AM Limited COP8 HMRC Investigation Letter..

[neo222]

I (stupidly) fell into the trap of the EBT/PBT structures and was taken in with the 'it's 100% legal' and the 'Counsel Approved' sales pitches, along with the 85%+ take home! Fortunately, I changed to running my own Limited Company as of the beginning of this year, mainly direct to clients now.

I was hoping that my naivety (and to be honest, my stupidness) wouldn't come back and bite me in the butt. I finally saw that it wasn't as 'legal' as they made out and was not worth the risk.

Today, I have received a letter from HMRC, which starts with "Thank you for your Tax Return for the year ended 5 April 2011." The letter goes on to say "I would now like to check your return. My check will be made under Section 9A Taxes Management Act 1970, and under HMRC Code of Practice 8 - cases where serious fraud is not suspected."

They go on to explain few general things about how they will conduct this check fairly, and go on to say;

"I note that during the year you took part in arrangements whereby you had entered into a contract of employment with an offshore employer AM Limited and in due course received sums of money in the form of loans or expenses."

Would you please let me know

• What sums you received in the form of loans or expenses during this year endded 5 April 2011, either directly or indirectly with your engagement with AM Limited.
• What amounts of loans you have since repaid, and on what dates.

As you can imagine, I am very worried, haven't properly slept since I got the letter and not sure what happens next. I have asked AM Limited what to do next as I am assuming that it is not just me that is been asked these questions. A tax specialist has advised that this is a 'Project case' and HMRC will be targeting everyone who usedAM Limited.

I have a few questions...

1. I have already provided them the amounts on my Tax Return, why are they asking for the same figure again?
2. Obviously I haven't paid any of the loan back -I am trying to find out what I should answer this question with.
3. When I provide this information, are they going to straight away slap me in the face with a bill for PAYE and NI against the loan amount, or will that come once they have challenged the AM Limited EBT structure/vehicle in a court?
4. If they do send me a tax bill for PAYE/NIC against the loan, for example, for around £60,000, and I cannot afford it (which I can't!), can I pay them monthly? I don't want to go bankrupt.
5. I expect that if AM Limited will not help me, I will need some professional representation to deal with HMRC, and hopefully get across to them, that I was an idiot. Does anyone have any sort of idea how much someone like this would cost to do the communication between me and HMRC?

Constructive comments only please. I know I was naive, I know I was stupid to even go near these companies, but I saw this and changed things earlier this year.

Really grateful in advance. I hope the questions above will be helpful to anyone else in my situation.

Thanks,
(a very worried) Neo222

[SarahL2012]

Specialist needed....

You need to get specialist advice - preferably a tax accountant who has dealt with these kinds of queries before and knows what HMRC is looking for. There might be people on this board who can recommend someone....

[BrilloPad]

I have asked AM Limited what to do next as I am assuming that it is not just me that is been asked these questions. A tax specialist has advised that this is a 'Project case' and HMRC will be targeting everyone who usedAM Limited.

You need to hear what AM LImited have to say.

How far did they say they were prepared to defend you?

[centurian]

[*]When I provide this information, are they going to straight away slap me in the face with a bill for PAYE and NI against the loan amount, or will that come once they have challenged the AM Limited EBT structure/vehicle in a court?

Strictly speaking, I don't think HMRC are the ones that take it to court. I think they issue a bill and then the taxpayer either pays up or has to dispute it, which eventually escalates to court. That's often why court cases are labelled "[taxpayer] v HMRC". It's the taxpayer that is challenging HMRC's tax demand.

You really need professional advice on this. Don't take any armchair lawyer guidance we give you.

Also, really get onto AM Limited. To stand any chance, you need them to step up to to the plate. As BP said, look into what promises were made about defending the scheme.

[BrilloPad]

You really need professional advice on this. Don't take any armchair lawyer guidance we give you.

deffo. As a guide Montpelier said they would defend their scheme up to high court(now supreme court). That was lost. Montpelier are going to Europe - the members have formed NTRT(not backed by Montpelier) and are trying to get the retrospective part of the law reversed - a very difficult process even though HMRC lied!

You can seee the many section 58 threads - its been going on for nearly 5 years now and no end in sight!

But your scheme may go a totally different direction.

Very best of luck.

[neo222]

Really appreciate your answers. I have only just sent the letter to AM Limited. I may be one of the first to have got the letter as I can't find any other people with the same letter, and I know quite a few users of the scheme. I expectI will have to chase AML in the new year if I haven't heard anything.

I'm sure advertising is not allowed on this site, but where can I find any recommendations for accountants with this kind of experience as, even if AML are helpful, I would like second opinions as I may need to be clever with what I do with the next year or two's earnings..

[Jessica@WhiteFieldTax]

Do you have an accountant already for your company? If so, see if they will take this type of work on, or if they have a referral route?

COP 8 isn't as serious as COP 9, but none the less this is the serious end of HMRC.

When we had a client with a COP 9 a few years back, we brought in Qdos as a consultant and they co-worked the case with us, but their business has now split, and I'm not sure offhand whether this type of thing now sits in the residual Qdos business or with Taxwise/Peninsula who took over part of the business. If you need a starting point, in the absence of your own accountant, then Qdos or Accountax would be a good start.

[mudskipper]

I (stupidly) fell into the trap of the EBT/PBT structures and was taken in with the 'it's 100% legal' and the 'Counsel Approved' sales pitches, along with the 85%+ take home! Fortunately, I changed to running my own Limited Company as of the beginning of this year, mainly direct to clients now.

I was hoping that my naivety (and to be honest, my stupidness) wouldn't come back and bite me in the butt. I finally saw that it wasn't as 'legal' as they made out and was not worth the risk.

Today, I have received a letter from HMRC, which starts with "Thank you for your Tax Return for the year ended 5 April 2011." The letter goes on to say "I would now like to check your return. My check will be made under Section 9A Taxes Management Act 1970, and under HMRC Code of Practice 8 - cases where serious fraud is not suspected."

They go on to explain few general things about how they will conduct this check fairly, and go on to say;

"I note that during the year you took part in arrangements whereby you had entered into a contract of employment with an offshore employer AM Limited and in due course received sums of money in the form of loans or expenses."

Would you please let me know

• What sums you received in the form of loans or expenses during this year endded 5 April 2011, either directly or indirectly with your engagement with AM Limited.
• What amounts of loans you have since repaid, and on what dates.

As you can imagine, I am very worried, haven't properly slept since I got the letter and not sure what happens next. I have asked AM Limited what to do next as I am assuming that it is not just me that is been asked these questions. A tax specialist has advised that this is a 'Project case' and HMRC will be targeting everyone who usedAM Limited.

I have a few questions...

1. I have already provided them the amounts on my Tax Return, why are they asking for the same figure again?
2. Obviously I haven't paid any of the loan back -I am trying to find out what I should answer this question with.
3. When I provide this information, are they going to straight away slap me in the face with a bill for PAYE and NI against the loan amount, or will that come once they have challenged the AM Limited EBT structure/vehicle in a court?
4. If they do send me a tax bill for PAYE/NIC against the loan, for example, for around £60,000, and I cannot afford it (which I can't!), can I pay them monthly? I don't want to go bankrupt.
5. I expect that if AM Limited will not help me, I will need some professional representation to deal with HMRC, and hopefully get across to them, that I was an idiot. Does anyone have any sort of idea how much someone like this would cost to do the communication between me and HMRC?

Constructive comments only please. I know I was naive, I know I was stupid to even go near these companies, but I saw this and changed things earlier this year.

Really grateful in advance. I hope the questions above will be helpful to anyone else in my situation.

Thanks,
(a very worried) Neo222

To clarify, do you think you will owe tax/NIC on £60K of income, or do you think your bill will be £60K?

If the former, it may be worth working out how much you are likely to owe vs. the costs of professional representation if AM aren't going to defend it.

Worse case you could end up with big legal bill and big tax bill.

Good luck.

[neo222]

To clarify, do you think you will owe tax/NIC on £60K of income, or do you think your bill will be £60K?

If the former, it may be worth working out how much you are likely to owe vs. the costs of professional representation if AM aren't going to defend it.

Worse case you could end up with big legal bill and big tax bill.

Good luck.

Hi mudskipper,

I've just been doing some workings and looking at my tax return that I submitted. THe cash benefit was approximately £6000 for the tax year and the loan amount was approximately £110,000.

I am assuming if HMRC want to go harsh on me and tell me that the loan was disguised renumeration, then I would be charged a load of Tax and NI on the £110,000 amount?

The problem is I have got absolutely no idea how much one of these tax specialists would even charge... even a ball park figure.

I will be on the phone again to AML on 2 January wanting to know what they will do for me.

What I am confused about is why I am been investigated under COP8 when the maximum that could be recovered is maybe less than £40,000 and that's if they find that it wasn't a loan? COP8 investigations are for cases where they will recover of £500,000....

Bit confused still..

[neo222]

Do you have an accountant already for your company? If so, see if they will take this type of work on, or if they have a referral route?

COP 8 isn't as serious as COP 9, but none the less this is the serious end of HMRC.

When we had a client with a COP 9 a few years back, we brought in Qdos as a consultant and they co-worked the case with us, but their business has now split, and I'm not sure offhand whether this type of thing now sits in the residual Qdos business or with Taxwise/Peninsula who took over part of the business. If you need a starting point, in the absence of your own accountant, then Qdos or Accountax would be a good start.

Thanks for the information Jessica, I will take a look at the companies you suggest. I am hoping AML will help me out though as it would be in their best interests now I will be running a full commentary on this forum - and the fact that they are still trading and making a lot of money I expect..