HMRC Enquiry letters on Loans from EBT and other schemes

[stt106]

In order to prove these are loans (which they are!) couldn't I just start paying them back?

To whom are you paying??

[JHW]

Benefit In Kind Treatment in Recalculations by HMRC

Everyone on these schemes would have been paying tax as a benefit in kind on the zero interest of these loans.

It appears to me that although HMRC are now trying to state that these loans should be taxed as income, they are also still including the benefit in kind amounts in their calculation of the overall income as they see it in their revised calculations. Surely these amounts are either income or loans and they cannot tax us both ways?

Am I being thick and not understanding the calculations? Or is there some law that I'm unaware of which of which says they can do this?

I think this applies to their 2008-9 recalculations, but is even more apparent in the 2009-10 recalculations as the benefit in kind is cumulative across years. It will be even worse for those expecting 2010-11 letters.

I am sure I must be wrong as no one else seems to have raised it, but it is continuing to bug me.

Any explanation appreciated. Thanks.

[porrker]

Transfer of asset

From what I have heard and can piece together.

For my scheme at least HMRC are attacking my use based on at least two of points
1. Transfer of assets (TAA)/ITA 2007 section 720-739. Basically their argument is that my employment contract was an asset.

2. Loans are not loans, they are income.

Check your letter for any "technical" blurb/Q&A

There was an FTT hearing in May 2013 (I don't know which scheme or any details). These arguments would have been used then. There's probably a lot of commonality regarding how the schemes are engineered so these arguments probably apply to multiple schemes. Other issues such as scheme implementations will (by their nature) be unique to each scheme, but implementation is immaterial if it's a fundamental 'design' failure.

So once the judgement to the May case appears I think we'll be somewhat clearer on where things go. We'll either have HMRC declaring victory and shouting from the rooftops with more propaganda or they'll go quiet and then appeal to the UTT. Anyone in a scheme where TAA/S62 applies will be affected by the FTT ruling. Either way expect barrister fees and a long wait (>12 mths)

PS. No ETA for the FTT decision.

Hi Convict,

The transfer of your employment contract as an assets is an interesting approach. HMRC successfully argued that the transfer of trust shares in the Aberdeen Asset Management case but this was against AAM not the users. You will have paid PAYE and NIC against your employment contract so how can they argue it's a transfer of asset. Was your contract value, loan amounts or loan dates part of your employment contract?

[convict]

Hi Convict,

The transfer of your employment contract as an assets is an interesting approach. HMRC successfully argued that the transfer of trust shares in the Aberdeen Asset Management case but this was against AAM not the users. You will have paid PAYE and NIC against your employment contract so how can they argue it's a transfer of asset. Was your contract value, loan amounts or loan dates part of your employment contract?

https://www.google.co.uk/search?q=INTM600260

Looking at their draft document, INTM600260. They are relying on IRC vs Brackett [1986]

What are assets?

The meaning of “asset” for the purposes of the legislation is at Section 717 ITA 2007. “Assets” is another term given a very wide meaning for the purpose of the transfer of assets provisions, including property or rights of any kind.

There is however some amplification in that reference to assets representing any assets, income or accumulation of income, includes references to:-
shares in or obligations of any company to which the assets, income or accumulations are or have been transferred, or
obligations of any other person to whom the assets, income or accumulations are or have been transferred.

Assets can be tangible, such as shares, securities or other forms of real property, or intangible, like the creation of rights such as the rights created by a service contract or contract of employment. An example of circumstances where rights under a contract were found to be assets is in CIR v Brackett (60 TC 134) in which rights under an employment contract were held to be assets for the purpose of the transfer of assets provisions.

I can't find an online copy of the Judgement so can't really understand the Judge's thinking etc.

[AngryMan]

To whom are you paying??

The originating loan provider with whom I had a contract

[vern19]

The originating loan provider with whom I had a contract

And then what?

[convict]

Can I get an understanding from anyone if they have actually received a Demand yet post submission of their Appeal, trying to understand timelines, time is your friend in this case unless the interest is way high. Appreciate replies, Im dealing with my issue from across other side of the World,it aint pleasant.

All you have at the moment is a finger-in-the-air assessment estimate from HMRC . This is for them to get the ball rolling and make sure they don't miss any deadlines etc.

You pay interest at 3% PA on the amount, backdated to the time they think it should have been paid. Let's put the arguments regarding fairness of this aside for now.

If you send them a letter, do it singed for/recorded to the address on the discovery assessment. You then have proof of delivery should anything go awry.

My timeline is:
Appeared online in my SA page 06/11/13. Pay by 06/12/13 or else!
Got letter 14/11/13 (letter dated 06/11/13)
Sent back appeal 16/11/13
Received by HMRC 18/11/13
Spoke to HMRC today (26/11/13) on the phone, acknowledged receipt, "it's in the big pot with all the others, don't worry"
04/12/13 - Postponement applied and showing on online account

The amount will be postponed until tax tribunal (FTT and more probably UTT) decisions are made. If they are judged to be in the right then you'll get enquiries to calculate proper amounts (plus interest @ 3% pa from the original date) and then finally closure notices with the tax demand.

Best guess (by me) is a year or two from now maybe, but it could be longer.

[Patch123]

has anyone got a link to consolidated list of appeal letters, would like to take a view . already sent protective order to postpone., dont know even if i have to actually send an appeal letter , less is more and all that, thanks

Hi I also got same letter from hmrc yesterday and was with trm for 2098 2009

Let e know what are you planing to since we have only 30 days to reply back to hmrc

[Patch123]

status

are folk merely putting in protective orders right now (ie request to postpone payment and tax) and waiting to see what HM Revenue do next OR are also appeals being drafted as to why you feel you shouldnt pay ???, thanks. ALSO can someone give me the link for example appeal letters, :-)

the way i read these letters is , if you object to the numbers then tell us why but at the same time i dont see HM Revenue providing any hard evidence. If HM Revenue had hard evidence we would of been delivered demands, right ?.

Tiz a game of chess I sense. wait it out seems to be the best approach.

has anyone got a link to consolidated list of appeal letters, would like to take a view . already sent protective order to postpone., dont know even if i have to actually send an appeal letter , less is more and all that, thanks

[vern19]

are folk merely putting in protective orders right now (ie request to postpone payment and tax) and waiting to see what HM Revenue do next OR are also appeals being drafted as to why you feel you shouldnt pay ???, thanks. ALSO can someone give me the link for example appeal letters, :-)

the way i read these letters is , if you object to the numbers then tell us why but at the same time i dont see HM Revenue providing any hard evidence. If HM Revenue had hard evidence we would of been delivered demands, right ?.

Tiz a game of chess I sense. wait it out seems to be the best approach.

By appealing you are effectively postponing any payment demands by HMRC. They may take one person from each scheme to a Tribunal and, if successful, they will be in a very strong legal position to enforce payment form all others using the scheme. Also in Court cases it is usual for the loser to pay all the fees.

One problem some people will have in defending the loans is if there was 0% interest applicable. HMRC can then class the loan as a benefit in kind which is obviously taxable. Some loans did have a commercial rate of interest applicable and will be tougher for HMRC to prosecute

It's a waiting game and we just have to hope a few Tribunals go our way