HMRC enquiries for EBT schemes through SANZAR

[MrO666]

This might be a stupid question, but seeing as HMRC 'think' that some loans were actually income (which they were not) so hence liable for income tax, then why haven't any of the assessments which people have received also had National Insurance figures on them too ?

Also, what's the deal with expenses ? If in the future the worst comes to it and HMRC win every exhaustive appeal avenue, are people then fully entitled to offset business expenses (travel, training etc) against any tax assessments ?

[DonkeyRhubarb]

This might be a stupid question, but seeing as HMRC 'think' that some loans were actually income (which they were not) so hence liable for income tax, then why haven't any of the assessments which people have received also had National Insurance figures on them too ?

I think the assessments are just a stake in the ground. Some people mentioned that HMRC had even estimated the amount of tax.

Were you employees of a company and taxed through PAYE? Because if you were then strictly speaking, if the loans were income, then the company should have deducted the tax through PAYE. There's also the issue of Employer's National Insurance.

Also, what's the deal with expenses ? If in the future the worst comes to it and HMRC win every exhaustive appeal avenue, are people then fully entitled to offset business expenses (travel, training etc) against any tax assessments ?

Again, assuming you were employees, this may be problematic because you would have had to claim expenses off the company. It would be worth running this past an accountant.

[MrO666]

I think the assessments are just a stake in the ground. Some people mentioned that HMRC had even estimated the amount of tax.

Were you employees of a company and taxed through PAYE? Because if you were then strictly speaking, if the loans were income, then the company should have deducted the tax through PAYE. There's also the issue of Employer's National Insurance.



Again, assuming you were employees, this may be problematic because you would have had to claim expenses off the company. It would be worth running this past an accountant.

If people were employees though, then HMRC can't come after the individual for employers NI though can they, that's between HMRC and the employer (if they still exist).

That does raise a good question though, if people were employees, then why is HMRC potentially coming after the individuals instead of the employer, seeing as the employer would have been liable for all PAYE deductions and not the employee ?

[malvolio]

If people were employees though, then HMRC can't come after the individual for employers NI though can they, that's between HMRC and the employer (if they still exist).

That does raise a good question though, if people were employees, then why is HMRC potentially coming after the individuals instead of the employer, seeing as the employer would have been liable for all PAYE deductions and not the employee ?

Because the "employment" is thought by HMRC to be a sham arrangement and they are applying the Ramsay principle to disregard it?

[MrO666]

Because the "employment" is thought by HMRC to be a sham arrangement and they are applying the Ramsay principle to disregard it?

So if that is the case, then in theory no employment would exist, hence the individual would be deemed as self employed....correct ? So in that scenario then expenses 'should' be allowable to offset against any liability.

That's how I see it anyway. HMRC can't have it both ways.

[convict]

If people were employees though, then HMRC can't come after the individual for employers NI though can they, that's between HMRC and the employer (if they still exist).

That does raise a good question though, if people were employees, then why is HMRC potentially coming after the individuals instead of the employer, seeing as the employer would have been liable for all PAYE deductions and not the employee ?

The law allows for the transfer of liability to occur when the employer no longer exists. HMRC still has to prove their case, it's just that the employee has to pay in the event that any ruling goes in their favour.

[MrO666]

The law allows for the transfer of liability to occur when the employer no longer exists. HMRC still has to prove their case, it's just that the employee has to pay in the event that any ruling goes in their favour.

.....and if it did go in their favour, is the individual allowed to claim legitimate business expenses ?

I'm just trying to find out whether in the worst case expenses can be used to reduce the overall liability ?

Thanks

[malvolio]

.....and if it did go in their favour, is the individual allowed to claim legitimate business expenses ?

I'm just trying to find out whether in the worst case expenses can be used to reduce the overall liability ?

Thanks

In reality the whole situation would be reassessed based on whatever the final decision is, the overall taxes ,penalties and interest owed would recalculated and any taxes paid during the affected period taken off, leaving an overall debt. It would be up to you to prove that any expenses claimed during the period were genuinely incurred with supporting evidence, which may be tricky if you haven't claimed any of course. There is a limited period of one company year (?) during which back expenses can be claimed. You also have to think about VAT owed of course, if you suddenly switch from employee to independent business and if you've gone over the threshold for any one year.

So in theory yes, but it's pointless second-guessing these things until the final outcome is known.

[MrO666]

In reality the whole situation would be reassessed based on whatever the final decision is, the overall taxes ,penalties and interest owed would recalculated and any taxes paid during the affected period taken off, leaving an overall debt. It would be up to you to prove that any expenses claimed during the period were genuinely incurred with supporting evidence, which may be tricky if you haven't claimed any of course. There is a limited period of one company year (?) during which back expenses can be claimed. You also have to think about VAT owed of course, if you suddenly switch from employee to independent business and if you've gone over the threshold for any one year.

So in theory yes, but it's pointless second-guessing these things until the final outcome is known.

Thanks for this, very informative.

I assume however it's safe to say that whatever happens it's likely to be years as opposed to months ?

[DonkeyRhubarb]

The law allows for the transfer of liability to occur when the employer no longer exists.

Do you know what happens with the 13% Employers NIC in that situation?