HMRC Enquiry letters on Loans from EBT and other schemes

[varunksingh]

Contracting Through Cascade-london since 2006

They replied on my behalf when I got an enquiry letter for 2010-2011 Tax Return. Now I have received this same discovery notice for 2008-2009 and Cascade-london have got Kingston Smith to respond. Very grateful to Cascade. My biggest worry is what would happen if Cascade-london goes under in coming years? If HMRC makes is impossible for business like Cascade to work, what would happen?

[centurian]

For the avoidance of doubt. The PCG insurance with AbbeyTax does not cover this type of tax planning/avoidance. I have already tried that route as a PCG member.

Wasn't too surprised that the PCG wouldn't cover it. Think about it, this was a personal loan, completely unrelated to your work related activities as a contractor, right ?

[zborg]

I also was with Cascade for a number of years and got the dreaded letter through this morning...will contact them on Monday and find out what they suggest - glad they are still around and seem helpful!

[Michael J Perry FCA]

Reminder from history

I also was with Cascade for a number of years and got the dreaded letter through this morning...will contact them on Monday and find out what they suggest - glad they are still around and seem helpful!

HMRC tend to investigate the promoter (who subsequently goes into liquidation) leaving the employees high and dry and fending for themselves. It is a pattern we have seen many times over the years. Where do you think HMRC got your details?

They also tend to offer ‘free’ tax specialist advice and defend the scheme as ‘legal’ and backed up by ‘counsels opinion’. The motivation might be not to panic anybody which could affect current business if the promoter is still trading as in the case of, for example, Cascade, Sanzar (Garraway), Darwinpay, Raingold, etc.

My advice is use an independent qualified tax specialist that deals ONLY with this particular area of tax practice (not necessarily me!). That is an FCA, FCCA or CTA. Do the due diligence before making contact and ask the right questions (see above #233).

Common sense will lead you to the right answer for the long haul ahead.

Good luck!

Update: HMRC still issuing further 2008/09 assessments. Wait for the COP 8 Enquiry Notices next!
Miss L J Stopp and her team are very busy and may not have time to read this!

[buddingarchitect]

HMRC responds after my appeal

I'm new to this thread too and have followed the instructions from Edge Consulting to appeal using their template. Sent by guaranteed delivery.

HMRC have now written to me again indicating that they have received my appeal and postponement application.

The letter goes something like this:

I note you appeal against the 2008-2009 assessment, and your contentions in this respect. However, my view remain that the funds you received are taxable - potentially under a number of alternative provisions, including employment income rules and specific anti avoidance legislation. We feel this applies, but will consider any further evidence you may wish to put about the operation of the scheme in our particular circumstances in support of your appeal that the income is not taxable. If you do wish us to consider further details at this time, could you please also confirm the full amount of sums you received as loans, if my original estimate is incorrect. If I do not hear from further from you at this point your appeal will remain open. I will nevertheless continue to review the arrangements and will write to you again in the near future

Then there's further details about the postponement and their estimate, then ways to pay, etc...

Will send a copy of this letter to Edge Consulting on Monday and see what they have to say. But so far Michelle from Edge has been very informative and supportive and mentioned that they have consulted with KPMG their accountants and we should appeal all the way as HMRC have no case.

Agreeing to pay in my opinion is an admission of some sort and all the paperwork I have is that the EBT scheme is legit and that I have a loan which has already been taxed and which I may have to pay back. I'd rather pay back the loan and then have it paid to me as salary at some later date when I'm taking time off so I can be taxed at a lower rate. If they had evidence they wouldn't be asking for it, like the amount I have in loans.

[Michael J Perry FCA]

HMRC response to your appeal

I'm new to this thread too and have followed the instructions from Edge Consulting to appeal using their template. Sent by guaranteed delivery.

HMRC have now written to me again indicating that they have received my appeal and postponement application.

The letter goes something like this:

I note you appeal against the 2008-2009 assessment, and your contentions in this respect. However, my view remain that the funds you received are taxable - potentially under a number of alternative provisions, including employment income rules and specific anti avoidance legislation. We feel this applies, but will consider any further evidence you may wish to put about the operation of the scheme in our particular circumstances in support of your appeal that the income is not taxable. If you do wish us to consider further details at this time, could you please also confirm the full amount of sums you received as loans, if my original estimate is incorrect. If I do not hear from further from you at this point your appeal will remain open. I will nevertheless continue to review the arrangements and will write to you again in the near future

Then there's further details about the postponement and their estimate, then ways to pay, etc...

Will send a copy of this letter to Edge Consulting on Monday and see what they have to say. But so far Michelle from Edge has been very informative and supportive and mentioned that they have consulted with KPMG their accountants and we should appeal all the way as HMRC have no case.

Agreeing to pay in my opinion is an admission of some sort and all the paperwork I have is that the EBT scheme is legit and that I have a loan which has already been taxed and which I may have to pay back. I'd rather pay back the loan and then have it paid to me as salary at some later date when I'm taking time off so I can be taxed at a lower rate. If they had evidence they wouldn't be asking for it, like the amount I have in loans.

That is going to be one of the standard responses as the cases are being coordinated by HMRC Specialist Investigations Office who will want to maintain a holding position at this time.

[smgrant78]

HMRC Enquiries on Loans from EBTs.

I've also received the 2008/2009 letter and the 2011 enquiry letter and am wondering what to do. Everything that I have read around EBT's suggests that HMRC are attempting to cajole members in EBT's into paying up as opposed to having won test cases to prove that the schemes are unlawful.

The recent Rangers case (although north of the border and subject to Scottish Law) suggests that interpretations can differ; there was a 2-1 majority rule against HMRC which they are appealing.

I'm trying to figure in which direction to go. I'm not for paying up (I still believe that the scheme was lawful at the time and do not like what I see as the retrospective change of tax treatment) until forced with one arm behind my back to do so. I've got two questions I am hoping someone can help me with;

1. I see on earlier posts that Michael J Perry is referred to with regards to pooling funds to appeal. Can Michael J Perry please stand up or can someone tell me how I get in contact (I'd be in favour of this approach)
2. Was anyone out there with Penfolds Limited? or with Tenon (IOM) Limited? If someone is, have you had any success with either the trustee or the company issuing the EBT

Cheers
Steve

[administrator]

Hi smgrant78, have upgraded your account so you can now send Private Messages - so you can contact Michael J Perry via PM if you need to.

[smgrant78]

Template to appeal

Someone references using a template to appeal. Is there a link someone can share? I'm going to try Cascade, Penfolds etc etc first but if all else fails a template would help to keep the wolves at bay for the moment.

[varunksingh]

What Documents/Info to collect?

HMRC tend to investigate the promoter (who subsequently goes into liquidation) leaving the employees high and dry and fending for themselves. It is a pattern we have seen many times over the years. Where do you think HMRC got your details?

They also tend to offer ‘free’ tax specialist advice and defend the scheme as ‘legal’ and backed up by ‘counsels opinion’. The motivation might be not to panic anybody which could affect current business if the promoter is still trading as in the case of, for example, Cascade, Sanzar (Garraway), Darwinpay, Raingold, etc.

My advice is use an independent qualified tax specialist that deals ONLY with this particular area of tax practice (not necessarily me!). That is an FCA, FCCA or CTA. Do the due diligence before making contact and ask the right questions (see above #233).

Common sense will lead you to the right answer for the long haul ahead.

Good luck!

Update: HMRC still issuing further 2008/09 assessments. Wait for the COP 8 Enquiry Notices next!
Miss L J Stopp and her team are very busy and may not have time to read this!

Hi Michael, Can you advise what information one contractor should collect from his solution provider if he want to use someone like yourself. Not just for now but to represent this all the way though. What documents one might need at Tribunal if it happens?