Overdrawn Capital Account Scheme (Aston Mae / Glen Mae / Procorre)

[mightyspur]

But you may have to go to the FTTT to argue the amount if the "review" just confirms the assessment.

Would you be willing to go to the FTTT on your own, without an advisor? You'd have nothing to lose, and I believe there are no court costs. The alternative, as I said, would be to use an advisor but that could cost ££££ (or £££££).

Yes, I guess I could go to the FTTT on my own without an advisor, in an effort to keep costs down. My only concern with that is I get caught up in taxation terms or process that I don't fully understand, and I fail to effectively prove my point. It would be quite intimidating as I know nothing about how they work and what is/isn't important. I often have to read the replies from HMRC several times to understand what they are saying, and why they are saying it, but I guess it depends on what happens between now and the outcome of this review and how confident I would be in arguing my case.

It's really getting me down though. I find myself constantly thinking about it. How I basically feel scammed by Procorre and my stupidity for getting involved. How I feel like HMRC are just making massive assumptions in a kind of "one size fits all" approach to their enquiries and not considering the actual facts in my case e.g. How can I possibly owe tax on "income" that I never actually received? The more I think about it, the more upset I get...

[woody1]

If it's any comfort, judges at tribunals are very sympathetic and understanding of taxpayers who represent themselves. They do not allow HMRC and their lawyers to bamboozle people with legal jargon.

If it was me, I would focus on the central fact that you received £X remuneration but HMRC are asking for a disproportionate amount of tax £Y.

[GregRickshaw]

One of the big contributors on here jamesbrown I think wrote a very good piece on representing yourself at tribunals.

[mightyspur]

Had a chat with my advisor, who have said that HMRC have a very strict settlement arrangement based on their understanding of the "scheme". If I try to argue how I should be handled differently, they will simply refuse my settlement offer and I will have to go to tribunal to argue my case. Their interpretation of the Procorre cleanse scheme, is the amount that my company was valued at, is all to settle previous loans received, so the only settlement they are offering is the total valuation, minus 16% in the fees Procorre charged and the rest is considered income and that is what I have to pay the income tax on.

They are ignoring the fact I actually only received circa 14k prior to the acquisition and to top it all off, if I decide to go ahead and pay that, there is still the likelihood they will also come after me for the actual money I did receive in the following years as earn outs payments. So I'll pay tax on income I didn't receive, then have to pay income tax on the actual payments I did receive and have already paid CGT on. Life gets better and better.

[woody1]

Had a chat with my advisor, who have said that HMRC have a very strict settlement arrangement based on their understanding of the "scheme". If I try to argue how I should be handled differently, they will simply refuse my settlement offer and I will have to go to tribunal to argue my case. Their interpretation of the Procorre cleanse scheme, is the amount that my company was valued at, is all to settle previous loans received, so the only settlement they are offering is the total valuation, minus 16% in the fees Procorre charged and the rest is considered income and that is what I have to pay the income tax on.

They are ignoring the fact I actually only received circa 14k prior to the acquisition and to top it all off, if I decide to go ahead and pay that, there is still the likelihood they will also come after me for the actual money I did receive in the following years as earn outs payments. So I'll pay tax on income I didn't receive, then have to pay income tax on the actual payments I did receive and have already paid CGT on. Life gets better and better.

On the face of it, that sounds like a "full and final settlement". Which should mean the end of the matter, and nothing further to pay.

I would query this with the advisor.

[eek]

On the face of it, that sounds like a "full and final settlement". Which should mean the end of the matter, and nothing further to pay.

I would query this with the advisor.

The previous person references the "Procorre cleanse scheme' and it's very possible that all he is talking about is the consequence of that scheme and there are still other Procorre schemes where HMRC believe money is owed.

And you only have to look at Dan Neidle's report on Property 118 (https://taxpolicy.org.uk/2023/09/22/amazing/) to see how 1 bad decision can result in HMRC getting multiple bits of the same cherry.

[interestedparty]

Had a chat with my advisor, who have said that HMRC have a very strict settlement arrangement based on their understanding of the "scheme". If I try to argue how I should be handled differently, they will simply refuse my settlement offer and I will have to go to tribunal to argue my case. Their interpretation of the Procorre cleanse scheme, is the amount that my company was valued at, is all to settle previous loans received, so the only settlement they are offering is the total valuation, minus 16% in the fees Procorre charged and the rest is considered income and that is what I have to pay the income tax on.

They are ignoring the fact I actually only received circa 14k prior to the acquisition and to top it all off, if I decide to go ahead and pay that, there is still the likelihood they will also come after me for the actual money I did receive in the following years as earn outs payments. So I'll pay tax on income I didn't receive, then have to pay income tax on the actual payments I did receive and have already paid CGT on. Life gets better and better.

Hi, can i double-check something with you please? Is it correct that the figure HMRC are assessing you on is the total valuation of the company, as was used used for the purported acquisition, minus the total fees charged to you which I understand was 16%? My understanding was that the acquisition price equated to the overdrawn capital account balance which already represented the net of total fees minus the 16% charges - so if they allow you the fees deduction then this equates to a double deduction as they'd already been deducted?

[woody1]

The previous person references the "Procorre cleanse scheme' and it's very possible that all he is talking about is the consequence of that scheme and there are still other Procorre schemes where HMRC believe money is owed.

And you only have to look at Dan Neidle's report on Property 118 (https://taxpolicy.org.uk/2023/09/22/amazing/) to see how 1 bad decision can result in HMRC getting multiple bits of the same cherry.

Unfortunately, it's a bit Hobson's choice in this case. It's either accept HMRC's settlement offer, or go to tribunal. And the clock is ticking to decide.

[mightyspur]

Hi, can i double-check something with you please? Is it correct that the figure HMRC are assessing you on is the total valuation of the company, as was used used for the purported acquisition, minus the total fees charged to you which I understand was 16%? My understanding was that the acquisition price equated to the overdrawn capital account balance which already represented the net of total fees minus the 16% charges - so if they allow you the fees deduction then this equates to a double deduction as they'd already been deducted?

As you say, HMRC are assuming the acquisition price equates to the overdrawn capital account balance. My advisor told me the settlement they are offering, is the total acquisition price minus 16% in fees, so in my case that is £220k - 16% = £184k as income. The tax illustration they sent in March last year had the full 220k listed as income and taxed calculated off the back of that figure (and my other income received in 2019), but I thought they had perhaps revised that position, as we are now 12 months down the line, but perhaps I misunderstood and your suggestion is correct and it is still on the £220k.

My issue though, is I had only received 14k via the OCA prior to the acquisition. If Procorre had valued my company at 14k then I wouldn't be so frustrated with all this (and alarm bells would have started ringing a little earlier)

[woody1]

As you say, HMRC are assuming the acquisition price equates to the overdrawn capital account balance. My advisor told me the settlement they are offering, is the total acquisition price minus 16% in fees, so in my case that is £220k - 16% = £184k as income. The tax illustration they sent in March last year had the full 220k listed as income and taxed calculated off the back of that figure (and my other income received in 2019), but I thought they had perhaps revised that position, as we are now 12 months down the line, but perhaps I misunderstood and your suggestion is correct and it is still on the £220k.

My issue though, is I had only received 14k via the OCA prior to the acquisition. If Procorre had valued my company at 14k then I wouldn't be so frustrated with all this (and alarm bells would have started ringing a little earlier)

Is that because it's being subjected to the Loan Charge?

One of the bad things about the LC is that all the loans are taxed in a single year, not in the years you received payments, thereby pushing more of the income into the higher rate bands. (I'm guessing you received more than 14k over the years, perhaps the 220k in total?)

If it is the LC, then I'm not sure you've got a lot of choice other than to settle. If you can't come up with the money in one go, you could ask for a payment plan (time to pay).