2019 tax charge - consultation preparation

[DotasScandal]

It's not just a question of collecting the tax, they want to go after individuals so the message can go out that HMRC are in charge.

It's a campaign of terror, and it's about punishment. It is NOT about tax collection.
It's about sending a message that what is reserved for the 1% WILL REMAIN reserved for the 1% - lest you want to be subjected to literally endless pain.

If you get that, then you'll get why HMRC seems so devoid of any kind of commercial logic.

[webberg]

My opinion (just that, a view arrived at after reading the case and knowing a smidgen about tax), is that the analysis supplied by ILiketax above is probably a better stab at the eventual result than the other views here.

I think the UBS/DB decision is relevant for the reasons given.

It's true that in all these cases the liability fell upon the employer. This is why the new 2019 charge is promised to arrive with provisions allowing the transfer of liability from employer to employee.

Whether that can be achieved or not remains to be seen.

Our information is that the major bucks for HMG on the new charge is corporate EBT's similar to the UBS/DB schemes although perhaps of lesser volume.

As such individual contractors are perhaps collateral damage and hence even more important that some form of exemption is achieved or failing that, a united front on resistance is achieved.

[DonkeyRhubarb]

As such individual contractors are perhaps collateral damage

I'm not so sure about that.

Who else would they need new transfer of liability rules for? Certainly not big corporates.

[flamel]

I'm not so sure about that.

Who else would they need new transfer of liability rules for? Certainly not big corporates.

Probably because of the precedent set in the Murray Group Holdings case, where it's the employer that's liable.

If that remained the case, they wouldn't be able to come after individuals who are still in business. So it's all the contractor's fault and they must be made to pay.

[StrengthInNumbers]

Iliketax and HMRC should also say I like morals

[DotasScandal]

Iliketax and HMRC should also say I like morals

Yes, cause nothing says "moral high ground" like covering-up 10 years of inaptitude and inaction with a smear campaign that would have made Goebbels proud. /sarc

[AtW]

I guess all would have settled if HMRC offered a sensible opportunity. Equate all contractors to PAYE and without interest or IHT and subtract what we paid to scheme providers and it will be huge success.

You can't be serious.

[DotasScandal]

You can't be serious.

That this could be deemed "sensible" by some (in the absence of ANY legal basis indicating that such tax is in any way due) is indicative of how successful HMRC have been with their propaganda.
I think their continued psychological games (designed by Behavioural Insights Ltd, please remember) can make one lose perspective indeed.
E.g: some people erupt in joy when HMRC accepts their rep and their APN gets revised down...when the APN value was completely bogus to start with.
Next we'll be rejoicing that they only stole 90% of all we owned, when they could have gone for 100%.

[Iliketax]

What would be your definition and purpose of an EBT?

Not in terms of contractor umbrellas, but why were they created in the first place?

There is no set definition but it would typically be a discretionary trust set up for the benefit of all, or substantially all, a group's employees and their dependants. But that definition is so wide that it could do anything. There are some tax and Companies Act reasons for narrowing that definition in particular circumstance (e.g. to make is a s86 IHTA trust, an employees' share scheme under the CA or to qualify under s236H TCGA)

One purpose is to own companies for the benefit of all employee. I set up EBT this year to buy a large company (2,000 employees) that had a large number of shareholders around the world. The EBT now owns the company for the benefit of all employees and has no intention of selling. A bit like John Lewis which is owned by an EBT.

Another purpose is to hedge share plan awards. Until 2003 a listed company could not hold its own shares in treasury. So an EBT was set up to buy shares so that the company could hedge its liabilities under its share plans. This would mean an outflow of cash to buy those shares but would mean no shareholder dilution. Hedging share plans the right way is important (e.g. from memory Marconi lost a fortune doing it badly).

To warehouse shares. Before 2013 a private company could not hold its own shares in treasury and so a trust would warehouse 'spare' shares. For example, if a Finance Director left owning 1,000 shares but her replacement was going to get 600 shares then the remaining 400 shares could be held by an EBT. Then these could be awarded to new joiners, people who get promoted, etc.

To create an internal market for shares. So a company with large numbers of employee shareholders might create an EBT to buy and sell shares so as to create a market. So if one month people want to sell 100 shares and others might only want to buy 80 then the EBT would buy the remainder.

As part of a tax advantaged share plan. Share Incentive Plans that receive favourable tax treatment must use a special type of EBT (as did the old approved profit sharing scheme before that).

To help manage the sale of shares in the market. So employees of a small, thinly traded, listed company might want to sell £100,000 but the market might only be able to take £10,000 of shares a day and so the EBT might buy the shares that cannot be sold. These shares would typically be used to satisfy future awards.

Another example is to provide pension benefits (e.g. FURBS and EFRBS) on retirement. I would say that only some of these are commercially intended to provide pensions benefits but that the majority of EFRBS have been mass-marketed to provide loans.

Medical insurance trusts. Companies can buy medical insurance for their employees from a third party (like BUPA) but they can also set up an EBT to do this. Some companies also had provident funds to provide benefits to employees.

Deferred compensation. Some trusts allow the payment of bonuses to be deferred in where the employees don't really trust the company to pay them in the future (e.g. on a takeover where you have no idea what the new owners will think of the bonus plan).

[webberg]

I'm not so sure about that.

Who else would they need new transfer of liability rules for? Certainly not big corporates.

It's because a lot of employees who had the benefit of a large corporate plan to pay their bonus have since left that company and drawn the full bonus with no tax.

HMRC want the ability to go after them rather than their former employer.

Big Corporate and HMRC working in harmony because if Big Corporate were held liable they will claim that they cannot now do a lot of the tax compliance and admin stuff that HMRC has not the resources for.