HMRC Enquiry letters on Loans from EBT and other schemes

[dangerouswhensober]

There is an interesting and valuable snippet of information in the BBC report of the HMRC appeal:

"HMRC continues to believe that schemes using employee benefit trusts to avoid tax do not work. Around 700 users of EBT schemes have already settled with us resulting in around £800m of tax and NICs (National Insurance Contributions) being paid."

Now using some 'back-of-an-envelope' calculations (and because it's Friday afternoon & I have some time):

It has been commonly quoted that there are 60,000+ individuals in 1000+ schemes which are being (or may be) investigated by HMRC.

Let's assume that only one-third of those schemes involve EBTS (although I suspect it may be more than that, given the high priority that HMRC has assigned the Rangers case)

So roughly 20,000 individuals may be involved in EBT schemes under investigation - of which 700 have already settled for £800m

These ball-park figures show:
(1) Only 3.5% of EBT scheme users have already settled, and
(2) Total tax claimed from EBT scheme users is £ 22,857,000,000 (i.e. > £22 billion)

I find point (1) to be very heartening - I for one am not responding to the Settlement Offer I received, on a point of principle (I don't owe the money) and on a point of practice (I don't have the money immediately to hand). (And let's not forget that everone who does not settle causes extra workload for HMRC).

If in any way accurate, I find point (2) to be VERY REVEALING - it's not surprising HMRC won't give up on the Rangers EBT case - set against this potential collection, the legal fees (all the way up to the Supreme Court) are a drop in the ocean.

Now - bearing in mind that these guesstimates may be significantly wrong - anyone care to comment ?

Actually - if 700 users have settled for £800m, the average settlement figure is ~ £1.1 million !!!

Who are these contractors - and what kind of IT contracts are they on - and can I apply ??

[Safe]

Actually - if 700 users have settled for £800m, the average settlement figure is ~ £1.1 million !!!

Who are these contractors - and what kind of IT contracts are they on - and can I apply ??

Most of these are companies not individual contractors. Some of these companies have millions of EBT liabilities and hence £800m tax income for HMRC.

[zaphrus]

Actually - if 700 users have settled for £800m, the average settlement figure is ~ £1.1 million !!!

Who are these contractors - and what kind of IT contracts are they on - and can I apply ??

I think one of the settlors was Goldman Sachs Goldman Sachs let off paying £10m interest on failed tax avoidance scheme | Business | The Guardian

[Rob79]

There is an interesting and valuable snippet of information in the BBC report of the HMRC appeal:

"HMRC continues to believe that schemes using employee benefit trusts to avoid tax do not work. Around 700 users of EBT schemes have already settled with us resulting in around £800m of tax and NICs (National Insurance Contributions) being paid."

Now using some 'back-of-an-envelope' calculations (and because it's Friday afternoon & I have some time):

It has been commonly quoted that there are 60,000+ individuals in 1000+ schemes which are being (or may be) investigated by HMRC.

Let's assume that only one-third of those schemes involve EBTS (although I suspect it may be more than that, given the high priority that HMRC has assigned the Rangers case)

So roughly 20,000 individuals may be involved in EBT schemes under investigation - of which 700 have already settled for £800m

These ball-park figures show:
(1) Only 3.5% of EBT scheme users have already settled, and
(2) Total tax claimed from EBT scheme users is £ 22,857,000,000 (i.e. > £22 billion)

I find point (1) to be very heartening - I for one am not responding to the Settlement Offer I received, on a point of principle (I don't owe the money) and on a point of practice (I don't have the money immediately to hand). (And let's not forget that everone who does not settle causes extra workload for HMRC).

If in any way accurate, I find point (2) to be VERY REVEALING - it's not surprising HMRC won't give up on the Rangers EBT case - set against this potential collection, the legal fees (all the way up to the Supreme Court) are a drop in the ocean.

Now - bearing in mind that these guesstimates may be significantly wrong - anyone care to comment ?

The settlement figure will include some massive companies who will settle rather than fight and will include corporation tax as well as PAYE etc.

I agree that the legal fees are small in comparison and that HMRC will take this fight all the way. Initially I thought Court of Appeal but it appears that this will stay in Scotland and so go to the Court of Sessions. I need to look at their procedures.

[orientalist]

Apn and inheritance tax

A few thousand contractors affected by retrospection= we can live with that, everyone involved in inheritance tax planning being subject to uncertainty and apn's = a different kettle of fish! Let's hope the policy wonks push this one hard and see if that brings retrospection into focus for a lot more people....

[Rob79]

A few thousand contractors affected by retrospection= we can live with that, everyone involved in inheritance tax planning being subject to uncertainty and apn's = a different kettle of fish! Let's hope the policy wonks push this one hard and see if that brings retrospection into focus for a lot more people....

Probably a new thread on IHT but I'll let those with the power decide.

The issue on IHT is (probably) Discounted Gift Trusts. In very simple terms, you put £1m with an insurance company and agree to take back 5% a year. Depending on your age/health/income drawn/type of trust, some of that £1m falls out of IHT immediately (or so it is claimed). Hey presto, instant tax relief and 5% per annum tax free.

This is sold by some huge insurance companies - global names - as well as dodgy tax scheme punters.

It will indeed be interesting to see if HMRC/HMG take on this fight.

[Rad]

Hi,

I just received a similar scare mongery type letter, obviously I think HMRC dont have much to go on as I was with ASMG (Assignment Solutions) around 2006.

Have you done anything about this or has anyone got advise. I am thinking of jut ignoring this as its been such a long time and letter has no solid facts as it mentions a date upto 5th April 2011 and thats it!!

Advise is appreciated

I think contacting lawyers with experience in these matter on an individual basis will be very costly and less effective if we approached as a group.

Maybe be advisable to consider creating or using an existing group for individual providers and a main group for all users of tax avoidance umbrellas. I understand some individuals have done this already.

I've chatted to a lawyer who does not specialise in tax but the general advice is, work together with people in similar situation if your old umbrella is dissolved as is in my case with ASMG. Also on the general issue of retrospective tax and dealing with APNs.

[jbryce]

Strange. Do you have an open enquiry against you? If not, then the six years has been and gone.

Hi,

I just received a similar scare mongery type letter, obviously I think HMRC dont have much to go on as I was with ASMG (Assignment Solutions) around 2006.

Have you done anything about this or has anyone got advise. I am thinking of jut ignoring this as its been such a long time and letter has no solid facts as it mentions a date upto 5th April 2011 and thats it!!

Advise is appreciated

[lightball]

AML Limited v HMRC investigation

I used AML in 2013 for less than a year and have received no letters from HMRC. I decided to use them this year as I don't have any other choice.

if HMRC ever bothers me. All I'm going to say to them. If you repay my loan first I will then be able to pay your flipping tax.

There are lots of people taking up the loan from their banks. Are they also after them? No, so they should not even go there.

In reality you have agreed and sign up to get the loan and that's what you were getting. A LOAN.

How are you going to pay it back is none of their business.

If that is not a good defence then all these people with the bank loans are doomed too.

[LisaContractorUmbrella]

I used AML in 2013 for less than a year and have received no letters from HMRC. I decided to use them this year as I don't have any other choice.

if HMRC ever bothers me. All I'm going to say to them. If you repay my loan first I will then be able to pay your flipping tax.

There are lots of people taking up the loan from their banks. Are they also after them? No, so they should not even go there.

In reality you have agreed and sign up to get the loan and that's what you were getting. A LOAN.

How are you going to pay it back is none of their business.

If that is not a good defence then all these people with the bank loans are doomed too.

Are you sure you don't have a choice? You could set up a Limited Company or you could use a PAYE umbrella company.

With regard to the loan - when you are loaned money from a bank you sign a contract which commits you to paying the loan back over a given period of time at a set rate of interest. The arrangements HMRC are targeting are invariably sham arrangements - there is no intention that the 'loan' will ever be repaid. The money received is earnings from a contract and the loan arrangement serves no other purpose than to avoid tax.