Edge EBT thread

[administrator]

Admin: Can you please assign me PM rights please so that I can directly contact TheDandy.

Hi could you please give me pm rights too. Many thanks

Both done

[DCXM11]

Fighting fund

Another recipient of unwanted letters - please can I be counted into the fighting fund. Will use the template provided by Michael as advised by most throughout this thread

Little joy from Michelle on contacting her, hands washed type stuff

No idea where we stand with HMRC, and the sum owed is significant, therefore a group approach and the best possible representation makes sense

Count me in

[ebtedge]

Is it time for TheDandy to step in?

Thank you Admin.

My credentials are as a CTA with over 14 years PQE. I started at HMRC in 1992 and latterly spent more than a decade of that at the forefront of tax planning in the UK as a Director of a specialist tax consultancy company. This, of course, gave me a great deal of experience of dealing with HMRC enquiries, particularly those led by SI. I set up my own consultancy company only recently to focus on enquiry work.

Specifically I have worked for clients in the contractor sector since 2002. I was part of the team that devised the arrangement used by Edge. I am currently representing over 3,000 contractors in very similar arrangements in their dealings with HMRC. I have advised on, and dealt with HMRC enquiries into, a large number of EBT loan cases outside the contractor sector over the past decade or so.

I was also personally involved in one of the leading cases on Discovery (which given the disclosure at least in later years of a DoTAS number of SATRs will be important): HMRC v Charlton, Corfield & Anor (see the FTT decision upheld in the Upper Tribunal). I am fully conversant with the technical arguments presented by HMRC, and the rebuttals and have opinion from two leading QC's to call upon as necessary.

By way of assistance to those on the forum below is an extract of an update I posted to contractors for whom I am already acting within three hours of the release of the decision in Boyle.

This is the case that we have been awaiting. It was heard in May this year but the decision has only today been released. You will see that HMRC have been victorious. They are already referring to it as a “comprehensive victory”……..We expect HMRC to publicise the decision widely. Indeed they may well write to you about it in the coming days or weeks.

Whilst we cannot deny that HMRC won the case and that is in itself unhelpful, Boyle will NOT determine the arrangements dealt with [by me elsewhere].

The Boyle case involved a contractor structure run by Sandfields/Consulting Overseas. It was, in my experience, a good strategy, implemented very poorly. We understand that the vast majority of their contractors had already settled with HMRC, paying full taxes, some years ago.

There is absolutely no doubt that the poor implementation contributed to the taxpayers defeat. I was involved in a large number foreign currency loan schemes more than a decade ago. All, implemented properly, were agreed by HMRC. This contrasts starkly with the Boyle case and highlights the importance of proper, professional, implementation.

…..My initial reaction is that whilst unhelpful the case is easily distinguished from our own and in many ways not particularly informative. My immediate response to HMRC having been sent the case earlier this morning was:

“……..

I have read the case only quickly, and just the once, but my initial reaction is that Boyle does little to move matters forward.

You will not be surprised to hear that I expect many to be able to easily distinguish their own cases (and I will most certainly assert that [those cases I am representing] can do so). Given the findings of fact (and indeed arguments (or rather lack of) presented for the taxpayer I think the Boyle case will be of little wider application. What is clear is that it was very poorly implemented with, for example, no evidence that the foreign currency ever existed. In that context the overall decision is unsurprising.

I would also say that it is not quite the comprehensive victory that it might first appear. Even in the poor factual circumstances the Tribunal found that the loans were loans (within the BIK provisions) and not earnings but concluded on the evidence that the loans had been written off and hence were taxable as emoluments. I find the latter conclusion surprising in some respects but one clearly driven by the poor facts. I do not believe that a Tribunal would reach such a decision in different circumstances. But the finding that they were not earnings is in many respects helpful to taxpayers particularly when looking at questions surrounding Discovery about which Boyle tells us nothing given the complete absence of disclosure. Furthermore, and quite astonishingly, the taxpayer's representative appeared to make no reference to four previous EBT loan cases where the Tribunal, presented with fuller argument, reached a different conclusion. I would argue that the five cases taken together now unequivocally put to bed arguments that loans such as those in [those cases with which I am dealing] can be earnings within PAYE.

On Discovery there was no DOTAS number and no white space disclosure. Indeed on reading the judgment it is stated at para 78 that no reference was made to the loans at all. So the decision on Discovery is neither surprising nor of application for those cases within DoTAS or who made white space disclosure. That will be the case for many in receipt of Discovery assessments in [those cases upon which I am advising] and others. On this point I do not see the decision as relevant at all.

With regard to the Transfer of Assets Abroad legislation again the arguments presented for the taxpayer appear to have been very thin indeed. It sheds no light at all on the arguments that XXXXXXXXXXX [redacted], or other cases mean that the legislation cannot apply. It is most surprising that they were not even presented by the taxpayer.

I have to say that the lack of reference to what are obviously potentially relevant cases reflects poorly on the representation the taxpayer received. It does not appear to have been a particularly even fight. Whilst on one hand I am surprised that a case with such a poor factual matrix even made it to the Tribunal I have no doubt that more experienced representation for the taxpayer would have seen the case be a more relevant pointer to some of the technical arguments I expect to the set out in those cases with which I am dealing. As it is, my initial reaction is that Boyle adds little beyond clarifying those arguments I expect HMRC to make.

If Admin are happy to do so can I please ask that anyone willing to join a collective fighting fund DIRECT MESSAGE ME or email me at my company email address (if Admin is happy to include the link) so that I can evaluate its viability. I do not wish to miss anyone posting within the thread.

Many thanks

Hi TheDandy, I recollect that you have done some ground work when the 2008/09 letters were posted out, and I think this needs a collective decision before we start PMing Saleos. What is your take on this?

[Michael J Perry FCA]

Group representation

This refers to ex-employees of a pay scheme that are affected by the same issues in a dispute with HMRC.

If there is an appeal taken to the Tax Tribunal, that can be a costly exercise. So all members of the scheme may be asked to contribute to the costs of the case of one test employee.

Other than that, each taxpayer deals directly with HMRC on their own case although sometimes 'group appeals' are lodged on behalf of a number of people and that can reduce costs.

However, appeals are a very small part of the overall process and HMRC deal with each individual according to the facts of their particular case and group treatment is not possible.

In the event of calculating any penalties that may be due, the individual's level of cooperation (and a number of other factors) are taken into account.

I hope this provides some clarification.

[ebtedge]

Group Appeal

This refers to ex-employees of a pay scheme that are affected by the same issues in a dispute with HMRC.

If there is an appeal taken to the Tax Tribunal, that can be a costly exercise. So all members of the scheme may be asked to contribute to the costs of the case of one test employee.

Other than that, each taxpayer deals directly with HMRC on their own case although sometimes 'group appeals' are lodged on behalf of a number of people and that can reduce costs.

However, appeals are a very small part of the overall process and HMRC deal with each individual according to the facts of their particular case and group treatment is not possible.

In the event of calculating any penalties that may be due, the individual's level of cooperation (and a number of other factors) are taken into account.

I hope this provides some clarification.

Michael, Whoever signed up to Edge had similar, rather, same kind of EBT structure and hence HMRC have to pursue each individual on the same lines. If Edge were to employ a different EBT structure for each individual, then it would make sense to deal it on a case-by-case basis, but in our case, I am of the opinion that group appeal is apt. Or is my thinking clouded because of the hour that I am posting at?

[ScottW]

Michael, Whoever signed up to Edge had similar, rather, same kind of EBT structure and hence HMRC have to pursue each individual on the same lines. If Edge were to employ a different EBT structure for each individual, then it would make sense to deal it on a case-by-case basis, but in our case, I am of the opinion that group appeal is apt. Or is my thinking clouded because of the hour that I am posting at?

I'm slightly confused by the discussion which seems to have started around individual and group appeals.

As far as I know from my reading of the Rangers example the entire EBT structure is being argued as a group not on a player by player basis – is this not the same as the Edge case (assuming we all signed up to the same Edge structure). Therefore why would we not be able to appeal as a 'Group'?

Having said that there is something which interests me;

The Rangers decision for example. Several educated, knowledgeable, intelligent judges came to the conclusion that the EBTs were loans and no additional tax was due. However another had a very strong dissenting opinion and her notes released to support her opinion were considerably longer than the two who deemed the EBTs OK - but she was in effect outvoted.

Surely this shows that the entire pro/con EBTs is simply a question of opinion. Not hard fast legal rules with 'DNA type evidence' proving you guilty, but simply a matter of opinion.

This then leads me to ask what is to stop 20 people forming 'Group 1' and appealing HMRCs decision on one particular aspect of the case, and 'Groups 2/3/4/5' appealing on others? Surely if its a matter of opinion then you stand more chance of having an opinion go your way the more opinions you ask. Given that HMRC could say the same doesn't that show the underlying stupidity in all this?

[TatCon]

Edge EBT Tread

Like others, I am also an ex-Edge employee and have received another HMRC Notice of Assessment for 09/10.

I interested in contributing to the fund. Also, whats the best appeal letter to use as there are quite a few around.

Admin: Can you please assign me PM rights please

[out of the frying pan]

Group Appeal

I am also ex-Edge and have received HMRC Notice of Assessment for 08/09 & 09/10.

I'm expecting one for 10/11 as well.
I have sent off an appeal based on what we were advised to send last year, albeit a cut down version.

I'm in favour of a group fighting fund should it come to it and would like to contribute.

Admin: Can you assign me PM rights please ?

[underduvet]

PM rights

I am also ex-Edge and have received HMRC Notice of Assessment for 08/09 & 09/10.

Admin: Can you assign me PM rights please ?

[K12AN]

Am I right in saying that the HMRC are pursuing all former Edge employees individually, but the first Edge user to be taken to appeal etc will be the 'test case' for the rest of us....so the outcome of this test case will be of great interest to all of us.

Is the purpose for the 'Group action' to ensure that this individuals test case is well prepared and well-funded?
Or is the purpose to request to HMRC that those in the group be taken as 'one case' - which may or may not be the first/test case?

If HMRC were to lose this test case, I can't imagine them then pursuing others who were on the same provider - as this would also likely prove to be fruitless, expensive and embarrassing.