There are various parties who have tried or who are trying to make some money from outstanding loans (aside from HMRC) and I thought it might help us all if I laid out what FACTS we know and what we and others are doing about this.
Montpelier
Requests were made in April 2016 for 10% of loans to be repaid to a Montpelier outfit as this would "prove" that the loans were real and conversely also "prove" that HMRC's argument that the loan payments were remuneration was "false".
By that time HMRC was already arguing that the payments were remuneration and therefore whether the "loans" were repaid or not, they were taxable remuneration at the time they were paid. The so called justification for claiming repayment was (in our view) at best, flawed and did not reflect tax analysis at the time. Since then, the tax analysis has become clearer and no "repayment" of a "loan" will have any impact on HMRC's view.
We resisted calls for repayment on behalf of clients. We put Montpelier to the test of proof and they were unable in most instances to demonstrate liability. These demands have not been renewed.
More recently Montpelier are claiming that as loans from earlier schemes have no escaped all forms of taxation because a) HMRC failed to open and enquiry and b) the loan charge for periods pre December 2010 has fallen away, they are now entitled to a success fee payable int he form of a loan that was allegedly made to individuals in 2009 and 2010. Again, put Montpelier to proof and challenge the various claim forms they are making use of as we think they are flawed.
Loan charge cleansing schemes
The impending loan charge in the lead up to April 2019 saw a number of schemes launched.
In general these worked by the promoters finding a "financier" who would lend the individual money which would then be used to repay the original loan. For a reasonable fee of course.
Mention in despatches here for AML, Horizon and some ex White Collar schemes. Special distinction to Trust Help Line - a firm now going for strike off after its shareholders and directors have filed the barest minimum of required documents.
Safe to say that HMRC's view that none of these achieved their objective is a view that we have some sympathy for.
K2 and Hyrax
The loans originally made by the "Resourcing Trust" that sat behind each of these, were moved on to a professional trustee called Praxix and then to another called Pinotage, originally in Switzerland and latterly in BVI, and finally claimed to have been sold to FS Capital. The latter is asking for repayment.
Again the process here must be to ask for proof, not just of claim but here of probity in the transaction chain, before considering next moves.
We are aware that Peak has formed a "Loan Association" but quite what the objective of that outfit is, remains unclear. Perhaps the idea is to make a legal challenge to the ability of FS Capital to recall loans. If so, that is a multi-jurisdictional legal defence that will presumably have to also stall or deflect attempts from FS Capital to collect. I'm not a lawyer but that sounds like hard yards to me. I'd be guessing at close to 1000 hours of legal time over a couple of years, with no guarantee of proving that a loan (or at least a repayment obligation) does not exist.
There may well be law firms involved here as well, we don't know.
We (WTT) are in evidence gathering mode and seeking opinion from our clients. We have made and maintained communications with FS Capital and are planning our next steps this week. We are not seeking to agree another temporary moratorium but rather a more permanent solution.
IQ, Garraway, Sanzar, Winchester, Darwin, Infinity, Long Acre, Dynamic
The majority of the loans made from these schemes post 2011 seem to have fallen into the hands of a firm called Felicitas, based in Ramsay in IOM. They appear - from the public record - to be owned/directed by a couple of people who have a long history in the contractor scheme world. Some of that history concerns "compliant" firms in the UK now being in the hands of liquidators at the behest of HMRC.
The loans arrived at Felicitas courtesy of one of two professional trust companies owned by Baker Tilly in Douglas, IOM. It's entirely unclear whether those firms had the necessary discretion to enter into the alleged transactions or whether in doing so they have complied with trust law and/or their licence from the IOM FSA. Questions can (and should) be asked.
Felicitas has also asked Gladstones to act for them. That UK law firm arrives on the scene with a reputation of being aggressive chasers of small claims and there are allegations of sharp practice. If you have issues with this firm, the SRA is your go to organisation.
In terms of help, we understand that ETC Tax are offering a free template letter which is seeking proof of liability. Perhaps that will be enough to prevent the claims being renewed. Perhaps not. We have no idea whether ETC may eventually be required to charge a fee and suggest that those engaged with them seek that information at the appropriate time.
We understand that a law firm called Freiths may also have clients in this area. If so, we have no idea if they are charging fees or not.
We (WTT) have a large volume of clients here. Those who are in our Big Group we have not charged. Those who are not we have asked for a nominal fee. We are in evidence gathering mode and have been asking questions of the above parties and others.
This situation has a way to go yet.
Other schemes
We have seen the beginnings of other schemes looking at what is happening here and looking to join the bandwagon.
In short, if you have a loan repayment demand, there is a process.
1. Write back to the party claiming money and dispute the claim
2. Ask that party for evidence - this needs to be made available in hard copy and you are not obliged to click through to unverified websites
3. If evidence is produced- seek professional help
4. If evidence is not produced within a reasonable period, write back and tell the party claiming money that you regard their claim to be invalid.
Myth busting
Statute of limitations - there is an often stated argument that if their is no claim for repayment within 6 years from the loan agreement being made or 6 years from the last drawdown, then repayment claims lapse. This is not true. The statute of limitations (usually) begins when a claim is made under the agreement. It lapses 6 years later if the claim is resisted and the claimant makes no efforts to collect on their rights.
Settling the tax means no loan is repayable - incorrect. The tax liability and the rights and obligations under the loan agreement are entirely separate. the fact that you have agreed with HMRC that money you received should have been taxed, makes absolutely no difference to whether it was a loan or not. Conversely, repaying the loan will not man that HMRC will cease trying to tax the money as income.
I hope this helps.
If I can answer questions here I shall so long as I can limit my responses to known facts.
Montpelier
Requests were made in April 2016 for 10% of loans to be repaid to a Montpelier outfit as this would "prove" that the loans were real and conversely also "prove" that HMRC's argument that the loan payments were remuneration was "false".
By that time HMRC was already arguing that the payments were remuneration and therefore whether the "loans" were repaid or not, they were taxable remuneration at the time they were paid. The so called justification for claiming repayment was (in our view) at best, flawed and did not reflect tax analysis at the time. Since then, the tax analysis has become clearer and no "repayment" of a "loan" will have any impact on HMRC's view.
We resisted calls for repayment on behalf of clients. We put Montpelier to the test of proof and they were unable in most instances to demonstrate liability. These demands have not been renewed.
More recently Montpelier are claiming that as loans from earlier schemes have no escaped all forms of taxation because a) HMRC failed to open and enquiry and b) the loan charge for periods pre December 2010 has fallen away, they are now entitled to a success fee payable int he form of a loan that was allegedly made to individuals in 2009 and 2010. Again, put Montpelier to proof and challenge the various claim forms they are making use of as we think they are flawed.
Loan charge cleansing schemes
The impending loan charge in the lead up to April 2019 saw a number of schemes launched.
In general these worked by the promoters finding a "financier" who would lend the individual money which would then be used to repay the original loan. For a reasonable fee of course.
Mention in despatches here for AML, Horizon and some ex White Collar schemes. Special distinction to Trust Help Line - a firm now going for strike off after its shareholders and directors have filed the barest minimum of required documents.
Safe to say that HMRC's view that none of these achieved their objective is a view that we have some sympathy for.
K2 and Hyrax
The loans originally made by the "Resourcing Trust" that sat behind each of these, were moved on to a professional trustee called Praxix and then to another called Pinotage, originally in Switzerland and latterly in BVI, and finally claimed to have been sold to FS Capital. The latter is asking for repayment.
Again the process here must be to ask for proof, not just of claim but here of probity in the transaction chain, before considering next moves.
We are aware that Peak has formed a "Loan Association" but quite what the objective of that outfit is, remains unclear. Perhaps the idea is to make a legal challenge to the ability of FS Capital to recall loans. If so, that is a multi-jurisdictional legal defence that will presumably have to also stall or deflect attempts from FS Capital to collect. I'm not a lawyer but that sounds like hard yards to me. I'd be guessing at close to 1000 hours of legal time over a couple of years, with no guarantee of proving that a loan (or at least a repayment obligation) does not exist.
There may well be law firms involved here as well, we don't know.
We (WTT) are in evidence gathering mode and seeking opinion from our clients. We have made and maintained communications with FS Capital and are planning our next steps this week. We are not seeking to agree another temporary moratorium but rather a more permanent solution.
IQ, Garraway, Sanzar, Winchester, Darwin, Infinity, Long Acre, Dynamic
The majority of the loans made from these schemes post 2011 seem to have fallen into the hands of a firm called Felicitas, based in Ramsay in IOM. They appear - from the public record - to be owned/directed by a couple of people who have a long history in the contractor scheme world. Some of that history concerns "compliant" firms in the UK now being in the hands of liquidators at the behest of HMRC.
The loans arrived at Felicitas courtesy of one of two professional trust companies owned by Baker Tilly in Douglas, IOM. It's entirely unclear whether those firms had the necessary discretion to enter into the alleged transactions or whether in doing so they have complied with trust law and/or their licence from the IOM FSA. Questions can (and should) be asked.
Felicitas has also asked Gladstones to act for them. That UK law firm arrives on the scene with a reputation of being aggressive chasers of small claims and there are allegations of sharp practice. If you have issues with this firm, the SRA is your go to organisation.
In terms of help, we understand that ETC Tax are offering a free template letter which is seeking proof of liability. Perhaps that will be enough to prevent the claims being renewed. Perhaps not. We have no idea whether ETC may eventually be required to charge a fee and suggest that those engaged with them seek that information at the appropriate time.
We understand that a law firm called Freiths may also have clients in this area. If so, we have no idea if they are charging fees or not.
We (WTT) have a large volume of clients here. Those who are in our Big Group we have not charged. Those who are not we have asked for a nominal fee. We are in evidence gathering mode and have been asking questions of the above parties and others.
This situation has a way to go yet.
Other schemes
We have seen the beginnings of other schemes looking at what is happening here and looking to join the bandwagon.
In short, if you have a loan repayment demand, there is a process.
1. Write back to the party claiming money and dispute the claim
2. Ask that party for evidence - this needs to be made available in hard copy and you are not obliged to click through to unverified websites
3. If evidence is produced- seek professional help
4. If evidence is not produced within a reasonable period, write back and tell the party claiming money that you regard their claim to be invalid.
Myth busting
Statute of limitations - there is an often stated argument that if their is no claim for repayment within 6 years from the loan agreement being made or 6 years from the last drawdown, then repayment claims lapse. This is not true. The statute of limitations (usually) begins when a claim is made under the agreement. It lapses 6 years later if the claim is resisted and the claimant makes no efforts to collect on their rights.
Settling the tax means no loan is repayable - incorrect. The tax liability and the rights and obligations under the loan agreement are entirely separate. the fact that you have agreed with HMRC that money you received should have been taxed, makes absolutely no difference to whether it was a loan or not. Conversely, repaying the loan will not man that HMRC will cease trying to tax the money as income.
I hope this helps.
If I can answer questions here I shall so long as I can limit my responses to known facts.
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