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Hmrc disguised remuneration loans information required!

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    #31
    I wouldn’t get too optimistic based on the tone of the letter. You will likely get a follow up letter at some point which is generally standardised to say how interest and penalties are charged and how it’s linked to behaviour. They way you behaviour/comply from this point is a contributing factor, but I’m sorry to inform you that you will most definitely be charged interest and will undoubtedly receive some form penalty for non-disclosure and underpayment of tax. You will however have the opportunity to appeal against the penalty at least but you will need to evidence in some way that you acted with due care and consideration. Carelessness will still result in penalties.

    From personal experience as well as colleagues still trying to settle under the 2020 loan charge which were late disclosures but prompted, ie HMRC had already opened up and enquiry similar to yourself, HMRC have suggested to penalty range is between 15-30% of the tax due. Late interest is also added to that. I would strongly suggest you start to gather whatever you have on how you joined the scheme, how you checked it was ‘legit’ and what due diligence you completed.

    This is a long drawn out process from here I’m afraid. As some have suggested, HMRC have opened up and enquiry, now the year is open, I can assure you there are a significant number in the same position but there are 2 options available in my opinion;

    1. Provide HMRC what they want and sit back and wait and be one of the tax payers that wishes it goes away/forgets about it and let’s interest build up (HMRC seem more than happy to let liability and penalties build up!!)

    2. Proactively provide the info, seek appropriate tax advice which will likely mean disclosure of the entire scheme for the year and future years (there is argument you could change 2017 year now 4 years has passed so a discovery could not be made but I suspect HMRC may still try). Work with a tax advisor to calculate what you owe and request HMRC to check/agree calculations to move to a settlement position.

    Even getting to a point of agreement with HMRC under point 2 could take a few years! I personally would start to pay what you can on your HMRC tax account to reduce to interest and again it’s linked to your behaviour/cooperation.

    if you were earning £1350 weekly (please note these numbers are crude and estimated and are purely for illustration purposes based on your example provided) lets say for 46 weeks a year, I’d roughly say you should have paid £12k a year tax and £5k a year National Insurance but I suspect you might have only paid £1k annual tax if that??

    You could probably do the math from there. HMRC have charged interest at roughly 3% each year give or take 0.25%. The level of penalty is the biggest unknown.

    One thing I would check is whether the loan is written into Trust or not. If it is, there could be IHT implications also.

    I echo comments from other members here. Absolutely shocked these practices dare continue and quite clearly the consequences of operating them are not suffice to put the scheme owners off. I would personally name and shame the umbrella and associated accomplices if agencies or promoters were involved. The number of colleagued tied up in this is purely shocking and there are many more than need the warning. Posting the umbrella/agencies names here gives those that do some level of due diligence before they join by searching the internet and opportunity to hear your story!! Also, please don’t tell me this practice is ongoing in the NHS still or Financial Services (I don’t believe you shared your role/industry)?? It’s possible to even question your end employer as under the revised legislation, the end employer has responsibility on the entire supply chain from a tax perspective. There should be appropriate due diligence by them on any umbrella firm they work with otherwise they could also find themselves open to HMRC scrutiny and penalties. I’d be interested to know who your end client is.

    You have come to the right place to summarise to help you get through this. I don’t often post as I find it difficult to find the time but I’d genuinely hope the above is informative and supports you. I just hope that you do find the courage to name and shame, it can only help prevent others from falling foul. I already commend you for facing up to what is ahead of you, reality will soon hit your other colleagues whether this year or in 5years time but the longer it takes, sadly the more hard hitting it will be for them.

    Keep posting, keep it touch.

    J

    Comment


      #32
      Originally posted by Jumper View Post
      I wouldn’t get too optimistic based on the tone of the letter. You will likely get a follow up letter at some point which is generally standardised to say how interest and penalties are charged and how it’s linked to behaviour. They way you behaviour/comply from this point is a contributing factor, but I’m sorry to inform you that you will most definitely be charged interest and will undoubtedly receive some form penalty for non-disclosure and underpayment of tax. You will however have the opportunity to appeal against the penalty at least but you will need to evidence in some way that you acted with due care and consideration. Carelessness will still result in penalties.

      From personal experience as well as colleagues still trying to settle under the 2020 loan charge which were late disclosures but prompted, ie HMRC had already opened up and enquiry similar to yourself, HMRC have suggested to penalty range is between 15-30% of the tax due. Late interest is also added to that. I would strongly suggest you start to gather whatever you have on how you joined the scheme, how you checked it was ‘legit’ and what due diligence you completed.

      This is a long drawn out process from here I’m afraid. As some have suggested, HMRC have opened up and enquiry, now the year is open, I can assure you there are a significant number in the same position but there are 2 options available in my opinion;

      1. Provide HMRC what they want and sit back and wait and be one of the tax payers that wishes it goes away/forgets about it and let’s interest build up (HMRC seem more than happy to let liability and penalties build up!!)

      2. Proactively provide the info, seek appropriate tax advice which will likely mean disclosure of the entire scheme for the year and future years (there is argument you could change 2017 year now 4 years has passed so a discovery could not be made but I suspect HMRC may still try). Work with a tax advisor to calculate what you owe and request HMRC to check/agree calculations to move to a settlement position.

      Even getting to a point of agreement with HMRC under point 2 could take a few years! I personally would start to pay what you can on your HMRC tax account to reduce to interest and again it’s linked to your behaviour/cooperation.

      if you were earning £1350 weekly (please note these numbers are crude and estimated and are purely for illustration purposes based on your example provided) lets say for 46 weeks a year, I’d roughly say you should have paid £12k a year tax and £5k a year National Insurance but I suspect you might have only paid £1k annual tax if that??

      You could probably do the math from there. HMRC have charged interest at roughly 3% each year give or take 0.25%. The level of penalty is the biggest unknown.

      One thing I would check is whether the loan is written into Trust or not. If it is, there could be IHT implications also.

      I echo comments from other members here. Absolutely shocked these practices dare continue and quite clearly the consequences of operating them are not suffice to put the scheme owners off. I would personally name and shame the umbrella and associated accomplices if agencies or promoters were involved. The number of colleagued tied up in this is purely shocking and there are many more than need the warning. Posting the umbrella/agencies names here gives those that do some level of due diligence before they join by searching the internet and opportunity to hear your story!! Also, please don’t tell me this practice is ongoing in the NHS still or Financial Services (I don’t believe you shared your role/industry)?? It’s possible to even question your end employer as under the revised legislation, the end employer has responsibility on the entire supply chain from a tax perspective. There should be appropriate due diligence by them on any umbrella firm they work with otherwise they could also find themselves open to HMRC scrutiny and penalties. I’d be interested to know who your end client is.

      You have come to the right place to summarise to help you get through this. I don’t often post as I find it difficult to find the time but I’d genuinely hope the above is informative and supports you. I just hope that you do find the courage to name and shame, it can only help prevent others from falling foul. I already commend you for facing up to what is ahead of you, reality will soon hit your other colleagues whether this year or in 5years time but the longer it takes, sadly the more hard hitting it will be for them.

      Keep posting, keep it touch.

      J
      Hi many thanks for this lengthy post. This has been absolutely helpful for me and the other 16 who I know for a fact are watching. The sad part in all this is that we are all Healthcare workers and I will definitely disclose the umbrella by Friday, as I gave them untill Friday to respond. I'm also only disclosing them Friday, as I did reassure the other 2 who are working with me so sort this out that we would at least give the umbrella until Friday before we disclose, as we want others to be fully aware that this is dangerous and not worth it! Also to make you all laugh, one of the new nurses (gives away the profession oh dear) rang me this evening asking me if the current loan scheme he is on, which also gives loans, is better or I could suggest something that offers him more. I posted him to this thread instead, and told him he would get a good deal on here. Went back to him and asked him if he saw the thread and he was completely out of it, no comment as he didn't get it. I then tried to explain to him and he said "oh really that link you sent me has no umbrella". I didn't say anything else after that, so this gives you an idea of how rampant and almost blatant this is going on!

      Also just wanted to check on something that the last 3 guys have touched on. Is there a cut off period that hmrc can only legally go far back to chase up this money? If so does it mean they cannot go back as far as 2018 to 2019?if so why is this as I thought they can even go back 20yrs ago?

      Comment


        #33
        Wow! Really surprised to read of the industry you guys are working in, the end client should take far greater care on the umbrellas it chooses to work with!

        There are far more knowledgeable than me on HMRCs rights but in short, HMRC have 4 years from the filing date to open an enquiry into a tax year. Beyond 4 years there are greater powers that allow HMRC to open enquiries up to 20years but HMRC must firstly show there has been a loss of tax and secondly the tax payer has been careless and dishonest. They only need to evidence loss of tax and conclude you acted carelessly to go back 6 years. Whilst it’s possible, it can also be challenged.

        I’d encourage your colleagues to come and join and become a member. I’d really like to hear their argument on why they believe they are legitimately avoiding income tax. I’ll open disclose that I took a punt and used a scheme for a period and can honestly say it’s been the BIGGEST regret of my life. I’ve paid back life changing sums of money to HMRC and remain without closure as the process has taken years. Whilst it is now too late for those using the scheme, it’s not too late to stop and limit the damage. I took a gamble ‘knowing’ I used a tax avoidance scheme that I may have to pay it back, ultimately I did many years later. What I learnt as to how I was “discovered” as using the scheme was the promoter of the scheme was “obliged/forced” to provide HMRC with all the users details of the scheme and we were all contacted in quick succession. I will assure you now, however HMRC discovered the scheme, once they are aware of a single user, they will open enquiries on all the umbrellas employees. No rock will go unturned.

        Comment


          #34
          Then I’ll put umbrella references here:

          NHS worker forced into contracting? Read this
          https://forums.contractoruk.com/umbr...read-this.html

          Tax avoidance promoters (Mini Umbrellas) targeting NHS workers
          https://www.gov.uk/guidance/tax-avoi...s-spotlight-54
          "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
          - Voltaire/Benjamin Franklin/Anne Frank...

          Comment


            #35
            Originally posted by Jumper View Post
            Wow! Really surprised to read of the industry you guys are working in, the end client should take far greater care on the umbrellas it chooses to work with!

            There are far more knowledgeable than me on HMRCs rights but in short, HMRC have 4 years from the filing date to open an enquiry into a tax year. Beyond 4 years there are greater powers that allow HMRC to open enquiries up to 20years but HMRC must firstly show there has been a loss of tax and secondly the tax payer has been careless and dishonest. They only need to evidence loss of tax and conclude you acted carelessly to go back 6 years. Whilst it’s possible, it can also be challenged.

            I’d encourage your colleagues to come and join and become a member. I’d really like to hear their argument on why they believe they are legitimately avoiding income tax. I’ll open disclose that I took a punt and used a scheme for a period and can honestly say it’s been the BIGGEST regret of my life. I’ve paid back life changing sums of money to HMRC and remain without closure as the process has taken years. Whilst it is now too late for those using the scheme, it’s not too late to stop and limit the damage. I took a gamble ‘knowing’ I used a tax avoidance scheme that I may have to pay it back, ultimately I did many years later. What I learnt as to how I was “discovered” as using the scheme was the promoter of the scheme was “obliged/forced” to provide HMRC with all the users details of the scheme and we were all contacted in quick succession. I will assure you now, however HMRC discovered the scheme, once they are aware of a single user, they will open enquiries on all the umbrellas employees. No rock will go unturned.
            The issue I'm seeing is that most of my colleagues have used the schemes for quiet a while. Most date back to immediately following ir35 which was 2017,so there is a false sense that they will continue to get away with it. How long where you a part of the scheme and what was the estimated end cost you had to pay back and what period did you have to pay back please?

            Comment


              #36
              Re HMRC discovery time limits, these are normally 4 years from the end of each tax year (ie 17/18 year by 5th Apr 2022) though can be longer 6 (carelessness) or 20 (fraud)

              Unfortunately the loan charge may complicate matters for you, as any loans (or similar) outstanding on 5th Apr 2019 were liable to tax in the 18/19 tax year anyway.

              Its not clear whether you and your “co-workers” were employed via an agency. If so, HMRCs source of information will be the employment intermediaries reporting- this is a legal requirement for all agencies for any workers not paid via PAYE directly

              Comment


                #37
                Originally posted by Chevalier View Post
                Re HMRC discovery time limits, these are normally 4 years from the end of each tax year (ie 17/18 year by 5th Apr 2022) though can be longer 6 (carelessness) or 20 (fraud)

                Unfortunately the loan charge may complicate matters for you, as any loans (or similar) outstanding on 5th Apr 2019 were liable to tax in the 18/19 tax year anyway.

                Its not clear whether you and your “co-workers” were employed via an agency. If so, HMRCs source of information will be the employment intermediaries reporting- this is a legal requirement for all agencies for any workers not paid via PAYE directly
                Hi thanks. What does this part mean in simple terms please?

                "Unfortunately the loan charge may complicate matters for you, as any loans (or similar) outstanding on 5th Apr 2019 were liable to tax in the 18/19 tax year anyway."

                Comment


                  #38
                  Originally posted by taxed View Post

                  The issue I'm seeing is that most of my colleagues have used the schemes for quiet a while. Most date back to immediately following ir35 which was 2017,so there is a false sense that they will continue to get away with it. How long where you a part of the scheme and what was the estimated end cost you had to pay back and what period did you have to pay back please?
                  If there are users that have been in the scheme since 2017 and still using them today I feel for them and think they are going to be in for a huge shock.

                  I used a loan scheme for 23 months and was pre IR35. Following HMRC opening an enquiry into one of the years a few years back, I made the decision to seek tax advice and sent all my details and my own tax calculations to HMRC and I basically paid the loan charge.

                  The problem with the loan charge is it takes all your accumulated weekly or monthly loans (your 2nd payment received from the umbrella that wasn’t included on your payslip) adds them all together and applies that total value as income to your income already in year 18/19.

                  Using your colleagues as an example if they have used the scheme for 5yrs and they received £1k monthly salary then £3k per month through the loan scheme then that’s £180k in loans over a 5yr period (£3k x 12 months x 5yrs). Applying £180k income to your 18/19 tax return will likely result in most of that income being taxed at 40%. Tax and NI on £180k in a single year equates to roughly £75k.

                  Add late interest onto that, you’re at +£80k. Then if you’re facing penalties (currently believed to be 15-30% but I’d welcome any other users that have experienced settlement with HMRC recently) thats an additional £11k-£22k so in short anyone using the same scheme for 5yrs earning a day rate of over £250 is unlikely to get any change from £100,000.

                  I have yet to personally formally settle but I’ve paid the loan charge, interest and penalties and re-mortgaged properties and used savings to do so but in total my liability was a six figure payment like most unfortunately but it’s the consequences of my own action and decisions and something I have to live with. I could have opted for a payment arrangement but choose an alternative route to avoid being in HMRCs pocket for years to come. I’ve had many of sleepless nights but the only way you can move on is face up to what’s coming and tackle it. There are so many that have since been on this journey, many still on these boards that can show you it is tough but anyone can get through it.

                  Your colleagues need to read some of these posts. This is real and has seen careers end, families left in financial devastation and sadly the loan charge has been even attributed to suicides. They are on HMRCs radar now, an open enquiry HAS to be closed which will re

                  Comment


                    #39
                    The loan charge - where to start?

                    Effectively it takes all loan balances outstanding since 2010 and brought them back into taxation (again) as though you earned all those loans as income in the 18/19 tax year. So even if HMRC had missed the boat earlier, it gave them a second bite of the cherry.

                    It’s been devastating for many here and may come as a nasty shock…if so I’m so sorry.

                    There were opportunities to spread the payments over 3 tax years (as well as a settlement scheme) but that was some time ago..



                    Comment


                      #40
                      which will result in a tax bill no doubt about it, how much is simply dependable on day rates, how long you used it! Your colleagues should seek immediate tax advice but assuming they are using loan schemes, regardless of type/name of scheme they should stop immediately!

                      Comment

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