HMRC enquiries for EBT schemes through SANZAR

[convict]

I today received a dreaded assessment for 07/08 :-( I was also one of the ones who listened to sanzar when they told me not to do a SA!.

Just wanted it let others know they are now working backwards (where they can)

That's just plain tulipy of HMRC. They know they'll never get anywhere in a Tribunal on the the 6 year bit (see http://forums.contractoruk.com/hmrc-...ml#post1842789 ) but because of the proposed new legislation of take now argue later, they'll screw with you because they can. Proper abuse of power IMHO

[gettingangry]

This the thing that bugs me the most. When I sent in my self assessment I had the money to pay the tax if there was a problem with the scheme and I disclosed all the loans on my SA return. When they didn't do anything about it I thought I was in the clear. I am now a single parent earning a quarter of what I was on before and feeling a bit sick about all this.

This is a very valid point. I also received 2 or 3 letters saying the scheme I was using was being investigated by HMRC. No followup letter was ever sent saying that I should stop or even consider stop using the scheme. Self-assessment guidelines for working out benefit in kind were issued by HMRC - if they were illegal why did they issue tax calculations. If they were illegal why did they introduce new legislation in 2011 to stop them - if they were illegal no new legislation would have been required. They allowed schemes to continue after investigation and then come back years later saying we owe thousands.

[z4thras]

Commentary on Rangers UTT

haven't completely read this but a commentary on what happened in UTT for Rangers UTT Thread | The Scottish Football Monitor

[malvolio]

This is a very valid point. I also received 2 or 3 letters saying the scheme I was using was being investigated by HMRC. No followup letter was ever sent saying that I should stop or even consider stop using the scheme. Self-assessment guidelines for working out benefit in kind were issued by HMRC - if they were illegal why did they issue tax calculations. If they were illegal why did they introduce new legislation in 2011 to stop them - if they were illegal no new legislation would have been required. They allowed schemes to continue after investigation and then come back years later saying we owe thousands.

There are many complex strands in this whole situation, but you really need to keep one thing clear in your head: it's call "Self Assessment" for a reason. It's down to you to declare your income correctly, nobody else.

[MrO666]

Some people in this situation will have VERY good grounds for arguing the legality of these DA's, other however will clearly not.

If you clearly stated on your tax return that you were using a tax avoidance scheme, named the scheme, and also ensured that the DOTAS number was included, then it's the opinion of more than one tax expert that HMRC would have a very tough time trying to argue in court that they had no reason to suspect there may be an underpayment of tax.

In the cases I am aware of where people have questioned the validity of these DA's, HMRC have responded (in some cases) with very weak language. They've used terms like 'I believe' and 'in my opinion'. If HMRC knew they had a cast iron case for issuing these DA's, the language would be a lot firmer, and the words 'opinion and believe' would NOT feature in their letters, they would quote firm case law.

The problem you will have, is that initially HMRC will argue that they do have full grounds to issue the DA (when in reality they know that don't). The only way to challenge them on this will be to get your tax advisor (don't try it yourself) to go at them hard, which will probably result in you forcing HMRC into a face to face meeting initially, followed by an independent review , and then if they still don't relent, you'll need to start proceedings to take them to the tribunal. I suspect that in some cases (where full disclosure was clearly made), HMRC may hold strong initially, but concede prior to anything going to court. After all, HMRC have to justify spending public money, and no judge would be impressed if HMRC went to court to argue a case that really was fairly black and white.

However, I don't believe that just the inclusion of a DOTAS number is enough to make HMRC back down at all, so the above approach would only be for people who had clearly given HMRC sufficient information on their returns for them to be clear what you were doing.

Keep in mind that tax advisors aren't cheap, so it comes down to how large your potential liability is, how strong your case is, and how big your balls are, as offering HMRC out in a fight is not for the faint hearted. Also, it depends whether you want to appear on the HMRC most wanted list, as even if you do win the day, you're probably going to be targeted for everything else as you will have p1ssed them off.

That said, if your case is strong enough then I would go for it, as the law is the law, and as much as HMRC hate the fact, they too have to stick to it.

[jbryce]

Closure

Ok - here's a question. Say you have a DA for a given year, then a follower notice and then you mortgage your house, rob a bank - whatever. If you pay the notice is that it? Is that closure for that tax return or do they then come back for more?

[DonkeyRhubarb]

Ok - here's a question. Say you have a DA for a given year, then a follower notice and then you mortgage your house, rob a bank - whatever. If you pay the notice is that it? Is that closure for that tax return or do they then come back for more?

No, unfortunately it's not settlement (closure)

At the end of an investigation they normally issue another type of notice called a Closure Notice (CN). If the DA is only an estimate then they won't issue a CN until they have assessed the correct amount.

If you want closure you would have to request that.

The payment notices won't be for the full amount anyway because, according to the consultation document, they will just be for the tax and won't include interest or any NICs due.

[jbryce]

No, unfortunately it's not settlement (closure)

At the end of an investigation they normally issue another type of notice called a Closure Notice (CN). If the DA is only an estimate then they won't issue a CN until they have assessed the correct amount.

If you want closure you would have to request that.

The payment notices won't be for the full amount anyway because, according to the consultation document, they will just be for the tax and won't include interest or any NICs due.

Jeez, so even if we do bend over, then there is STILL no end to it all. Not really much of an incentive to settle............
When I mention NICs my accountant just rolls his eyes....

[MrO666]

No, unfortunately it's not settlement (closure)

At the end of an investigation they normally issue another type of notice called a Closure Notice (CN). If the DA is only an estimate then they won't issue a CN until they have assessed the correct amount.

If you want closure you would have to request that.

The payment notices won't be for the full amount anyway because, according to the consultation document, they will just be for the tax and won't include interest or any NICs due.

With regards to the NIC, I've had it on good authority that HMRC are VERY unlikely to try and get that on top of tax and interest.

The key reasons as explained to me (by a leading tax consultancy) are:

1) Seeing as a scheme promoter was in many cases the employer, then as we know the employer is responsible for NIC contributions. Now before anyone jumps at me and says that HMRC can transfer that debt to the taxpayer in the case of the employer not existing anymore, this is in fact incorrect in the case of NIC's (not for Income tax). That rule can only be applied where the taxpayer was also a director of the employing company.

2) The second point was that if they were to come back with a NIC demand at a later date, my sources tell me that in all likelihood the taxpayer could strongly argue that HMRC were in full knowledge that NIC's would be due on any balance sought in the original DA, so hence should have been included in the original DA's.

3) Class 1 NIC's are not and cannot be collected by the self-assessment system.

In relation to if you were to pay the assessment and then do nothing, it's very unlikely that HMRC would then start to pursue you for further money unless they were suddenly in receipt of information which were to clearly show that their original DA was insufficient. In reality that's very unlikely, however as DR has said, the discovery would probably stay open for years, although I'm assuming on dusty day they would have to close it down, but who knows.

If it comes to the crunch, my personal approach will be to sit down with HMRC, iron out the figures between us, get closure notices for the agreed figures and that'll be the end of it.

[Old Kent Road]

If you clearly stated on your tax return that you were using a tax avoidance scheme, named the scheme, and also ensured that the DOTAS number was included, then it's the opinion of more than one tax expert that HMRC would have a very tough time trying to argue in court that they had no reason to suspect there may be an underpayment .

In my case and presumably others for Sanzar 08.09 they didn't provide the DOTAS number in time for the Self assesment. It was advised a good few months after and I submitted it to hmrc via an AAG4 form.

How does this fit with a discovery assessment?

Presumably it should be deemed part and parcel of the SA as hmrc has still been advised. Is DOTAS number sufficient ? What if the whitespace was blank?