HMRC Enquiry letters on Loans from EBT and other schemes

[jbryce]

Magnanimity

He is, you know. If you don't understand what you are fighting against, you aren't ever going to win. Utterly pointless railing against the providers with their guarantees and legal opinion, whether or not EBTs are legal (hint; they mostly are) and everything else. Once you go past 80% retention, especially when the provider is taking a chunk out, you're clearly breaking some kind of rule when the lowest rate of tax for personal income is 20% after the first £10k.

"Having issues" with taking more than the optimum Limited Company solution is just pointless.

...the reason a lot of these schemes were effective is because they played the (complicated/mad) tax system to their advantage; whether they broke a rule is, now, rather irrelevant. HMG and HMRC have said enough is enough and are prepared to legislate to kill these schemes off once and for all.

Thankfully, and painfully, they appear to have succeeded and swollen treasury coffers as well.

Rather clever. Some magnanimity in their victory would be welcome......

[IngloriousContractor]

HMRC issuing an SRN in respect of a scheme is ABSOLUTELY DEFINITELY NOT an "approval".

Ok. Don't call it approval, call it acknowledgement / non-disapproval. The fact is they were fully aware and capable to nip it in the bud.

Before joining sanzar, I had called PCG's tax advice and they said scheme should be ok but in not so many words... I had called HMRC directly and clearly asked them if a scheme with SRN was illegal, could it cause any problem in the future, etc and none of their answers were categorical or helpful. All the guy at the other end said was - I wouldn't do it.

Have no problem with HMRC legislating to close these schemes off. I am all for a clear and fair taxation system. I fully support it. Applying legislation retrospectively though is against the principle of law.

If I am driving a 40 mile road at speed of 40 miles, I don't expect to get a ticket when the speed limit on that road changes to 30 miles 4 years later!

[eek]

Ok. Don't call it approval, call it acknowledgement / non-disapproval. The fact is they were fully aware and capable to nip it in the bud.

Before joining sanzar, I had called PCG's tax advice and they said scheme should be ok but in not so many words... I had called HMRC directly and clearly asked them if a scheme with SRN was illegal, could it cause any problem in the future, etc and none of their answers were categorical or helpful. All the guy at the other end said was - I wouldn't do it.

Have no problem with HMRC legislating to close these schemes off. I am all for a clear and fair taxation system. I fully support it. Applying legislation retrospectively though is against the principle of law.

If I am driving a 40 mile road at speed of 40 miles, I don't expect to get a ticket when the speed limit on that road changes to 30 miles 4 years later!

But the speed limit hasn't changed. HMRC argument is that you were doing 50 miles an hour on that road, its just taken them a few years to check the speed camera...

[LisaContractorUmbrella]

Ok. Don't call it approval, call it acknowledgement / non-disapproval. The fact is they were fully aware and capable to nip it in the bud.

Before joining sanzar, I had called PCG's tax advice and they said scheme should be ok but in not so many words... I had called HMRC directly and clearly asked them if a scheme with SRN was illegal, could it cause any problem in the future, etc and none of their answers were categorical or helpful. All the guy at the other end said was - I wouldn't do it.

Have no problem with HMRC legislating to close these schemes off. I am all for a clear and fair taxation system. I fully support it. Applying legislation retrospectively though is against the principle of law.

If I am driving a 40 mile road at speed of 40 miles, I don't expect to get a ticket when the speed limit on that road changes to 30 miles 4 years later!

Not being funny but did that not give you a clue?

[centurian]

But the speed limit hasn't changed. HMRC argument is that you were doing 50 miles an hour on that road, its just taken them a few years to check the speed camera...

WHS - HMRC being slow/unhelpful is not retrospection.

These schemes hang on the thinnest of legal interpretations - it takes an army of (expensive) lawyers to work out whether it is legal or not - a guy on the end of a phone at HMRC can never give you a clear and straight answer on stuff like this.

If you want straight answers and certainty, don't go near these schemes

[malvolio]

WHS - HMRC being slow/unhelpful is not retrospection.

These schemes hang on the thinnest of legal interpretations - it takes an army of (expensive) lawyers to work out whether it is legal or not - a guy on the end of a phone at HMRC can never give you a clear and straight answer on stuff like this.

If you want straight answers and certainty, don't go near these schemes

And, of course, the underlying scheme may well be fully legitimate, it's just that you are not in a position where you should be using it. Just like Chris Moyles and his exotic car sales company that wasn't

[Rob79]

One of the numerous points at issue here is the capability of HMRC to investigate and take action against a disclosed scheme.

A disclosure would be made late, very late. Perhaps the latest legitimate time it could be made is after the first sums of money have routed through the structure. Assume that it is notified as DOTAS 5 working days after that.

HMRC has 30 days to issue an SRN. This is an administrative chore and does not mean that anybody with any technical knowledge has looked at it.

Perhaps 6 months later the file gets passed to a technical division. They spend a year asking for information and collating their internal records to see who may have used the structure.

They spend a year deciding whether they have a better than 51% chance of winning in Court.

They spend a year picking a case and going through the process of finding a Court date.

They spend another year waiting for a date.

A minimum of 4 and a half years if things go well. More likely 5 years or more.

That is a function of HMRC resource, Court bookings, no co-operation from taxpayers and constant reorganisations and policy changes in HMRC.

Do the Courts consider this unfair? NO. See the recent case of Neil Pattullo. Do the lower courts favour HMRC. YES. Do you get an honest answer at Court of Appeal and above. YES. How long does it take to get to Court of Appeal. perhaps 10 years. Does it cost a lot. YES perhaps over £1m.

HMRC has a part to play in a broken system but they are not the only broken cogs.

[IngloriousContractor]

One of the numerous points at issue here is the capability of HMRC to investigate and take action against a disclosed scheme.

A disclosure would be made late, very late. Perhaps the latest legitimate time it could be made is after the first sums of money have routed through the structure. Assume that it is notified as DOTAS 5 working days after that.

HMRC has 30 days to issue an SRN. This is an administrative chore and does not mean that anybody with any technical knowledge has looked at it.

Perhaps 6 months later the file gets passed to a technical division. They spend a year asking for information and collating their internal records to see who may have used the structure.

They spend a year deciding whether they have a better than 51% chance of winning in Court.

They spend a year picking a case and going through the process of finding a Court date.

They spend another year waiting for a date.

A minimum of 4 and a half years if things go well. More likely 5 years or more.

That is a function of HMRC resource, Court bookings, no co-operation from taxpayers and constant reorganisations and policy changes in HMRC.

Do the Courts consider this unfair? NO. See the recent case of Neil Pattullo. Do the lower courts favour HMRC. YES. Do you get an honest answer at Court of Appeal and above. YES. How long does it take to get to Court of Appeal. perhaps 10 years. Does it cost a lot. YES perhaps over £1m.

HMRC has a part to play in a broken system but they are not the only broken cogs.

Thanks! Useful piece of information that HMRC should be transparent about so people understand the implications of joining any schemes. Before joining sanzar, I looked through their website and also called them but this kind of info is not available and that's why it makes it look like a scam.

[LisaContractorUmbrella]

From HMRC:

Tax planning to be wary of

It sounds too good to be true.
Artificial or contrived arrangements are involved.
It seems very complex given what you want to do.
There are guaranteed returns with apparently no risk.
There are secrecy or confidentiality agreements.
Upfront fees are payable or the arrangement is on a no win/no fee basis.
The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided.
The scheme is said to be approved by HMRC (it does not follow that this is true).
Taxation of income is delayed or tax deductions accelerated.
Tax benefits are disproportionate to the commercial activity.
Offshore companies or trusts are involved for no sound commercial reason.
The involvement of professional trustees is claimed to guarantee that the arrangements succeed.
A tax haven or banking secrecy country is involved without any sound commercial reason.
Tax exempt entities, such as pension funds, are involved inappropriately.
It contains exit arrangements designed to sidestep tax consequences.
It involves money going in a circle back to where it started.
Low risk loans to be paid off by future earnings are involved.
The scheme promoter lends the funding needed.
There is a requirement to take out insurance against the failure of the tax planning to deliver the tax benefits.

HM Revenue & Customs: Avoidance schemes currently in the spotlight

[IngloriousContractor]

What you have quoted above is published fairly recently by HMRC.

What I am saying is not even an opinion, its a point of view! I do not have a vested intrest.
I am going to move on from HMRC bashing while some others defend hmrc because it is not constructive discussion on this thread.