HMRC Enquiry letters on Loans from EBT and other schemes

[Boobetty]

Margaret Hodge (nee Oppenheimer), co-owner of the world's largest independent steel trading company, STEMCOR. The same company that makes UK profits of £2bn a year and pays <1% in tax on that. This is the same Maggie Hodge that chairs the public accounts committee, a board of MP's set up to oversee the tax "planning" activities undertaken by Google, Vodafone, Starbucks and....oh yes....STEMCOR

[dangerouswhensober]

I'll take on some of those points.

.

Hi Rob -

If you have time, could you give your opinion on a few follow-up points:

(1) Re: "If you have assessments, you will NOT get an APN" - on the face of it, this seems to be good news. The main fear for most of the affected contractors is that, on the basis of past membership of schemes the legality of which have not been assessed in any court, they will receive APNs (which, in my understanding, cannot be legally challenged - so it's pay now and argue later). You seem to think that HMRC will abide by Lin Homer's statement to parliament (i.e. HMRC will at this stage only seek accelerated payment in cases where there has already been a tribunal decision in their favour) - do you not think that this will be renounced at some stage in the (near) future ?

(2) Re: "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." I know bankruptcy is not automatic - there has to be one or more formal petitioners. But ... I was not aware that HMRC could (instead) apply for some kind of charge over assets or future income, on the basis of a claimed tax debt which (once again) has not been validated in any court. (And, if HMRC did go down that route, it would give me a chance to challenge the assessment in front of a judge as part of the legal process - so this also seems to be good news). Is this not the case ?

(3) Re: "I have not spoken with them about this but I think the plan will be based on the sort of sequestration orders mentioned above ..." Do you mean that these further sequestration powers may be requested by HMRC in the next Budget, for inclusion in the 2015 Finance Bill ?

BTW - Many thanks for your input to date - I for one value your experience & expertise a lot.

[Rob79]

Hi Rob -

If you have time, could you give your opinion on a few follow-up points:

(1) Re: "If you have assessments, you will NOT get an APN" - on the face of it, this seems to be good news. The main fear for most of the affected contractors is that, on the basis of past membership of schemes the legality of which have not been assessed in any court, they will receive APNs (which, in my understanding, cannot be legally challenged - so it's pay now and argue later). You seem to think that HMRC will abide by Lin Homer's statement to parliament (i.e. HMRC will at this stage only seek accelerated payment in cases where there has already been a tribunal decision in their favour) - do you not think that this will be renounced at some stage in the (near) future ?

(2) Re: "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." I know bankruptcy is not automatic - there has to be one or more formal petitioners. But ... I was not aware that HMRC could (instead) apply for some kind of charge over assets or future income, on the basis of a claimed tax debt which (once again) has not been validated in any court. (And, if HMRC did go down that route, it would give me a chance to challenge the assessment in front of a judge as part of the legal process - so this also seems to be good news). Is this not the case ?

(3) Re: "I have not spoken with them about this but I think the plan will be based on the sort of sequestration orders mentioned above ..." Do you mean that these further sequestration powers may be requested by HMRC in the next Budget, for inclusion in the 2015 Finance Bill ?

BTW - Many thanks for your input to date - I for one value your experience & expertise a lot.

1. APN's are meant for situations where there is tax in dispute, a year is open and HMRC want to get the money in. They say that this will incentivize the taxpayer to get to the substantive point at dispute but we all know that's unlikely as HMRC will delay. If there is an assessment already issued, the correct route would be to apply to have the tax they have agreed to postpone, released. That would require that they go to a Tribunal (or at least could be challenged at Tribunal if they made a unilateral decision. Thus the stated aim of the APN, i.e to reduce disputes, will be frustrated. Therefore I think that HMRC will follow Lin Homer but not because she said so and it's a matter of policy, but rather because the law would force them to Court if they tried to APN something already assessed.

2. My understanding (and I'm happy to be put right by an expert) is that HMRC (and any other creditor) can oppose a bankruptcy if they believe that they will get more value from the individual being allowed to trade/work without a bankruptcy order. A tax debt is enforceable. An APN creates a tax debt (against which there is no appeal) and an insolvency Court would not be interested in whether the debt is calculated correctly, unless it was manifestly wrong. So no chance of tax challenge via that route.

3. I meant that HMRC has an arsenal of sequestration powers already. The additional ones they're after now (to raid bank accounts) hopefully will not appear or if they do appear will be massively limited.

Thank you for the kind words.

A warning. The views expressed are my own based on my experience. You have only my word that I have this experience and skills. Many of you are in your present predicament because you took people at their word or face value and have been caught out when the ideas and plans expressed as "can't fail", did exactly that. Please do not believe everything or anything I express without getting proper advice. This is especially the case at the moment as I get up to speed with the contractor world which I'm sure has nuances and elements that are new to me.

[flamel]

A warning. The views expressed are my own based on my experience. You have only my word that I have this experience and skills. Many of you are in your present predicament because you took people at their word or face value and have been caught out when the ideas and plans expressed as "can't fail", did exactly that. Please do not believe everything or anything I express without getting proper advice. This is especially the case at the moment as I get up to speed with the contractor world which I'm sure has nuances and elements that are new to me.

So far your views are in line with my own advisor (he's an ex inspector).
He sums it up saying if HMRC want all they say you owe them, then go bankrupt. HRMC then get very little. If not then pay them what you do have (i.e. your share of the family house) and give them something each month. HMRC get very little.
In other words all very pointless on their behalf. His advice is to not worry as they can't take what you don't have and they can't make you work and pay all your earnings to them (as abolished on 1 August1833).
In the meantime I'm going for the "spend as you earn" routine which is very cathartic.

[dangerouswhensober]

Thanks again ...

Many thanks to you again Rob, and thanks also to 'flamel' for sharing the advice of his professional advisor.

[pimpernell]

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.

Hi Rob,

Thanks for your reply.

There was definitely a gap between the COP8s ( I think 3-4 years), and I'm in the process of trying to establish when the first one was. The second one I received was for 2007-2008, but I left the scheme in 1st April 2007 ( I have a P45) so there's no liability at all for that year. In fact it's surprising I have a COP8 for that year at all, because I went back to PSC. I've never heard from HMRC, and I don't intend to rattle their cage.

I've established that the scheme was never registered for DOTAS, as it was set up prior to April 2004, and closed it's doors to new members when the DOTAS came into effect. I think this would also take me outside any APN sweep. Any thoughts?

I think the gap between receiving COP8s was because the scheme moved from onshore to offshore in the intervening years. Would that make sense?

Like others, I value your input and posts. Many thanks.

[flamel]

I should have said that my circumstances are unique to me (for example i have very few assets and only have another few years potential working life left) so everyone should get their own personalised advice if they can't pay HMRC's dodgy tax grab.

[DarnEBTs]

Section 9A of TAM Act 1970

Hi,
Rec'd this today for year ended 2013. This is within 12 mths on filing. States will write back with more in 3-4 weeks time. I was with a scheme this year. Guess I should wait. But anything else in meantime should be done on my part? Is this expected now so that inquiry is at least open within 12 months. Seems like worrying days ahead and just want to put this all behind. I have given up contracting!!!

Any update appreciated. Thanks.

rgds

[costo]

1. APN's are meant for situations where there is tax in dispute, a year is open and HMRC want to get the money in. They say that this will incentivize the taxpayer to get to the substantive point at dispute but we all know that's unlikely as HMRC will delay. If there is an assessment already issued, the correct route would be to apply to have the tax they have agreed to postpone, released. That would require that they go to a Tribunal (or at least could be challenged at Tribunal if they made a unilateral decision. Thus the stated aim of the APN, i.e to reduce disputes, will be frustrated. Therefore I think that HMRC will follow Lin Homer but not because she said so and it's a matter of policy, but rather because the law would force them to Court if they tried to APN something already assessed.
.

Rob - when you say assessments are you referring to discovery notices? so lets assume a given contractor has a COP8 for 2 tax years and a discovery for a notice - in your opinion do you believe that HMRC will issue APN's for the COP8's but NOT for the years with the discovery?

[DonkeyRhubarb]

The APN legislation has two separate sections dealing with this:

213 Content of notice given while a tax enquiry is in progress

214 Content of notice given pending an appeal

213 applies where there is only an open enquiry (COP8). 214 applies where there is an assessment (discovery), or closure notice, which the taxpayer has appealed.

In either case you can get an APN.