2019 tax charge - consultation preparation

[DotasScandal]

IN terms of booking the APN funds, they're already doing it. They say that because they win 80% of cases, they can book 80% of APN collected.

Wow, is that true?
If so, that's quite amazing, and an outrageous stretch. Is that validated by the legislator, or is it yet another HMRC right that they granted themselves unilaterally?
Considering the charade that this mythical "80%" figure is, that sounds completely unlawful to me.

[regron]

......that sounds completely unlawful to me.

Nothing new there then !!

[StrengthInNumbers]

I was planning to pay APNs and if court decides that we were wrong pay up. But with 2019 change has broken me. I am not going to give up to this bullying.
So no payment to APN, appeals and will go jail or get bankrupt- but will not settle until HMRC offers a fair settlement.

[DonkeyRhubarb]

Example 5 makes it pretty clear how the charge will work.

https://www.gov.uk/government/public...technical-note

Example 5

An employer ‘B’ directly placed £200,000 into an EBT ‘P’ prior to December 2010 in order to remunerate an employee ‘A’. Shortly afterwards P made a loan of £195,000 to A.

If that loan is outstanding on 5 April 2019 the new measure will charge the loan amount of £195,000 to income tax and NICs. The £5,000 not borrowed by A is not subject to the charge but may be caught by Part 7A at a later date.

If A repays the debt to the P before 5 April 2019 there is no charge under the new measure as there is no debt outstanding. However, the £200,000 now held by P may be caught by Part 7A at a later date, for example if it were distributed to A.

There could be an earnings charge on the contribution to P prior to December 2010. More detail is provided in Chapter 6.

[centurian]

Example 5 makes it pretty clear how the charge will work.

https://www.gov.uk/government/public...technical-note

6.The government will take further action in the future if it becomes aware of other avoidance schemes or new schemes that are used to try and circumvent these changes. This could include retrospective action where appropriate.

They're saying it like the whole thing isn't retrospective to begin with - which is probably deliberate.

[webberg]

It's semantics.

The law is not retrospective.

The effect is.

Smoke, mirrors, spin, deceit, dissembling, outright lying to Parliament.

[DonkeyRhubarb]

Yes, it's the same as with APNs.

The charge affects something which happened in the past but the legislation itself is not retrospective.

However, where I think they could be skating on thin ice is if a court (tribunal) was already considering the question of whether the loans were disguised remuneration. They might have to include a "carve out" for such appellants. This is what happened in the 1987 Padmore case, which was the precursor to BN66.

House of Commons General Committee

"The 1987 provision, with regard to section 62 of the Finance Act 1987, seeks to reverse the Padmore case, to which we have referred. It says that the measure is deemed to have an effect except in relation to any judicial decision made before the amending legislation was announced. That is an important carve-out. It benefited not only Mr. Padmore, but a number of other individuals who had entered into arrangements and waited for the conclusion of the judicial proceedings relating to Mr. Padmore. In doing so, they benefited from that carve-out."

[Whysoserious]

Just food for thought... Two contractors (Jack and Victor) used the same scheme, for the same duration and with the exact same sums of money involved.

Jack - Receives an APN and pays it in full. He waits patiently for HMRC to agree to take the case to court to decide on the tax outcome.
5th April 2019 date comes, but no tax charge is imposed on Jack or his employer because he has paid the APN.
5-10 years down the line, the tax scheme is finally heard in court, all the way to the Supreme Court.
The scheme wins, HMRC lose with no right of further appeal.
Jack receives his APN money back with interest. Jack didn't pay the 5th April 2019 tax charge as he had paid the APN at the time.
Jack is happy.

Victor - Receives an APN but refuses to pay. HMRC apply 5%, 10% and finally 15% late payment charge to his APN total.
Still Victor refuses to pay the APN, believing the scheme works and will be proven in a court of law.
5th April 2019 date comes, and Victor receives a tax demand for PAYE & NI on his loan total (assuming the liability has transferred from employer to employee).
Victor now has an APN charge against him (with penalties) and a tax charge against him (new 5th April 2019 proposed legislation).

Questions:
If Victor pays the APN plus penalties on or after 5th April 2019, does the 5th April tax charge disappear?
If Victor pays the tax charge, does the APN plus penalties disappear? (the APN at this point would likely be a higher total than the tax charge)
If Victor pays the tax charge but not the APN. The scheme then wins in court (5-10 years down the line), Victor does not receive any of his money back.
If Victor pays the APN, but not the tax charge. The scheme then wins in court (5-10 years down the line), Victor receives his APN money back with interest, but still has a tax charge against him from 5th April 2019.

Jack in the end is happy.
Victor in the end is screwed.
Both used the same scheme, same duration, same money.

[DonkeyRhubarb]

5th April 2019 date comes, but no tax charge is imposed on Jack or his employer because he has paid the APN.

That is not correct.

Jack will be hit by the 2019 charge but HMRC will use the APN (payment on account) towards it. Jack may have to pay a bit more if the APN is less than the charge (tax+nic).

[Whysoserious]

Ok, understood.

So Jack pays the APN, plus a bit extra (if needed) when the 5th April 2019 tax charge comes in.
5-10 years down the line the schemes win, HMRC loses. Jack receives his APN money back with interest, minus the extra bit (top up) that he paid to HMRC for the tax charge? Jack is still better off if the scheme wins.

If you don't pay the APN, but pay the full tax charge. 5-10 years down the line and the scheme wins in court. You don't receive a penny back.