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

[contractor46]

Hi all,

I have had a good search of the site and found some similar queries but nothing that truly matches this predicament and wondered if anyone might have any advice prior to me contacting an Accountant/HMRC.

This situation is around my (stupid) use of a "payroll provider" for the years 2013-2014 and 2014-2015 and trying to work out how I can best rectify this situation and try to pay HMRC any taxes owed.

I have not seen any other threads talking about the use of the scheme i will explain and also within these more recent time periods.

I will try to avoid detailing the names of any companies to avoid falling foul of any forum rules but happy to add these on request. The company have reported to me in writing to say that this scheme is not a DOTAS.

The scheme paid me a low salary (within tax free allowance) using PAYE (deducts tax and NI)
The remaining money from the my invoice is used to buy rights to *shares within the company.
The company loan me the money used to buy the shares at a **market rate.
The payroll company buy the shares back from me at the end of the tax year.
A dividend voucher is issued to me that i should submit to HMRC and then pay tax on if it brings my income (salary plus dividend) into the taxable regions.
Capital gains are reported on the dividend voucher and must be submitted via a self assessment but fall within the allowance.


*The payroll company advise that Joint Share Ownership Plans are a perfectly legitimate device and as there is risk involved that the shares may decrease then cannot be seen as tax avoidance.
**The payroll company advise that as long as the loan is loaned at a market rate then it cannot be seen as tax avoidance; anyone can loan anyone money as long as it is market rate.

My situation is that i ignorantly did not know i was entering into such a complex scheme and now having read further I am concerned about APNs, Retrospective tax etc.

I have not completed any self assessments using this company so far (as I only just become aware that I should do so). I know I am late with my 2013-14 one so will bear the brunt of any penalties & interest.

I have immediately ceased using this company and will now switch to a Limited Company but I am unsure what I should do going forward.

I suppose my questions are:
1. Does this scheme sound likely to become marked as a tax avoidance in the future by HMRC (very hard to predict I know).
2. Would I be better off declaring all of the money that I have been paid to HMRC now and paying the requisite tax on it as if it was salary (obviously i lose out on any tax benefits i could have had by using a limited company in the mean time and the fess paid to this payroll company).
3. If the answer is to declare all the money as salary then how do i do this? I have had differing opinions from accounts that I have spoken to so far. Can i just declare it on a self assessment?

I am aware of the Contractor settlement scheme but I believe this is only available for people up to 2011.

Any help that anyone can provide would be greatly appreciate as I am very anxious about this situation. The information I have gathered has all come in the last week since I became aware of my situation.

Thanks

[StrengthInNumbers]

Brought shares at market rate? How? Shares listed ?

[webberg]

Hi all,

I have had a good search of the site and found some similar queries but nothing that truly matches this predicament and wondered if anyone might have any advice prior to me contacting an Accountant/HMRC.

This situation is around my (stupid) use of a "payroll provider" for the years 2013-2014 and 2014-2015 and trying to work out how I can best rectify this situation and try to pay HMRC any taxes owed.

I have not seen any other threads talking about the use of the scheme i will explain and also within these more recent time periods.

I will try to avoid detailing the names of any companies to avoid falling foul of any forum rules but happy to add these on request. The company have reported to me in writing to say that this scheme is not a DOTAS.

The scheme paid me a low salary (within tax free allowance) using PAYE (deducts tax and NI)
The remaining money from the my invoice is used to buy rights to *shares within the company.
The company loan me the money used to buy the shares at a **market rate.
The payroll company buy the shares back from me at the end of the tax year.
A dividend voucher is issued to me that i should submit to HMRC and then pay tax on if it brings my income (salary plus dividend) into the taxable regions.
Capital gains are reported on the dividend voucher and must be submitted via a self assessment but fall within the allowance.


*The payroll company advise that Joint Share Ownership Plans are a perfectly legitimate device and as there is risk involved that the shares may decrease then cannot be seen as tax avoidance.
**The payroll company advise that as long as the loan is loaned at a market rate then it cannot be seen as tax avoidance; anyone can loan anyone money as long as it is market rate.

My situation is that i ignorantly did not know i was entering into such a complex scheme and now having read further I am concerned about APNs, Retrospective tax etc.

I have not completed any self assessments using this company so far (as I only just become aware that I should do so). I know I am late with my 2013-14 one so will bear the brunt of any penalties & interest.

I have immediately ceased using this company and will now switch to a Limited Company but I am unsure what I should do going forward.

I suppose my questions are:
1. Does this scheme sound likely to become marked as a tax avoidance in the future by HMRC (very hard to predict I know).
2. Would I be better off declaring all of the money that I have been paid to HMRC now and paying the requisite tax on it as if it was salary (obviously i lose out on any tax benefits i could have had by using a limited company in the mean time and the fess paid to this payroll company).
3. If the answer is to declare all the money as salary then how do i do this? I have had differing opinions from accounts that I have spoken to so far. Can i just declare it on a self assessment?

I am aware of the Contractor settlement scheme but I believe this is only available for people up to 2011.

Any help that anyone can provide would be greatly appreciate as I am very anxious about this situation. The information I have gathered has all come in the last week since I became aware of my situation.

Thanks

Hello.

It's a common enough scheme and HMRC is well aware that many who operate it argue that it should not be subject to DOTAS.

The key to that is whether the "arrangements" create a tax advantage.

The circuit breaker as advertised by the provider is that the share price can go up/down, the loan is repaid with interest and that there is a risk that the shares will not be able to be sold. All commercial risks and therefore not (to borrow an old phrase from a tax avoidance case) pre ordained series of transactions.

If that indeed is the position, then there's a fair chance DOTAS should not apply. You'll only know once HMRC has spent a year or two going over the contracts.

My personal opinion (having seen something similar) is that the document suite and the reality don't match. There is in reality no real risk involved and as such not only will DOTAS apply but you have probably underpaid your tax. To use a more recent quote, take an unblinkered look at the facts, determine them and apply the law to those facts.

My personal opinion as to the answers are:

1. Yes
2. No. Take the scheme to a professional adviser
3. Yes you can self assess it, but an adviser would be able to find the best method.

The present settlement offer is not available here.

The above is my view. It has been known to be incorrect/challenged/rubbished/agreed with.

Get proper advice, not the man in the pub or the anonymous writer on a forum.

[cojak]

weberg.

Is it a good idea for the OP to get out of the scheme sharpish and put away the money that he saved incase HMRC come knocking in the future?

Or should he speak to an advisor (not associated with said scheme) before he does anything rash?

[cojak]

To contractor46.

Do NOT post details of your scheme provider. These people are desperate to stay in business and they will set their lawyers onto us if you mention their name and possible HMRC enquiries in the same breath.

If HMRC actually do come knocking on your door - post away...

[contractor46]

Brought shares at market rate? How? Shares listed ?

I am told that it is actually the "rights" to the shares that I have bought which is at a market rate.

[StrengthInNumbers]

We're the rights trading in open market?
I am not an expert here and listen to webberg more but what I trying to get you to is that one of the things for your scheme to work will be RISK to exist in real. And for that share rights have to traded in an open market and valued by open market. ( or valued in a proper way)

[contractor46]

Hello.

It's a common enough scheme and HMRC is well aware that many who operate it argue that it should not be subject to DOTAS.

The key to that is whether the "arrangements" create a tax advantage.

The circuit breaker as advertised by the provider is that the share price can go up/down, the loan is repaid with interest and that there is a risk that the shares will not be able to be sold. All commercial risks and therefore not (to borrow an old phrase from a tax avoidance case) pre ordained series of transactions.

If that indeed is the position, then there's a fair chance DOTAS should not apply. You'll only know once HMRC has spent a year or two going over the contracts.

My personal opinion (having seen something similar) is that the document suite and the reality don't match. There is in reality no real risk involved and as such not only will DOTAS apply but you have probably underpaid your tax. To use a more recent quote, take an unblinkered look at the facts, determine them and apply the law to those facts.

My personal opinion as to the answers are:

1. Yes
2. No. Take the scheme to a professional adviser
3. Yes you can self assess it, but an adviser would be able to find the best method.

The present settlement offer is not available here.

The above is my view. It has been known to be incorrect/challenged/rubbished/agreed with.

Get proper advice, not the man in the pub or the anonymous writer on a forum.

Thanks for your reply; i really appreciate the time taken to respond.

I will certainly be sure not to post any names of the scheme on here so as not to cause any unwanted issues.

I have been speaking to accountants about this and many have said they don't feel they understand the Joint Share Ownership scheme or the scheme used by the payroll provider enough to help.
Another accountant who understood the scheme fully said that there is nothing I can do it about it now and I would have to continue to submit a self assessment for the dividend tax and then maybe make a deposit to HMRC for the amount incase of them making a future claim against me.

I actually would feel more comfortable in paying the full tax on the loans received to put an end to this mess now rather than have this worry for the next 6 years (or however long HMRC can pursue it). I just need to find a way to do this. It seems crazy that there is no way to do the "right" thing and pay the money back?!

[StrengthInNumbers]

Like loans to exist in real in EBT loan scheme with real implications of you are unable to pay if loans are recalled.

[webberg]

weberg.

Is it a good idea for the OP to get out of the scheme sharpish and put away the money that he saved incase HMRC come knocking in the future?

Or should he speak to an advisor (not associated with said scheme) before he does anything rash?

Good question.

The scheme has not been proven to require DOTAS disclosure, nor can anybody say at the moment it does not work.

I'm sure that it is probably 90% or 95% executed as required and probably according to the letter of the law "compliant".

That said, these boards are littered with schemes that were "compliant" with the letter of the law and therefore had HMRC "approval" - which was then and remains today a blatant lie. In an environment hostile to tax planning of any kind, created courtesy of HMG/HMRC, these schemes will in my opinion struggle to achieve their aims.

The bar for schemes created after 2011 is a lot higher and you have to say that HMRC are favourites to outlaw them in Court or in law. I fear also that they are a lot more complicated and defending them will be proportionately more expensive. I'm not sure if the providers will be any more sticky than the previous breed and therefore the cost will fall elsewhere.

(I'd exempt the NTRT campaign from that assessment as they are fighting a different principle).

As a personal view I would:

1. Take the details of the scheme to an adviser and get an opinion
2. If that adviser were me, I'd probably say approach HMRC with the details presented in the best possible way
3. Have the adviser have a no names discussion with HMRC on a without prejudice basis
4. Re-assess once HMRC's view is known
5. In the meantime, go for permie/Ltd/umbrella

As I said, my opinion, others are available.

I would say that today the Lib Dems have promised to pay for their latest election promise with a crackdown on tax avoidance. Similar rhetoric is all around us. Smell the coffee?