HMRC Enquiry letters on Loans from EBT and other schemes

[TheDandy]

In some ways it doesn't really matter. Loans to employees, interest free or otherwise, are perfectly legitimate. The problem comes when a scheme operator uses a legitimate tax structure but the applies it incorrectly to create an artificial arrangement with no purpose other than to avoid tax - that's what the Courts will consider when making their judgement. Se Cojak's comments on the Rangers case - there was an expectation that the loans would be repaid - a contractor entering into an EBT scheme would not expect to have to repay the loan as, in reality, what ended up in their pockets was their earnings from a contract, just with less tax paid.

The loan will have to be repaid or tax paid. Expectations aside (and counsel can't just turn up at the Tribunal with assertions), when you part company from your mortal coil you'll have a debt to repay out of your estate. If it's written off (taxable event). Tax deferment no?

IANAL. The answer is to get yourself some legal advice from a qualified professional.

[jonnyd]

not recieved any settlement letter

Hi all,

I was on a scheme for a couple of years 2007/8 but so far Ive not recieved any settlementment letter.
Any ideas?
Would they have chosen to go after the top 50% of ebt users?
Who knows..

should I still expect one?
I guess so, but I find it weird I havnt recieved one. Would my total loans not have been enough to hit a threshold?

[vern19]

Hi all,

I was on a scheme for a couple of years 2007/8 but so far Ive not recieved any settlementment letter.
Any ideas?
Would they have chosen to go after the top 50% of ebt users?
Who knows..

should I still expect one?
I guess so, but I find it weird I havnt recieved one. Would my total loans not have been enough to hit a threshold?

Have you ever received a discovery notice for 07/08?

[jbryce]

In the Rangers case the EBT recipients were genuine employees whose services were used by the club, they weren't contractors who worked for a third party and then put their contract earnings through a 'scheme'. With regard to case law:

Rangers Football Club

Murray Group Holdings & Others v HMRC [2012] UKFTT 692 (TC)

Outcome: Taxpayer win, HMRC to appeal
etc....

Why don't HMRC just pick on one of the Contractor EBTs?

I've never really got that. They quote non of the above, but reference Boyle which has scant resemblance to most schemes. Surely if they just, once and for all, nailed a scheme then we'd all roll over?

[malvolio]

Why don't HMRC just pick on one of the Contractor EBTs?

I've never really got that. They quote non of the above, but reference Boyle which has scant resemblance to most schemes. Surely if they just, once and for all, nailed a scheme then we'd all roll over?

Once again, it's not about the scheme, it's about whether or not you are entitled to the tax breaks offered by the scheme. It doesn't even have to be an EBT, they are just one route; it's how you're connected to the EBT (or whatever other option) that makes the difference.

The key point about Rangers (which isn't fully settled yet anyway, although I suspect the ruling will be upheld) is that the people involved were genuine employees. Contractors aren't.

[jonnyd]

Have you ever received a discovery notice for 07/08?

If you mean did I recieve a notice asking for back taxes due to a being involved in an EBT then yes, about 18 months ago for 08, maybe longer. I appealed that and then recieved another letter stating that I didnt owe anything unless the appeal process deems otherwise.

What am I to make of that? and the lack of the latest letter?

[vern19]

If you mean did I recieve a notice asking for back taxes due to a being involved in an EBT then yes, about 18 months ago for 08, maybe longer. I appealed that and then recieved another letter stating that I didnt owe anything unless the appeal process deems otherwise.

What am I to make of that? and the lack of the latest letter?

The assessment you received 18 months ago means that HMRC have now protected that year. The lack of a settlement letter is strange but unfortunately, I doubt they have forgotten about you.

[jbryce]

Once again, it's not about the scheme, it's about whether or not you are entitled to the tax breaks offered by the scheme. It doesn't even have to be an EBT, they are just one route; it's how you're connected to the EBT (or whatever other option) that makes the difference.

The key point about Rangers (which isn't fully settled yet anyway, although I suspect the ruling will be upheld) is that the people involved were genuine employees. Contractors aren't.

Not sure that is really the key point with Rangers as it didn't rest with their being employed - that was a side issue to them actually receiving loans. Anyway all it really shows is that when HMRC trumpet a win, as they did with Rangers, they look ridiculous when they lose.

The point is.
Boyle is not really applicable, so why not tackle a contractor based EBT and prove the point one way or another? Even HMRC aren't convinced by Boyle so why noy go after a contractor EBT?

[LisaContractorUmbrella]

Not sure that is really the key point with Rangers as it didn't rest with their being employed - that was a side issue to them actually receiving loans. Anyway all it really shows is that when HMRC trumpet a win, as they did with Rangers, they look ridiculous when they lose.

The point is.
Boyle is not really applicable, so why not tackle a contractor based EBT and prove the point one way or another? Even HMRC aren't convinced by Boyle so why noy go after a contractor EBT?

HMRC look for precedents which is why they will target and pursue certain companies even though there may be other companies that would appear to the outsider to be a better target. They even went after a vicar for the tax on the Easter Sunday church plate just to prove a point! (VAT cases are worse - one went on for years over whether or not a Jaffacake was a cake or a biscuit - VAT is due on one and not the other and it ended up with the lawyers bringing a giant Jaffacake into the court room and then breaking it to see if it made a snapping noise like a biscuit )

I am sure that they would love to drag a dodgy umbrella scheme provider or contractor EBT scheme before the courts and prove all the points that they've been trying to make for years but it's unlikely that they will ever get that far as the companies in question will either fold or phoenix before they get the chance. Fighting HMRC in court is a very expensive business - £100,000's and, even if you win, you are unlikely to get your costs back so, a dodgy scheme provider who can fold one day and phoenix the next is really not likely to bother. It's more likely, if a company is targeted by HMRC and wants to continue with their business operations that they will agree to settle (often referred to as 'sweetheart deals' when it concerns very large corporation) - HMRC gets some money in and no-one has to go to court.

[horrada]

Once again, it's not about the scheme, it's about whether or not you are entitled to the tax breaks offered by the scheme. It doesn't even have to be an EBT, they are just one route; it's how you're connected to the EBT (or whatever other option) that makes the difference.

The key point about Rangers (which isn't fully settled yet anyway, although I suspect the ruling will be upheld) is that the people involved were genuine employees. Contractors aren't.

Who says there not genuine employees?

Contractor found the contract themselves. Not genuine employee?
IOM company found contract for employee. Genuine employee?