Track the Finance Bill 2020-21 here

[DavidD]

hot on the failure of NC31 am hearing lots of brown envelopes landing on doormats over the weekend.

Yes, one arrived for my wife even though she settled in full nearly 18 months ago..... Why can't they seem to ever get it right?

[webberg]

This part is certainly interesting...

Avoidance schemes
Taxpayers may attempt to use an avoidance scheme in order to reduce their tax bills. Sometimes you will need to consider avoidance schemes that fail.

For example a taxpayer may enter into an avoidance scheme after being shown written opinion of Leading Counsel, which says unequivocally that the scheme is legally correct. If the scheme is ultimately defeated you may find it difficult to show any negligence. You must however still consider the penalty position in the same way as you would for any other inaccuracy.

Does that effectively cover the user of a scheme from being penalised for "evasion"?

With respect, you have fallen into the trap set by HMRC's PR people.

"Taxpayers may use an avoidance scheme" my emphasis - and "penalised for evasion" -my emphasis.

Not the same and the tests for penalties are different.

Avoidance is legal. It may not work and a Judge may decide that it was a sham or that users were unaware of some aspects of the structure, but still, legal.

If you do something that is legal and you take reasonable care in doing so, such as being shown AND READING a QC opinion, then penalties based on unreasonableness are almost impossible to apply. (HMRC will still try but in our experience will back down if you maintain your position of having done nothing illegal).

Evasion is criminal. Here HMRC will almost certainly never back away from penalties.

I would also say that the position proposed by Mr Bloggs is not one I would agree with. I do not see anything in an HMRC manual that would aid a case against a QC. (I have only ever seen one QC actually sued for an "opinion" and that was not a tax transaction.)

[DealorNoDeal]

If you do something that is legal and you take reasonable care in doing so, such as being shown AND READING a QC opinion, then penalties based on unreasonableness are almost impossible to apply. (HMRC will still try but in our experience will back down if you maintain your position of having done nothing illegal).

The following case seems to support this. HMRC imposed penalties for fraud or negligence but the scheme user successfully appealed against them on the basis that he acted on professional advice.

Bayliss – HMRC Seek Extra Penalties From Failed Avoidance Scheme | Eaves & Co

Unfortunately, it looks like HMRC got legislation passed the following year to counter-act this. As far as I can tell, the legislation is only prospective and doesn't have any retroactive effect.

Errors in taxpayer documents | Tax Adviser

Bottom line: anyone using a scheme today would appear to be in a much weaker position in terms of relying on advice as a "reasonable care" defence against penalties.

[DealorNoDeal]

I should add, anyone using a scheme today needs their head examining.

[lowpaidworker]

I should add, anyone using a scheme today needs their head examining.

and yet the Morse enquiry found out that despite all the HMRC protestations thousands of tax payers are STILL being unwittingly sold, forced into and signing up to these schemes.

thousands.... his words not mine.

[webberg]

and yet the Morse enquiry found out that despite all the HMRC protestations thousands of tax payers are STILL being unwittingly sold, forced into and signing up to these schemes.

thousands.... his words not mine.

IF we were allowed to and IF I was inclined, I could list perhaps a dozen schemes that are up and active.

For the avoidance of doubt I would not recommend any of them.

[DealorNoDeal]

I doubt any scheme is marketed/sold as a "tax avoidance scheme". A lot of them purport to be umbrella companies and use words like "fully compliant" to make it all seem totally above board.

However, as malvolio said in another thread, the ridiculously low tax should be a bit of a clue that this is not normal. I think it's hard to excuse anyone these days for not doing a bit of due diligence.

[Paralytic]

and yet the Morse enquiry found out that despite all the HMRC protestations thousands of tax payers are STILL being unwittingly sold, forced into and signing up to these schemes.

thousands.... his words not mine.

"forced into"?

I know some people are not financially literate, and are easily persuaded by promises of huge returns with no risks, but anyone who signs up for one of these schemes nowadays, when there's a plethora of information telling them to do otherwise, really does deserve HMRC to come knocking.

[lowpaidworker]

I doubt any scheme is marketed/sold as a "tax avoidance scheme". A lot of them purport to be umbrella companies and use words like "fully compliant" to make it all seem totally above board.

However, as malvolio said in another thread, the ridiculously low tax should be a bit of a clue that this is not normal. I think it's hard to excuse anyone these days for not doing a bit of due diligence.

what if the charge were say 18.5% plus then the min tax required coupled with someone on a contract say 40k a year or under (i.e. Nurses Social workers etc) would take home 81% of their money using the correct tax calculations. How would they know without going into detail that their deductions weren't going to right people places. These scheme sellers don't always explain in detail how they work. Its all fine the fine print

[lowpaidworker]

"forced into"?

I know some people are not financially literate, and are easily persuaded by promises of huge returns with no risks, but anyone who sign up for these schemes nowadays, when there's a plethora of information telling them to do otherwise, really does deserve HMRC to come knocking.

I assume you don't follow LCAG and some of their evidence nor did you read the Morse review in detail. Some people had no option but to go via certain umbrellas/agencies. Maybe coerced rather than forced, but lets not pick bones