs. The costs arise from an earlier decision.

In brief, HMRC alleged negligence which attracted a penalty. The burden of proof for this is on HMRC. They failed to produce any evidence and the case fell apart.

There have been instances in recently (within 12 months) decided film tax scheme cases of HMRC issuing "penalty questionnaires". These say that HMRC needs information to assess whether certain years are able to be assessed and/or whether a penalty is due and if so under what terms.

I think something similar is part of the data asked for under the SO for contractors.

My advice is that HMRC has to prove negligence etc.

Do not therefore offer them evidence of any wrongdoing or carelessness and be careful in how questions are answered.

So are they trying to line up follow-up penalties?

[StrengthInNumbers]

HMRC knows they might not win against contractor EBT. They will try and get the fear of penalty for more to agree to settle.

[webberg]

HMRC knows they might not win against contractor EBT. They will try and get the fear of penalty for more to agree to settle.

HMRC commonly wave the "high penalty" flag in order to bring pressure to bear.

Some points to bear in mind.

A penalty can be applied ONLY if your BEHAVIOUR is careless, negligent or worse.

A penalty cannot be applied if the scheme you were using is subsequently decided in Court to be ineffective. In that case HMRC has to establish that you should have known that the scheme was ineffective and that you should have advised them accordingly!

The whole thing is counter intuitive in terms of self assessment.

Key here is that HMRC has the burden of proof. You do not have to prove that you were NOT careless etc.

We have seen HMRC try to apply penalties in film schemes that have been struck down. They argue that is was obvious that the scheme was a mass marketed tax avoidance plan and as such taxpayers knew that they were at risk. Perhaps they did. That's still not PROOF that the driving motive behind entering the scheme was avoidance.

The legislation contains some weasel words as well. "Main purpose or one of the main purposes". Aside from the semantic impossibility of having more than one main purpose, there has been no Judge made dicta as to what this means in practice.

If you get anything from HMRC asking to explain your motives or reasons for using a scheme, be very careful in how you answer it.