Another Consulting Overseas Victim?

[ibs]

More details (part2)

Having established that the above idea would not be workable in practice, my accountant believes he has worked out how Consulting Overseas made the scheme appear to work for contractors. This is his analysis.

A. After the payment of a salary, Sandfield has a profit of £5K from a contractors invoice.
B. They come up with a currency that no one is familiar with such as the BYR. It doesn't matter what the currency is.
C. They explain to the contractor that this currency rapidly depreciates.
D. They tell the contractor that they can forward purchase the equivalent of £5K plus interest for just £1K now.
E. The contractor is advanced a loan in BYR equivalent to £5000 which he immediately converts to Sterling.
F. He uses £1K of that money to forward buy enough BYR in 1 year to cover his loan and interest.
G. After 1 year he exercises the forward contract and repays to Sandfield his BYR loan.
H. He keeps the £4K remainder of his initial loan as a tax free profit.

To understand what has really happened it is necessary to look at Sandfield. After 1 year they have received a BYR loan repayment. The reality however is that whilst the BYR has depreciated, it has not become worthless. In fact it's probably only down by 30% so they can convert the original £5K worth of BYR to about £3.5K and that is a profit for Sandfield. It turns out that Sandfield made a similar profit from every single deal they did. Of course, for every winner there is a loser, and in this case it was the provider of the forward contract (the counterparty). They lost on every single deal. This wouldn't happen in a free market, but it could work if the counterparty and Sandfield were under common ownership. It has been established that Sandfield and Credex were under common ownership and Credex was probably the counterparty. Counsels opinion stressed the importance of the scheme operators and the providers of finance being independent. Consulting Overseas told us that they were independent and this was a deception.

So the real profit to the scheme was the cost of the forward contract (typically 20%). In effect they took a 20% fee and paid us 80% completely ignoring their PAYE obligations.

Basically it looks like we may have been "conned" and would have been better off contracting "normally". Sandfield Systems Ltd were a UK company and from what I can gather recruitment agencies went through them, so therefore the liability should be with Sandfield Systems Ltd in the UK who for some bizzare convenient reason went into liquidation!!

[Lewis]

Having established that the above idea would not be workable in practice, my accountant believes he has worked out how Consulting Overseas made the scheme appear to work for contractors. This is his analysis.

A. After the payment of a salary, Sandfield has a profit of £5K from a contractors invoice.
B. They come up with a currency that no one is familiar with such as the BYR. It doesn't matter what the currency is.
C. They explain to the contractor that this currency rapidly depreciates.
D. They tell the contractor that they can forward purchase the equivalent of £5K plus interest for just £1K now.
E. The contractor is advanced a loan in BYR equivalent to £5000 which he immediately converts to Sterling.
F. He uses £1K of that money to forward buy enough BYR in 1 year to cover his loan and interest.
G. After 1 year he exercises the forward contract and repays to Sandfield his BYR loan.
H. He keeps the £4K remainder of his initial loan as a tax free profit.

To understand what has really happened it is necessary to look at Sandfield. After 1 year they have received a BYR loan repayment. The reality however is that whilst the BYR has depreciated, it has not become worthless. In fact it's probably only down by 30% so they can convert the original £5K worth of BYR to about £3.5K and that is a profit for Sandfield. It turns out that Sandfield made a similar profit from every single deal they did. Of course, for every winner there is a loser, and in this case it was the provider of the forward contract (the counterparty). They lost on every single deal. This wouldn't happen in a free market, but it could work if the counterparty and Sandfield were under common ownership. It has been established that Sandfield and Credex were under common ownership and Credex was probably the counterparty. Counsels opinion stressed the importance of the scheme operators and the providers of finance being independent. Consulting Overseas told us that they were independent and this was a deception.

So the real profit to the scheme was the cost of the forward contract (typically 20%). In effect they took a 20% fee and paid us 80% completely ignoring their PAYE obligations.

Basically it looks like we may have been "conned" and would have been better off contracting "normally". Sandfield Systems Ltd were a UK company and from what I can gather recruitment agencies went through them, so therefore the liability should be with Sandfield Systems Ltd in the UK who for some bizzare convenient reason went into liquidation!!

Hmmmm ... so in this scenario Credex is losing money on every deal. Does that not reduce the scheme profits? You cannot just lose money and not pay it back somewhere or are you saying Credex has gone bankrupt with huge losses that have somehow been written off?

[Lewis]

In fact I was thinking it over at lunch and the above scenario (which is essentially exactly the same as your accountant's first scenario) is this: Contractor earns £5K. Consulting Overseas pay contractor £4K and pay Credex £1K for a forward that will pay about £3.5K in 12 months. Clearly the forward should cost more like £3.5K+ so Credex are going to be down £2.5K. In 12 months Credex pays CO £3.5K. Which you say is CO's profit. So Credex has lost £2.5K. So Credex would be losing 50% of CO's turnover. It doesn't matter if Credex buy a future themselves or only pretended to by one either way the loss is the same. I don't see how they can just ignore this loss.

But if you had a currency depreciating at a rate of over 80% a year (for example ZWD) it could work without problem. Contractor earns £5K. CO pay contractor £4K worth of ZWD and buy forward at £800 for same amount of ZWD (from Credex or market) and keep say £200 fees (don't know what fees they charge). This is ok because forward price of ZWD is dirt cheap because inflation so high in Zimbabwe. In 12 months Contractor gets the ZWD and pays back CO. Loan cancelled and deal done. Surely this is how it works.

That said I don't think even ZWD depreciates that fast!

[Le Turk]

Going Forward

Chaps,

We need to concentrate on this thing progressing forward to the commissioners for judgement as to whether it worked or it didn't, rather than debating the weird and wonderful world of otc fx derivatives.

I saw a friend ( non-settler ) at the weekend who appealed last year and has not heard a dicky back from the Inland Revenue since. A bit strange that for something that the IR is confident about.

If the IR was that confident in it's position then it would have progressed to the commissioners by now and been seeking recovery from the non-settlers. I think a question for Mr Kerry Rowe (IR) or Chilterns/Sandfield

[DonkeyRhubarb]

HMRC tactics

I saw a friend ( non-settler ) at the weekend who appealed last year and has not heard a dicky back from the Inland Revenue since. A bit strange that for something that the IR is confident about.

If the IR was that confident in it's position then it would have progressed to the commissioners by now and been seeking recovery from the non-settlers. I think a question for Mr Kerry Rowe (IR) or Chilterns/Sandfield

I didn't use the Sandfield scheme, but I did use CO's other scheme Actinium which is also under investigation.

I'm coming across loads of people from all sorts of different schemes who are under enquiry. Many including myself, and like your friend, have not heard a peep out of HMRC in years. My guess is that HMRC are sitting on tens (if not hundreds) of thousands of tax returns.

What they plan to do with these enquiries is anyone's guess* but there is no statutory time limit for closing enquiries, so in theory they could leave them open indefinitely.

If some people on the Sandfield scheme have settled, then there is almost an incentive for HMRC to never resolve this matter, especially if they could lose and have to fork out refunds.

Unfortunately, to force a resolution, it may require someone in the scheme to request closure from HMRC.

* perhaps they are waiting to see if they win the BN66 case and then they can use this as a precedent for further retrospective legislation to clobber all the other schemes they've got under enquiry.

[ibs]

In fact I was thinking it over at lunch and the above scenario (which is essentially exactly the same as your accountant's first scenario) is this: Contractor earns £5K. Consulting Overseas pay contractor £4K and pay Credex £1K for a forward that will pay about £3.5K in 12 months. Clearly the forward should cost more like £3.5K+ so Credex are going to be down £2.5K. In 12 months Credex pays CO £3.5K. Which you say is CO's profit. So Credex has lost £2.5K. So Credex would be losing 50% of CO's turnover. It doesn't matter if Credex buy a future themselves or only pretended to by one either way the loss is the same. I don't see how they can just ignore this loss.

But if you had a currency depreciating at a rate of over 80% a year (for example ZWD) it could work without problem. Contractor earns £5K. CO pay contractor £4K worth of ZWD and buy forward at £800 for same amount of ZWD (from Credex or market) and keep say £200 fees (don't know what fees they charge). This is ok because forward price of ZWD is dirt cheap because inflation so high in Zimbabwe. In 12 months Contractor gets the ZWD and pays back CO. Loan cancelled and deal done. Surely this is how it works.

That said I don't think even ZWD depreciates that fast!

Sorry Lewis, I posted this yesterday, but it didn't appear on the website.

If the currency depreciates by more than 80% both Sandfield and Credex make a profit, but the total is still £1000.

What I was trying to get across was that Sandfield Systems Ltd were a UK company that dealt with all our contracts and liaised with recruitment agencies in the uk. These agencies would not have dealt with an Isle of Man company, therefore if it was a Fraud as it now seems, then Sandfield Systems Ltd in the UK would be liable for the PAYE not us.

[sandfield]

We are taking legal action against Sandfield

A group of us have seeked legal advice on what to do and we now intend to start legal proceedings against Sandfield for the loss of fees. There is not much time left to sue which is why the case in being purposely dragged on and on until it is too late for us to take legal action.

We are still at the stage of consulting with the solicitors. If any of you would like or are interested to join the boat, then please send a mail to [email protected].

Thanks.

Former Sandfield Contractor

<admin note>I have enabled PM access on your account as well. If other users want to contact sandfield please use the contact form on the site to request and upgrade to allow PM access.</admin note>

[bigfella]

Sandfield

Can you explain what the purpose of legal action against Sandfield is given that both Sandfield Systems Limited and Consulting Overseas Limited are in liquidation?

If the information provided by the recent postings of ibs are to be believed, we have all been duped by Paul Bishopp. He led us to believe that the scheme was supported by Counsels Opinion, but the operation of the scheme deviated from that because Counsel stressed that Sandfield must not be connected with the provider of the currency. In fact, they were under common control and so we went into a scheme that didn't have Counsels Opinion. From what I can see, Paul Bishopp came up with a scheme that failed to properly account for PAYE and carried a 20% charge. The foreign currency exercise was probably no more than a paper exercise intended to disguise a scam. Has your solicitor considered an action against Paul Bishopp personally? Also has your solicitor considered whether any of the actions of Paul Bishopp may be criminal?

I don't know the answer to the question you pose, what I do know is that HMRC are taking a very long time to answer my questions. In their last letter they stated that they had confidentiality issues in responding to some of my points. It may be that they have done some kind of deal with paul Bishopp (without knowing the full facts). My last letter is dated 29th September 2009 and in it I explained in detail to Mr Rowe how I believe the scheme actually operated (I suspect he didn't know). I am currently waiting for a reply to that letter.

[BrilloPad]

so we were conned by Sandfield who did not explain how the scheme fully worked, then we were misled by Chilterns ( of course they may have also been misled) and then stiched up by HMRC...so all in all we well and truly up the swanny! So is the opnion that those of us who paid up have now no chance of ever getting this put through to solicitors

Oh joy

Why have you "fluffed" this thread now? Has something happened/changed?

[Iron Condor]

My accountant says that the market would not allow this scheme to work because for each winner there is a loser. In this case the provider of the forward contract was the loser. The forward contract would have cost much more.

Back in 2001 i tried to explain exactly this to a few contractors who were using this scheme and a couple who thinking joing about it.

One thought i had no understanding of how forward contracts worked and ignored me.

The other said it might be dodgy but he hoped he would 'get lost in the numbers' when HMRC got around to investigating everyone who was using the various schemes that were around at the time.