Using a scheme (Non DOTAS) in the last 1-2 years - Help needed to rectify

[StrengthInNumbers]

Because it's irrelevant. They don't need to go that far. The hurdle to prove illegality is higher than that needed for tax avoidance to be proven, so why bother.

Please, please, please, do not assume that because your scheme is legal (and how do you know until a judge says so) it is safe!!

Lost here😳. You are saying we will be punished for legal tax avoidance?

[webberg]

Lost here😳. You are saying we will be punished for legal tax avoidance?

If your "legal" tax avoidance is found not to work - note not illegal, just ineffective - and the result is you have paid less tax than you should have done, then yes.

You will have to pay the tax, interest and perhaps a penalty.

"Legal" tax avoidance is a bit like "abusive" avoidance in that it means nothing. It's a phrase that providers or politicians use because it has the ring of authenticity and integrity but is devoid of any real substance.

Judges have found that some schemes that follow slavishly the letter of the law, do work but only because the legislation creates a theoretical world around certain financial instruments and insurance policies and say that this is the ONLY way to tax the outcomes. Therefore where you meet the theoretical conditions you get the theoretical result, absurd, illogical, unfair or abusive as it may be. (Works both ways this one, look at the Lobler case).

Judges prefer the real world where they can derive facts and apply the PURPOSE of the law. In that world compliance with the letter of the law means little.

Don't rely upon complying with the letter of the law, it's not enough.

[StrengthInNumbers]

Get you point. But in effect if the scheme did not work it was not legal - only we thought it was legal. Final word from judge.

Boyle decision was an example of this if scheme was done as written ( forex existed and brought/sold in open market at market rate ) decision could have been different.

Basically scheme failed as because it was not doing what was on paper.

[StrengthInNumbers]

Or in other example if EBT loans were just piece of paper with no legal withstanding or trustees were not independent etc etc then EBT loan scheme will not work.

[cojak]

I would like to remind people that this is a professional forum. All posters have a right to their opinion in this thread.

[webberg]

Shoddy or missing execution will inevitably make winning a case more difficult as it gives HMRC and easy win BUT that has no bearing on legality.

In the context here, you mean legal as in complying with tax law.

You need to meet tax law (otherwise it is illegal and you're completely sunk) but there is a lot of interpretation involved. It is possible to be completely legal but for a judge to decide that your interpretation is not the best one nor the one that was intended.

So I think you have to define "legal" in this context as:

Meets all the tax law AND the interpretation is better than an HMRC alternative.

I stress again that simply meeting the letter of the law in the EBT/loan scenario is not enough (in my opinion).

It would be worth reviewing the facts of your scheme and seeing what alternative interpretations might be available.

[flamel]

Since the introduction of GAAR one would have to look at the underlying feasibility of any scheme.

In law, think of Lord Denning, who would interpret the law based on equitable principles.

One of which is "equity is as long as the Chancellor's foot"

[flamel]

Lost here😳. You are saying we will be punished for legal tax avoidance?

That is correct.

[StrengthInNumbers]

I partially agree with webberg but no we CANNOT be punished for legal avoidance. Every decision is based on interpretation of law and judge agrees with one interpretation more then the other one basically.

Boyle decision is a case in example. It was legal that forex was being brought and sold. But forex broker was only serving clients of a related company and no trail to prove. And thus judges sided with HMRC. So judges didn't call it but it looked like a sham and failed to work. Similarly if money did not flowed properly or loan agreements were not signed or had no legal implications, they will not hold in EBT case.

But on the other hand if for example loan agreement was proper and gave trustees the power to recall the loans and beneficiary obligation to repay in a set time, courts cannot ignore them. They are valid loans. This is one point why HMRC is struggling with IHT.

We will know in due course but it is definitely not a slam dunk for HMRC and thus giving it a go is definitely worth it against settlement.

[flamel]

....... it is definitely not a slam dunk for HMRC and thus giving it a go is definitely worth it against settlement.

With no incentive to reach a settlement this is the only sensible course of action.