HMRC Enquiry letters on Loans from EBT and other schemes

[bluerover]

TRM/Raingold

Edge have now contacted me and informed the following complete with appeal letter text:

Their view on this is that in the first instance HMRC don’t have a leg to stand on, this view supported by KPMG, their tax advisors having not won a single ‘like-for like’ case.

In the first instance they have advised to send the letter (below) and should HMRC come knocking with further demands they will ‘consider’ appointing KPMG to fight further claims – all in all the person I spoke to appeared supremely confident this was nothing more than a fishing trip on the good ship ‘empty vessel’

Letter (this can be used by others, amended where required)

Dear xxxxx

I am writing to formally notify my appeal against an additional tax liability of £xxxxxxx assessed for the tax reporting period 2008/2009 which has arisen from an outstanding beneficial loan balance.

During the 2008/2009 tax period, I was employed by Edge Consulting Limited in the capacity of a xxxxx Consultant. My services were outsourced to an end client for an arranged fee and I was remunerated by way of an agreed salary. At this time, profit that Edge Consulting Limited generated from the outsourcing of its employees was settled into an employee benefit trust of which its employees and I as such an employee, became beneficiaries. The employees were then able to periodically request funds from the trust, this was a request made to the trustees who, at their discretion, would advance funds to the employee from the trust. The funds were paid to the employees as a loan, these loans did not attract an interest rate and were therefore regarded as beneficial to the employee. The loans have always been treated as beneficial by Edge Consulting Limited and my P11D documents support this. Furthermore, these loans all remain outstanding and can be recalled by the trustees at any time.

In consideration of the above, the outstanding EBT loan values should not be treated as income and only the relevant benefit-in-kind tax should apply. This benefit-in-kind denoted in the P11Ds should have been collected through subsequent adjustments of my PAYE tax code.

I trust this should prove sufficient at this stage.

Yours sincerely,

Thanks for sharing. This sounds better than the one TaxTalkUK have provided. Bit more weight to it.

As ads1980 said in their post given the detail in the letter they posted it might not be suitable for all and I certainly couldn't say for sure. We are all have similar issue but with different companies.

So potentially the above letter, anyone could use changing the details appropriately. One daft question, what value do you replace XXXX with that precedes 'Consultant' in the first sentence of the second paragraph. Is it area of work such as IT or something more specific.

As per DonkeyRhubarbs comments totally agree with recorded delivery to prove the letter has been sent...

Its certainly been very helpful, supportive and definitely calming to see these responses. I'm in a place where I just want to get an appeal in a see what happens next.

[shevlane]

Be careful which 'template' letter you use and what you disclose

Edge have now contacted me and informed the following complete with appeal letter text: Letter (this can be used by others, amended where required)

Dear xxxxx

I am writing to formally notify my appeal against an additional tax liability of £xxxxxxx assessed for the tax reporting period 2008/2009 which has arisen from an outstanding beneficial loan balance.

During the 2008/2009 tax period, I was employed by Edge Consulting Limited in the capacity of a xxxxx Consultant. My services were outsourced to an end client for an arranged fee and I was remunerated by way of an agreed salary. At this time, profit that Edge Consulting Limited generated from the outsourcing of its employees was settled into an employee benefit trust of which its employees and I as such an employee, became beneficiaries. The employees were then able to periodically request funds from the trust, this was a request made to the trustees who, at their discretion, would advance funds to the employee from the trust. The funds were paid to the employees as a loan, these loans did not attract an interest rate and were therefore regarded as beneficial to the employee. The loans have always been treated as beneficial by Edge Consulting Limited and my P11D documents support this. Furthermore, these loans all remain outstanding and can be recalled by the trustees at any time.

In consideration of the above, the outstanding EBT loan values should not be treated as income and only the relevant benefit-in-kind tax should apply. This benefit-in-kind denoted in the P11Ds should have been collected through subsequent adjustments of my PAYE tax code.

I trust this should prove sufficient at this stage.

Yours sincerely,

I have seen a few of these example letters now, and it appears that they are either short (in keeping with telling them only what they are asking for at any point in time - i.e. not revealing too much if you don't have to) or long (laying out your cards & arguing your case in detail right from the off).

I am not sure which approach is better, but I'm leading towards the former, and then enter into a detailed specific argument later, if required.

Certainly, in the case of the above letter, it is custom to the Edge scheme. I certainly wouldn't use it as is for Talent Resource Management - as our loans were not interest free. They were in line with the BoE base rate + a certain percentage, in order to not have to fill out a P11D. Using the above could be detrimental to our case.

- shevlane

[DonkeyRhubarb]

I am not sure which approach is better, but I'm leading towards the former, and then enter into a detailed specific argument later, if required.

I'm with you on this. At this stage all you need to say is you don't accept the loans were income and you want to appeal.

Personally I would never give them any more than they ask for.

[LandRover]

Appeals

If x thousands appeal will HMRC be able to cope with the administration of all this?

[DonkeyRhubarb]

If x thousands appeal will HMRC be able to cope with the administration of all this?

Although they may have geared up for it, I am expecting a complete utter shambles.

That's why I'm suggesting everyone send any appeals or other letters to them by recorded delivery, so you've got proof you sent it and they received it.

[Vallah]

I'm with you on this. At this stage all you need to say is you don't accept the loans were income and you want to appeal.

Personally I would never give them any more than they ask for.

At this early stage I'm not sure it really matters as long as you appeal, as you say. However if you do put a few technical points in, you can always bat it back to them when they invariably don't answer the points when they send the next auto-generated letter out.

[DonkeyRhubarb]

Heads up

I've been contacted by a promoter I know who has been dealing with these assessments for quite a while.

They have suggested including the following in the appeal letter, otherwise there is a risk that HMRC might not postpone collection of all the monies. (Some of their clients have been chased for money even after they've appealed!!!)

"The postponement application should ensure that any amendments to payments on account and surcharges etc are taken into account"

[Michael J Perry FCA]

HMRC 2008/09 assessment and 2010/11 Tax Return Enquiry

Please read my earlier post in which I attached my CLIENT ALERT!

Due to the volume of conversation and conflicting views I am very happy to speak to any contractor who has worries about this.

I can explain in simple language EXACTLY what needs to be done and this will be CORRECT advice.

You can contact me any time and I would like to give an assurance that this advice is free of charge and with no hidden agenda!

I really do not like seeing so-called professional advice being applied to any and all circumstances.

[DonkeyRhubarb]

Please read my earlier post in which I attached my CLIENT ALERT!

Due to the volume of conversation and conflicting views I am very happy to speak to any contractor who has worries about this.

I can explain in simple language EXACTLY what needs to be done and this will be CORRECT advice.

You can contact me any time and I would like to give an assurance that this advice is free of charge and with no hidden agenda!

I really do not like seeing so-called professional advice being applied to any and all circumstances.

I applaud your offer to help but we are probably talking thousands of contractors here, across many variants of the scheme, who are affected.

Also, I think the first port of call for anyone should be the promoter who sold them the scheme. Only they will know the precise details of the tax structure and any legal opinion underpinning it.

[bluerover]

I've been contacted by a promoter I know who has been dealing with these assessments for quite a while.

They have suggested including the following in the appeal letter, otherwise there is a risk that HMRC might not postpone collection of all the monies. (Some of their clients have been chased for money even after they've appealed!!!)

"The postponement application should ensure that any amendments to payments on account and surcharges etc are taken into account"

Thanks DonkeyRhubarb. Really appreciating the advice and support...