HMRC settlement Deadlines/delays and the LC

[lowpaidworker]

confused dot com continued

Meant to add I engaged a tax specialist to help settle the EBT. They charged over £3k and fro what I can see just agreed settlement and the tax numbers. Did not actually fight the case... I could have worked out the tax liabilities.

So £3k on top of the tax bill... felt violated

[QCApproved]

Yep they were probably ex HMRC as well - some of that 3k may have gone on standing a few rounds for their ex colleagues in the "Counter Avoidance Team"

[webberg]

Meant to add I engaged a tax specialist to help settle the EBT. They charged over £3k and fro what I can see just agreed settlement and the tax numbers. Did not actually fight the case... I could have worked out the tax liabilities.

So £3k on top of the tax bill... felt violated

The loan charge rules require that you declare to HMRC all loans that might fall into the category of "disguised remuneration". That has a definition in the Tax Act and basically includes any arrangement in which a third party was used to pay you money for working.

There is likely a difference of opinion between HMRC and advisers as to whether that third party had to be aware of the arrangement or not and whether they were involved before, during or after the employment.

As you might expect, HMRC is of the view that if you are in doubt, you should declare. Any decent adviser will give you a better understanding of the law and the consequences of the choices it gives you.

We are aware that many promoters are claiming that if the loan was made directly by the employer, then it's not within the loan charge. (Because the loan charge is based in the disguised remuneration rules and that requires the presence of a third party at some stage). That may be true in the narrow confines of the loan charge.

We have seen HMRC argument suggesting that their interpretation is that a payment from the end user of your services to your employer, who then pays you, is de facto, a third party. Other than to observe that this is a huge leap from the legislation, there is insufficient space here to discuss it further.

We have also seen HMRC claim that despite the clear conditions for determining disguised remuneration, Parliament always intended that all arrangements which pass tax free money to employees are within the rules, whether or not a third party is present. If the interpretation above is a stretch for logic, then this one is beyond Saturn and still accelerating.

It's clear however that HMRC, whose mission is now to "maximise revenue", will be pushing these.

Finally, whether or not a loan from an employer is caught by the loan charge, it's almost certainly going to be taxable under the principles established in the Rangers case. That is bad and good for you. It's bad in that the amount is taxable and HMRC will claim that you are liable. It's good in that the amount is taxable and it may be that the employer is liable. Again, HMRC see you as a soft target and will go for you. The employer may of course be long gone.

So, you have some choices coming your way.

I note your experience with a tax adviser and have some sympathy. As a general rule you should always ask any adviser what they will do, when and how much it will cost, before you start working with them.

The above analysis you can do for yourself. You can also engage directly with HMRC. Tax law is moderately tricky and it's very true that most of the people you speak with in HMRC are working off a script and a check list and know little about tax, but with patience and application, you can do this.

I do not subscribe to the idea that HMRC will deliberately try to cheat you into paying something you do not owe. I accept that this happens, but it's more cock up than conspiracy and any reasonably diligent approach will expose such attempts.

There are two advisers active here. One is me (WTT Consulting) and the other is Phil Manley at DSW. We can both be found in less than a second on Google. We both offer an initial free call.

Other advisers can also be found.

Choose one who knows this area as otherwise you are paying for somebody to learn.

Be aware that settlement (if that is your choice) is pretty much fixed and aside from negotiating a time to pay or perhaps applying some special circumstances that might apply to you (did you work overseas?), any adviser promising to be able to negotiate a reduction, is probably being less than straightforward (and I'll give them the benefit of the doubt if this is not their area of expertise).

I think a couple of calls as above would repay you and put you in a better place to make a decision.

[webberg]

Yep they were probably ex HMRC as well - some of that 3k may have gone on standing a few rounds for their ex colleagues in the "Counter Avoidance Team"

Being ex HMRC does not automatically make you complicit with the present HMRC crew.

Accepting that there is a degree of jest in the post, recently Phil at DSW has written a very good piece about how the HMRC he joined has lost its sense of fair play and public service and instead is now a target driven, uncompromising and arguably unfit for purpose organisation.

We have ex HMRC people on our staff (and I'm ex HMRC) and we speak with such people a lot. Almost always there people leave HMRC because they are been stripped of any meaningful authority or independent action and are instead expected to follow a script that Treasury/policy has put together.

Unfortunately, those who penned the script sit isolated from the effects in their ivory towers and care nothing for the misery it causes and care nothing that they are spending tens of millions in wasted time and legal actions, when a few ounces of common sense would make everybody's life better.

However Treasury is driving the agenda and just wants money, regardless of the human cost.

It really saddens me that HMRC has fallen from the high standards of public service that they could rightly claim even up to perhaps 15 years ago. In my view, the rot started when the "Customs" side joined the "Revenue" side and the strong arm tactics of VAT collection were seen as the way forward. Things got worse when MPs in PAC (for reasons of their own grandisement) prevented HMRC from making sensible deals. Finally the creation of specialist teams such as Counter Avoidance, allows policy makers to pander to Treasury in suggesting new ways to raise tax (no doubt eyeing the gong for public service in due course) without having to look into the often bloodshot eyes of those paying.

In this they are aided by every new crop of politicians who reached a new low in the last session fo Parliament when the Financial Secretary to the Treasury, lied to Parliament and has yet to apologise or even recognise his error.

HMRC and Treasury consider themselves above the law, above the taxpaying population and able to operate with impunity because the country needs the money.

I left HMRC in 1979. Since then the above has unfolded and the overwhelming sense you get from speaking with ex HMRC people is that they are no longer prepared to work for an organisation in which the priority is to collect maximum tax, regardless of the law, and which does not care when real people fall ill, have lives destroyed or who will be damaged permanently.

HMRC is unfit for purpose and needs root and branch reform.

Unfortunately, they are the darlings of Treasury and have sufficient air cover to resist all such moves.

Short of mass civil disobedience, HMRC will continue to get away with what they are doing.

I enjoyed my time in HMRC. I think Phil did. most ex HMRC people did. Like me, they now look back with immense sadness at what it has become and fear that nothing will improve - and will get worse - because those at the helm are frankly out of control.

Thanks for reading - sorry - rant mode now disengaged.

[rshome]

What happens if you don't know the exact figures for the loan amounts?

I'm going through my old bank statements and a few entries I am not sure if they are related to the loans?

What I am asking is, what if the figures you give to HMRC are not 100% accurate (but 99% accurate)?

[tomtastic]

What happens if you don't know the exact figures for the loan amounts?

I'm going through my old bank statements and a few entries I am not sure if they are related to the loans?

What I am asking is, what if the figures you give to HMRC are not 100% accurate (but 99% accurate)?

I wonder this too, financial records only meant to be kept for 7 years max aren't they?
Do HMRC have the power to query loans made from the Trusts themselves?
Does the receiver of the loans not have the option to say "I'm not required to keep records for that duration", or do HMRC then guess a figure?

I imagine ultimately, if HMRC decide / discover an omission at any point in the future, they just re-open an investigation into you.

[me206et]

What happens if you don't know the exact figures for the loan amounts?

I'm going through my old bank statements and a few entries I am not sure if they are related to the loans?

What I am asking is, what if the figures you give to HMRC are not 100% accurate (but 99% accurate)?

They appear to start with 5 X salary or a figure they seem to know. Not sure how that works but in my case it seemed quite accurate.

[QCApproved]

In these circumstances HMRC will require you to fund an archaeological dig into the requisite systems
If the amounts were transcribed in the babylonian number format you will need affadavits from professors of that language as to the quantum sent on to HMRC

[rshome]

They appear to start with 5 X salary or a figure they seem to know. Not sure how that works but in my case it seemed quite accurate.

Thanks, can I ask what kind of figure are we taking about? If I say took £110-120K loans what sort of settlement bill roughly, any idea?

[QCApproved]

approx 30k depending on your salary and factoring in IHT