HMRC Enquiry letters on Loans from EBT and other schemes

[DonkeyRhubarb]

I think my man is saying these rules apply COP 8 or not, and the intent part would have to be proven if an assessment were raised, and this gets more difficult for hmrc the longer the elapsed time.

I don't see how that can be right since HMRC can only use discovery where an enquiry hasn't been opened.

[Rob79]

I don't see how that can be right since HMRC can only use discovery where an enquiry hasn't been opened.

I would agree.

If the year is open, i.e. no agreement on tax due, then HMRC can keep it open until a Court says otherwise. If it is open, then they can raise an assessment at any time.

COP 8 in place means the year is open.

Discovery is used by HMRC to reopen a year that has closed due to expiry of time or a formal closure notice.

The issue here might be a function of Chinese whispers rather than anything else?

[pimpernell]

I would agree.

If the year is open, i.e. no agreement on tax due, then HMRC can keep it open until a Court says otherwise. If it is open, then they can raise an assessment at any time.

COP 8 in place means the year is open.

Discovery is used by HMRC to reopen a year that has closed due to expiry of time or a formal closure notice.

The issue here might be a function of Chinese whispers rather than anything else?

OK. Thanks for that. I'll clarify.

[Fred Flinstone]

A lot to read!

I have open enquiries for years 08 and 09. The company said they had responded to HMRC. I heard nothing else. No assessments were ever received. The company went out of business in 2013 and now I have a Contractor Loans Settlement 'Opportunity' asking for a DO3 to be completed like 5 and 6 years after the enquiry! Years 08 and 09 were the ones were I earned the least - but if I give up just for peace and quiet then can they then think oh well easy target and start chasing me for earlier years???
I know others on the same scheme as me who were on it for years and never got any enquiries WHY ME!!! Sorry but I bet you all feel like that. They say orange is the new black so just wondering if it will suit me

[Rob79]

I have open enquiries for years 08 and 09. The company said they had responded to HMRC. I heard nothing else. No assessments were ever received. The company went out of business in 2013 and now I have a Contractor Loans Settlement 'Opportunity' asking for a DO3 to be completed like 5 and 6 years after the enquiry! Years 08 and 09 were the ones were I earned the least - but if I give up just for peace and quiet then can they then think oh well easy target and start chasing me for earlier years???
I know others on the same scheme as me who were on it for years and never got any enquiries WHY ME!!! Sorry but I bet you all feel like that. They say orange is the new black so just wondering if it will suit me

If you have no open enquiries for years before 08/09 then unless HMRC issue an assessment using their "discovery" powers, you cannot be asked for tax that may (or may not) be due.

HMRC are entirely impersonal. They do not mark files on taxpayers as "easy target" or "not likely to argue". They certainly used to mark files (paper ones in my days there) with messages like "sensitive" (politicians and others in the public eye) and "potential complaint case" but that may not happen any more either.

I suspect that HMRC will be seeking to capture as many people as possible so those who have so far escaped are probably on borrowed time.

[dangerouswhensober]

HMRC post-APN tactics

Like most people, I will be interested to see what happens after APNs have been issued and settlement periods expire, from the point of view of what HMRC will actually do.

Consider the following situation - common to myself and (presumably) several hundred other people here:

(1) I was in an EBT scheme from 2008 to 2011, and have received discovery assements for those three years. I have also received a "settlement offer" letter, which expires in January 2015.
(2) I decline (or am unable) to settle.
(3) HMRC issues an APN demand to me in January 2015
(4) I decline to pay within the 90 day period (either because I can't or I'm feeling particularly stubborn).
(5) HMRC instigates bankruptcy proceedings.
(6) I am made bankrupt some time in 2015 - HMRC receives all, some, or none or their claimed amount (depending on my assets and ability to pay).
Meanwhile:
(7) Some brave souls who were in the same scheme decide to oppose HMRC (either individually or as a group). Starting some time in 2015, the appeal case (eventually) goes through all four levels of the tax appeal process (FTT, HTT, CoA, and Supreme Court) with HMRC losing in each court. (As we know, this could take years).
(8) At the end of this process, HMRC is forced to drop all claims against all members of this scheme.

Under these circumstances, I would think that I would have a very significant financial claim for damages against HMRC. After all, I will have suffered the consequences of bankrupcy instigated by HMRC on the basis of a tax claim proven to be legally invalid. (And, as far as I'm aware, a person cannot fully un-bankrupted - proceedings may be subsequently annulled, but that doesn't compensate for the other negative experiences).

(In the USA, I'm pretty sure this type of claim would run into the hundreds of millions of dollars).

Given that the above scenario is (in my opinion) not only possible but likely to occur in the case of several schemes and many hundreds of scheme participants, would anyone care to comment on the likely tactics of HMRC ?

[Rob79]

Like most people, I will be interested to see what happens after APNs have been issued and settlement periods expire, from the point of view of what HMRC will actually do.

Consider the following situation - common to myself and (presumably) several hundred other people here:

(1) I was in an EBT scheme from 2008 to 2011, and have received discovery assements for those three years. I have also received a "settlement offer" letter, which expires in January 2015.
(2) I decline (or am unable) to settle.
(3) HMRC issues an APN demand to me in January 2015
(4) I decline to pay within the 90 day period (either because I can't or I'm feeling particularly stubborn).
(5) HMRC instigates bankruptcy proceedings.
(6) I am made bankrupt some time in 2015 - HMRC receives all, some, or none or their claimed amount (depending on my assets and ability to pay).
Meanwhile:
(7) Some brave souls who were in the same scheme decide to oppose HMRC (either individually or as a group). Starting some time in 2015, the appeal case (eventually) goes through all four levels of the tax appeal process (FTT, HTT, CoA, and Supreme Court) with HMRC losing in each court. (As we know, this could take years).
(8) At the end of this process, HMRC is forced to drop all claims against all members of this scheme.

Under these circumstances, I would think that I would have a very significant financial claim for damages against HMRC. After all, I will have suffered the consequences of bankrupcy instigated by HMRC on the basis of a tax claim proven to be legally invalid. (And, as far as I'm aware, a person cannot fully un-bankrupted - proceedings may be subsequently annulled, but that doesn't compensate for the other negative experiences).

(In the USA, I'm pretty sure this type of claim would run into the hundreds of millions of dollars).

Given that the above scenario is (in my opinion) not only possible but likely to occur in the case of several schemes and many hundreds of scheme participants, would anyone care to comment on the likely tactics of HMRC ?

I'll take on some of those points.

If you have assessments, you will NOT get an APN. Instead the postponement of tax you may have agreed will be cancelled and the tax will fall due.

If you decline to pay the tax due, bankruptcy is not automatic. HMRC may consider that if you have a job and an income, that they will apply for an order effectively docking your income at source to pay the tax. They may take a charge on an asset (usually property) so that on sale they get a cut. They may seize assets (walking distraint order). They may oppose your bankruptcy application. They have a whole range of weapons and a couple of hundred years of practice in this.

In terms of taking a case, HMRC needs to lose ONLY at the final level. They can win all the way to Supreme Court and lose there and that's game over for them.

A claim for restitution of assets or wrongful action by HMRC may not be possible. HMRC is a Crown function and may well be protected from such claims. Certainly there is an Ombudsman Service for HMRC that has to power to award damages in situations where HMRC has erred and some of those amounts are relatively substantial but not in the millions.

As you say, your situation is common to many and I'd be surprised if some plan is not in place with HMRC. It would damage their image to a degree to make hundreds bankrupt. Equally picking a few well known examples for bankruptcy would help them in showing to Joe Public that they are serious and will chase down those pesky avoiders.

I have not spoken with them about this but I think the plan will be based on the sort of sequestration orders mentioned above and resisting applications for bankruptcy.

[dangerouswhensober]

Many thanks Rob79 - I'm sure that answers and/or advice which minimises or decreases the uncertainty caused by HMRC and this situation is welcome by many people.

[pimpernell]

OK. Thanks for that. I'll clarify.

OK. Sorry if I was being misleading in previous posts but I've now clarified my position. for those of you who're interested:

I have received two COP8s. There are gaps in tax years between the COP8s ( I know they're not for adjacent tax years), and it is the intervening years (which don't have a COP8) which would be subject to Direct Assessment time limits, which given the elapsed years > 6 would mean an accusation of deliberately misleading.

The tax years for the COP8s I do have are still 'open enquiry', and as it stands, any APN would be limited to these tax years only.

As it happens I left the scheme, IIRC, one month into the latest COP8 tax year so my worst case liability is one year plus one month in any forthcoming APN, should I be issued with one. In fact it may be less than that because I don't think the scheme I was in was under DOTAS for the year of the first COP8 but I need to try to find that out.

There may also be eventual interest/ penalties of course, but as far as any nasty surprise (APN) is concerned, I'm somewhat relieved, although I do still have some digging to do to establish worst case scenario.

I'm assured my position is defendable for the other tax years not under COP8 if HMRC try to raise a direct assessment, given the elapsed time.

[Rob79]

OK. Sorry if I was being misleading in previous posts but I've now clarified my position. for those of you who're interested:

I have received two COP8s. There are gaps in tax years between the COP8s ( I know they're not for adjacent tax years), and it is the intervening years (which don't have a COP8) which would be subject to Direct Assessment time limits, which given the elapsed years > 6 would mean an accusation of deliberately misleading.

The tax years for the COP8s I do have are still 'open enquiry', and as it stands, any APN would be limited to these tax years only.

As it happens I left the scheme, IIRC, one month into the latest COP8 tax year so my worst case liability is one year plus one month in any forthcoming APN, should I be issued with one. In fact it may be less than that because I don't think the scheme I was in was under DOTAS for the year of the first COP8 but I need to try to find that out.

There may also be eventual interest/ penalties of course, but as far as any nasty surprise (APN) is concerned, I'm somewhat relieved, although I do still have some digging to do to establish worst case scenario.

I'm assured my position is defendable for the other tax years not under COP8 if HMRC try to raise a direct assessment, given the elapsed time.

That makes sense. Unusual to have COP 8's for different years but I suppose is possible.

There will certainly be interest as HMRC has no discretion (thanks to mad Maggie Hodge for that one).

Penalties are a different issue. So long as there has been no attempt at hiding information or deliberate misleading, it may be that no penalty is applicable. Usually HMRC try to apply a minimum of 15% (of tax) but are willing to discuss.