Reply to: BN66 - charges and interest

[BrilloPad]

Ok, this is how I understand it. Please feel free to correct.

The "cash rate" is what you get if you withdraw the money ie. if we win.

The "tax rate" is what you would get if you took out a CTD before the tax was due. This doesn't apply to us so you can ignore this.

Here is what happens depending on the outcome of our appeal.

Win
We get the CTD back + the "cash rate" of interest (1 or 2%). The interest is taxable in the year the CTD is withdrawn.

Lose
The CTD covers the tax liability. We get nothing back.

http://www.hmrc.gov.uk/howtopay/cert_tax_deposit.htm

"On the day you purchase your Certificate we will send you the Certificate together with Form 811 CTD, which gives details of the current interest rates and how they are applied."

Anyone fancy applying for that form? Who was it said they were bored?

[DonkeyRhubarb]

"cash rate" vs "tax rate"

Ok, this is how I understand it. Please feel free to correct.

The "cash rate" is what you get if you withdraw the money ie. if we win.

The "tax rate" is what you would get if you took out a CTD before the tax was due. This doesn't apply to us so you can ignore this.

Here is what happens depending on the outcome of our appeal.

Win
We get the CTD back + the "cash rate" of interest (1 or 2%). The interest is taxable in the year the CTD is withdrawn.

Lose
The CTD covers the tax liability. We get nothing back.

http://www.hmrc.gov.uk/howtopay/cert_tax_deposit.htm

[BrilloPad]

Does anyone know what the tax rate and cash rate columns mean in this table? I can't find any explanation on their web site.

http://www.hmrc.gov.uk/howtopay/ctd-interest-rates.pdf

I'm guessing that it's 1% under £100k and 2% over £100k but could be wrong. In which case it's not nothing but still peanuts.

Looks to me like 1% if you just withdraw it - but 2% if you put it towards a tax bill? That assumes you put in less than 100k or longer than a year.

[DonkeyRhubarb]

So do you earn no interest atall on a CTD? I thought you earned some?

Does anyone know what the tax rate and cash rate columns mean in this table? I can't find any explanation on their web site.

http://www.hmrc.gov.uk/howtopay/ctd-interest-rates.pdf

I'm guessing that it's 1% under £100k and 2% over £100k but could be wrong. In which case it's not nothing but still peanuts.

[BrilloPad]

So do you earn no interest atall on a CTD? I thought you earned some?

[DonkeyRhubarb]

CTD - further analysis

Have I got this right?

Scenario A
If you take out a CTD you only need to deposit an amount equal to your tax liability and not any interest that may have already accrued.

For example, take someone with a tax liability of £100k from a few years ago who has already accrued £30k in interest charges.

HMRC only levy interest on the £100k, so to stop the clock you need to deposit £100k in the CTD. The other £30k you may as well keep in a savings account and earn interest on it.

If the appeal is lost in 5 years time, then you will still owe £100k+£30K. Any interest you have earned on the £30k in the mean time is yours to keep.

Scenario B
Let's say you could earn 4% after tax on your savings. Instead of getting a CTD you put the whole lot in a savings account.

After 5 years, the £130k would have grown to £158k.
After 5 years, the liability would have grown to £167k.*

In other words, if we lose then you are £9k worse off. But if we win then you are £28k better off. Some people may decide that these are reasonable odds and it's worth risking £9k for the chance of "winning" £28k. Do your own sums.

* £30k + £100k + £100k*7.5%*5

[SantaClaus]

Santa Claus exemption
There is an overall exemption provided by HMRC to Santa Claus. Santa incorporated his business this year to save tax. Not that he pays a lot. He has never paid VAT and gifts made by Santa are tax free (special concession by HMRC). Despite professional advice he continues to pay all the fairies “cash in hand”. Even worse, no regard is made to the Working Time Directive, money laundering or minimum wage legislation. He blatantly ignores the health and safety issues when working on those roofs and has scant regard for speed limits. Some businesses get all the luck. Happy Christmas from all at Campbell Dallas.

http://www.businessperthshiremagazin...out_giving.htm

If those blasted fairies wont work for free, I'm going to have to do an Alan Sugar. You're fired!

[BrilloPad]

One thing is for sure SantaClaus can't be from HMRC!

Santa Claus exemption
There is an overall exemption provided by HMRC to Santa Claus. Santa incorporated his business this year to save tax. Not that he pays a lot. He has never paid VAT and gifts made by Santa are tax free (special concession by HMRC). Despite professional advice he continues to pay all the fairies “cash in hand”. Even worse, no regard is made to the Working Time Directive, money laundering or minimum wage legislation. He blatantly ignores the health and safety issues when working on those roofs and has scant regard for speed limits. Some businesses get all the luck. Happy Christmas from all at Campbell Dallas.

http://www.businessperthshiremagazin...out_giving.htm

[DonkeyRhubarb]

Next we will be getting posts from the ToothFairy...

One thing is for sure SantaClaus can't be from HMRC!

[BrilloPad]

either that, or a very large dentist's bill

Is that after Gooner and his HMRC mates kick our teeth out?

[SantaClaus]

Next we will be getting posts from the ToothFairy...

either that, or a very large dentist's bill

[BrilloPad]

I've been silently reading this thread and had to comment.

The text from DonkeyRhubarb below is the only bit of worthwhile information I have seen in the whole thread.

I've been laughing my head off reading about people's moral tax issues/hangups. Reminds me of the childish arguments I used to have with some contractors.

If people want to pay as much of their hard-earned money as they can to HMRC so our MPs can claim even larger expenses and salaries, then so be it. If they would like to fund even more £2000 a day management consultants at the NHS, then go ahead, make my day. But dont expect me to!

What is up for discussion is whether the governments actions on retrospective taxation are legal, because according to the human rights act, they are not. So many influential and powerful people will be affected by this, that I bet they will be itching to take this to the European Court Of Human Rights.

If the UK introduces retrospective taxation, then start putting money away for the air that you breathe, in case HMRC tries to tax it at a later date.
This is just part of the general erosion of human rights that have been sneaked in by this govt, along with the 42 day detention and the ability for local councils to tap your phone.

And commenting on suggestions that Montpelier will come to some agreement with HMRC and sod the contractors, I do not agree. If they dont defend this case succesfully, any future tax schemes they invent for UK customers will always be in doubt as they will be back-taxed at a future date.

Next we will be getting posts from the ToothFairy...

[DonkeyRhubarb]

This bit seems particularly relevant.

A retrospective provision would be one which levied the charge in respect of the benefit enjoyed in previous years. Such a tax would require very careful scrutiny for compatibility with the requirement of accessibility and foreseeability.

However, I think the government are trying to dodge the retrospection angle altogether by claiming that they are only "clarifying" the existing law as it stood in 1987. In other words, it is only the "clarification" which is retrospective and not the provision itself. They are saying that we chose to interpret the 1987 act in a way that is not valid and now they are just putting this beyond doubt.

I guess only the courts can decide whether this is reasonable or not.

[ASB]

What is up for discussion is whether the governments actions on retrospective taxation are legal, because according to the human rights act, they are not.

Firstly under UK law retrospective legislation is perfectly allowed - though it is not usually done simply by convention. In terms of taxation we do in fact have retrospective legislation every year. The finance act, when passed, is backdated to the start of the tax year.

In terms of ECHR the UK government take the view that Article 1 protocol 1 does NOT imply an outright ban on retrospective taxation. There is at least 1 case to support this view. Certainty and retrospective are not mutually exclusive. The committes view can be found in here: http://www.publications.parliament.u...ts/93/9305.htm

In this particular case it seems likely that the "backdating" of this measure to 2004 (or when the original announcement was made about avoidance schemes in general) may well succeed. I would be doubtful if the backdating of it to before this time would succeed. In effect a measure can be applied from when it is announced (which is helpful or we could never pass a finance act). This still arguably gives the required certainty.

However the recent Marks and Spencer VAT case does perhaps muddy the waters a bit.

[NotAllThere]

...If they would like to fund even more £2000 a day management consultants at the NHS, then go ahead, make my day. But dont expect me to!...

Hey - the money to pay my fees has to come from somewhere.