AM Limited COP8 HMRC Investigation Letter..

[neo222]

Hi Rob79,

Are you saying that AM could be biding their time just to get past some sort of time limit, so they get off the book themselves and leave us in the dark?

I may have been somewhat naive believing the latest update after reading this :/

I haven't read that there is an AM group set up? I was of the understanding that AM had 1000s of users?? Doesn't seem like there are 1000s on here.

I suppose I should go get some professional advice, but not even sure where to go or how much I should be looking at paying for said professional advice.

Any info would be appreciated Rob79.

Thanks you for such informative posts by the way - they are appreciated.

Neo

[Rob79]

Hi Rob79,

Are you saying that AM could be biding their time just to get past some sort of time limit, so they get off the book themselves and leave us in the dark?

I may have been somewhat naive believing the latest update after reading this :/

I haven't read that there is an AM group set up? I was of the understanding that AM had 1000s of users?? Doesn't seem like there are 1000s on here.

I suppose I should go get some professional advice, but not even sure where to go or how much I should be looking at paying for said professional advice.

Any info would be appreciated Rob79.

Thanks you for such informative posts by the way - they are appreciated.

Neo

First, I have no definitive information as to AML's motives and I have no reason to think that they are in any way acting in anything other than their own and their clients' interests.

Second, in my world it is not unknown for promoters of schemes that are subsequently dubbed as tax avoidance, to form "fighting groups" to operate against HMRC in litigation which have two (amongst many) effects. First, they charge fees for this. Second, it puts the promoter totally in control of timing and strategy etc.

In some cases we have issued warnings that time limits for bringing claims are coming up and the reaction from such groups has been "furious", "panic", etc and some have folded.

I understand AML are still in business and still offering contractor "schemes" (although not DOTAS'd which is remarkable) and as such they may have more skin the game and wish to be seen to be supportive and helpful.

Other firms have long since crashed and burned but like a phoenix, the same people appear under a different name with their sins washed away. They would have less interest in supporting those left with the ashes as the new generation of contractors have not experienced the pain of the previous.

In terms of numbers of users v posters, I'm not surprised. We reckon on perhaps 10% of those in schemes are active. Another 20% to 30% will "lurk" and the remainder will be following other strategies such as direct HMRC approach, using accountants, ostrich syndrome.

I've said before that any firm registered with the ICAEW or CIOT will be competent. Some firms have specialist people but I don't know who they are.

Costs?

Tax partner time in Central London perhaps £500 an hour plus. Certainly financial services tax specialists can be £1,000 an hour.
Tax junior time, say £250.
In the provinces perhaps half that.

Best option by far is to get together in a group and agree a fixed charge with a firm which has specialist knowledge or people (or both).

As I've explained before my firm is not yet in this space. We are considering it and if it is the case that we do something, then I will let the moderators of this forum know first as I don't wish to transgress any written or unwritten rules.

[ads1980]

Well, I have just been reading back through my terms of employment from 2008 and also the details that they provided to me. I guess you can only go by what they said at the time (which I did) and i'm not sure that any of it would be relevant anyway. But I have the docments that they sent me at the time so will read through them as well.

[ads1980]

Well AM Limited are adamant that they will fight this and that it is unjust. They have said that if HMRC decide to issue APNs that they will go straight to counsel with a view of court action. ROB79 might be best places to advise on this although I know you don't know the company and scheme personally but does this seem justifiable and should we be looking to seek legal assistance outside of them?

[Rob79]

Well AM Limited are adamant that they will fight this and that it is unjust. They have said that if HMRC decide to issue APNs that they will go straight to counsel with a view of court action. ROB79 might be best places to advise on this although I know you don't know the company and scheme personally but does this seem justifiable and should we be looking to seek legal assistance outside of them?

I'm pleased that AM will fight their corner. Have they told you how and why they think they have a case?

The "unjust" label depends on where you stand.

You may think it unjust that HMRC has taken an age to get around to telling you that cash you received is in fact taxable, contrary to what (in this case) AML said.

A non contractor who has paid tax on earnings may regard it as unjust that people can "get away" with paying tax at a much lower rate.

The Government may consider it unjust that people sat next to each other and earning much the same, can have such different tax rates.

It's all subjective.

My personal view is that trying to overturn legislation that has had the benefit of Parliamentary debate and the support of all parties, is a waste of time. There is no legal precedent for claiming that this is retrospective taxation and the European Courts are usually unable to hear cases relating to national tax jurisdiction. That position has been further entrenched as countries enter the BEPS negotiations. (Base Erosion and Profit Shifting) is a real issue with countries looking to protect their tax base.

The best a JR will do is perhaps stay the collection of an APN amount until a decision is reached. Would we be surprised if JR applications are refused and/or decisions are rushed out?

I wish AM luck in their position and I'm pleased that they have the cojones to stand up on behalf of their clients.

Just be aware that tax litigation is long and expensive. Average time from closure notice to end of process, perhaps 6 to 8 years. Cost would be approaching £2m.

That sort of cost and commitment is serious and before you set off down the road you need to be sure that you can complete the course. For example, has AM committed in writing to JR and subsequent tax Tribunals? Do they have a limit on their participation? Do they have the financial and other resources?

I will repeat that I know little about AM and from what I see here they are certainly still in touch with clients and responsive. Good luck to them, just cover your bases.

[StrengthInNumbers]

I'm pleased that AM will fight their corner. Have they told you how and why they think they have a case?

The "unjust" label depends on where you stand.

You may think it unjust that HMRC has taken an age to get around to telling you that cash you received is in fact taxable, contrary to what (in this case) AML said.

A non contractor who has paid tax on earnings may regard it as unjust that people can "get away" with paying tax at a much lower rate.

The Government may consider it unjust that people sat next to each other and earning much the same, can have such different tax rates.

It's all subjective.

My personal view is that trying to overturn legislation that has had the benefit of Parliamentary debate and the support of all parties, is a waste of time. There is no legal precedent for claiming that this is retrospective taxation and the European Courts are usually unable to hear cases relating to national tax jurisdiction. That position has been further entrenched as countries enter the BEPS negotiations. (Base Erosion and Profit Shifting) is a real issue with countries looking to protect their tax base.

The best a JR will do is perhaps stay the collection of an APN amount until a decision is reached. Would we be surprised if JR applications are refused and/or decisions are rushed out?

I wish AM luck in their position and I'm pleased that they have the cojones to stand up on behalf of their clients.

Just be aware that tax litigation is long and expensive. Average time from closure notice to end of process, perhaps 6 to 8 years. Cost would be approaching £2m.

That sort of cost and commitment is serious and before you set off down the road you need to be sure that you can complete the course. For example, has AM committed in writing to JR and subsequent tax Tribunals? Do they have a limit on their participation? Do they have the financial and other resources?

I will repeat that I know little about AM and from what I see here they are certainly still in touch with clients and responsive. Good luck to them, just cover your bases.

Rob79 first many thanks for your posts and I find them very useful.

I have one question if you can help please. Where promoters like AML are supporting the contractors in litigation what should the contractors be careful about? For example should it be argued in FTT that Tax was employers responsibility not contractor who were employees? This might be wrong example but I am trying to understand how can contractors now ensure that promotors don't miss some arguments in their own interest when going to litigation.

As for the cost of litigation if sufficient numbers are around £2M can be collected only by £1000 contribution from 2000 contractors and £2 will easily take you to Supreme court (definitely to CoA) with a very good/expensive silk. When on average 10s of thousand is at stake, chipping in £1000 to have a shot at getting it back seems like a logical choice provided you approach this in a professional manner to ensure no penalties etc come into play

[Rob79]

Rob79 first many thanks for your posts and I find them very useful.

I have one question if you can help please. Where promoters like AML are supporting the contractors in litigation what should the contractors be careful about? For example should it be argued in FTT that Tax was employers responsibility not contractor who were employees? This might be wrong example but I am trying to understand how can contractors now ensure that promotors don't miss some arguments in their own interest when going to litigation.

As for the cost of litigation if sufficient numbers are around £2M can be collected only by £1000 contribution from 2000 contractors and £2 will easily take you to Supreme court (definitely to CoA) with a very good/expensive silk. When on average 10s of thousand is at stake, chipping in £1000 to have a shot at getting it back seems like a logical choice provided you approach this in a professional manner to ensure no penalties etc come into play

More than one question but as I'm stuck in an airport staring at the fog at the moment, I'll have a go.

Firstly, I don't have an analysis of the AML scheme and as such the following is very general. The actual answer may vary depending on the actual transactions that took place.

Let's assume that the contractor was an employee of an IOM company. That company had a UK PAYE scheme and deducted tax and NI from payments made and paid these to HMRC. At the same time, this company made a payment to an IOM trust established for the benefit of the employees. That trust made a loan to its beneficiary (employee).

In this scenario, HMRC are arguing that the loan routed via the trust is actually salary that should be taxable.

If that view is correct, will the tax rules deem this as a payment that should have been subject to PAYE deductions by the employer? Should the amount of the loan be seen as taxable income of the contractor without being seen as salary subject to PAYE?

The answer is that HMRC will probably try both routes. They will claim that the income is taxable and that their first port of call for that tax is employer, given that the IOM trust is probably untouchable without a law suit (and an international relations spat). If they employer fails to pay, they can go to the recipient of the funds. In the UK, the tax rules give HMRC the ability to do this and they use it sparingly but they do use it. Unfortunately the rules here are all contained in "Regulations" rather than primary legislation (because PAYE is mainly an administrative system and not all its rules are in primary legislation). One consequence of this of course is that the income is seen as net salary and needs grossing up for tax. I've mentioned this before but was drowned out by several voices.

After all of the above, it's easier for HMRC to say that the loan is taxable income from a "self employment" and collect tax via assessment. That route is convenient but may (stress "may" not "definitely") create a very awkward scenario for HMRC's argument that the income is taxable at all.

Will I explain that further? NO - that's my IP which I may be able to monetize in due course.

Short answer therefore is that AML (in this case) might be on the hook, but HMRC will chase recipients.

My reference to being careful is in relation to allowing AML (or others) to control your destiny. From what I've read here, AML appear to be standing by their clients, which is to be applauded. I think others are not so fortunate. If AML are prepared to provide resource (money and time and information) in fighting your corner - great. But be careful about how long they can do that without charging additional fees.

It may be that the fees they eventually charge are reasonable and in line with your comments above. However, they are a commercial organisation and will need to show a profit. It would be disaster if they get you through FTT and then wanted a lot of fees to continue because you'd be between a rock and a hard place. You may also have expired any time limits on bringing claims by then.

I stress that I have no information that this will be the scenario and have no inside knowledge of AML's motives. They seem to be doing a good job so let's hope it continues.

[ads1980]

Thanks Rob79. Really useful information. I am going to give them a call anyway but is there anything specifically that I should ask that they might not otherwise disclose without me asking directly? I know its difficult for you like you say as you don't know the set up but any help is greatly appreciated.

[Rob79]

Thanks Rob79. Really useful information. I am going to give them a call anyway but is there anything specifically that I should ask that they might not otherwise disclose without me asking directly? I know its difficult for you like you say as you don't know the set up but any help is greatly appreciated.

Ask them how far they're prepared to litigate and who is paying?

[ads1980]

Ask them how far they're prepared to litigate and who is paying?

I do have some details but I don't think it's wise for me to post them on here. But I will ask about the payment. Thanks Rob