Reply to: PCG have won the Arctic S660a case

[malvolio]

Ah - well I did hear somewhere that one of the things that a recent consultation on how HMRC works came up with is exactly that - HMRC should assume a mistake has been made and investigate, not assume ill-intent and prosecute.

Can't see it happening though: the same day there was an article about HMRC's Hectors acquiring the same rights of entry, search and seizure as HMRC's excise men. Now that is a frightening thought.

[Mailman]

Yes, I agree with that view now. What I was getting at is that the system should be the other way around, where the burden of proof is on the taxman to PROVE you owe them money, not for you to prove you dont.

This is why I was going on about being innocent until proven guilty.

Regards

Mailman

[zathras]

I think you will find that it was the IR that brought the original case against these two, therefore it was up to the IR to prove them beyond reasonable doubt as being guilty, which they failed to do in a split decision.

It is always the taxpayer who brings a case to the commissioners when denying that they owe tax from a tax demand, ergo the burden of proof is on them to prove they do not owe the tax (i.e. that the taxman is wrong)

[malvolio]

I think you will find that it was the IR that brought the original case against these two, therefore it was up to the IR

No. HMRC gave them a bill for £42k and demanded payment. Geoff and Diana appealed, it went to the commissioners and away they went.

The more worrying aspects are the original and badly-mismanaged split decision by Nuala Brice (who presided over the original IR35 appeal by the PCG, incidentally) and the dismally biased judgement handed down by Park J at the high court. In any sane world, the whole afffair would never have got past the commissioners, especially if you consider the final judgement, supported by a large pile of case precedent, which was that HMRC had no remit to interpret the law in the way they had. It is a pity that HMRC's own legal people do not understand their own legislation.

[Mailman]

[QUOTE=zathras]In the case of tax cases it is the taxpayer who brings the case, and therefore is in the position of having to prove the tax inspector wrong; ie the burden of proof falls on them. For that reason they cannot be found innocent or guilty of anything. QUOTE]

I think you will find that it was the IR that brought the original case against these two, therefore it was up to the IR to prove them beyond reasonable doubt as being guilty, which they failed to do in a split decision.

Therefore the burden of proof fell on the IR to show these two were tax cheats but they didnt do that since the commissioners both disagreed with each other.

Further take it to it's logical conclusion and it is apparent that if the commissioners disagreed there is doubt in the minds of the commissioners.

Exactly therefore the case should have been dismissed and those two should have been declared "innocent". However in a travesty of justice they were literally found "guilty" of tax evasion.

Regards

Mailman

[zathras]

The problem as I see it is that the wife shared equally in the risk of the company so she should also be able to share equally (or more) in the benefits. And this is the way the court of appeal has seen it.

Couple that with the fact that these two set their company up in accordance to advice from IR and you see what a complete crock of crap this case has always been.

What I would have liked to have seen is the IR getting bent over an apple cart and f*cked royally up the arse over how they handled this (through the monkey court that was the commissioners). It would have been great if the Judge declared that tied hearings do NOT go in favour of IR but in favour of the accused, sort of like being innocent until proven guilty and since the commissioners could not agree on this matter then these two should have been found innocent...and not guilty as was declared by the senior commissioner.

Mailman

In the case of tax cases it is the taxpayer who brings the case, and therefore is in the position of having to prove the tax inspector wrong; ie the burden of proof falls on them. For that reason they cannot be found innocent or guilty of anything. Further take it to it's logical conclusion and it is apparent that if the commissioners disagreed there is doubt in the minds of the commissioners.

Not that I am agreeing with that, just that is the way it is. The behaviour of the IR over this issue has been injustified as demonstrated by the courts. The appeal court has shown that some things Dr Nuala Brice thought true (Ordinary shares are a right to income - they are many things but right to income is not one of them, indeed as any investor in Microsoft, Lastminute.com, Eurrotunnel will testify the last thing ordinary shares grant is a right to income (all those companies by the way went at least a year without declaring a dividend, some have yet to do so)

[malvolio]

I'm quite calm - I just prefer the spin to be spinning the way we want it to, not the way the Government, via the BBC, clearly wish. There is no monoply on creative interpretation, after all!

[Bagpuss]

See - nobody understands the proper use of English any more... No wonder Cambell was so successful.

One last time - the revenue have not lost anything other than a court case. The money was never theirs to take, so how can they have lost it? .

Erm didn't they (Artic) lose the first case? and as most accountants have been advising against splitting the dividend for the last few years since Hector announced what they would be doing, I think it is reasonable to explain it (to the lay reader) as the revenue losing income. Even though it has now been re-clarified as income that hector shouldn't have had, I suspect many people have been paying them (what is now) extra tax and hence it's a loss however unjust.

PS. Calm down we are on the same side here!

[Mailman]

The problem as I see it is that the wife shared equally in the risk of the company so she should also be able to share equally (or more) in the benefits. And this is the way the court of appeal has seen it.

Couple that with the fact that these two set their company up in accordance to advice from IR and you see what a complete crock of crap this case has always been.

What I would have liked to have seen is the IR getting bent over an apple cart and f*cked royally up the arse over how they handled this (through the monkey court that was the commissioners). It would have been great if the Judge declared that tied hearings do NOT go in favour of IR but in favour of the accused, sort of like being innocent until proven guilty and since the commissioners could not agree on this matter then these two should have been found innocent...and not guilty as was declared by the senior commissioner.

Mailman

[malvolio]

At its simplest:

Under the original legislation, if you deliberately create a company structure that is intended to avoid paying tax on income - say by creating a company owned by your children into which you pay all your money and take back a tiny wage and subsequent dividends - you will be liable fo rthe tax as though you had earned and decalred it as your own income from day one.

Hector thought this to be a wizard wheeze to tax husband and wife companies with split shareholding and hence split dividend payments. Hector neatly avoided thinking about Norman Lamont's announcement of separate taxation for husband and wife, when he allowed that some married couples may take advantage of such arrangements.

However, the Court of Appeal has held that Lamont's point stands and husband-and-wife arrangements are as legitimate as any other. More importantly, they held that Geoff and Diana did not set up the company as a deliberate way to avoid tax liabilities, since they did not know for certain that they would be making a profit at the time, hence the dividend split was not "a bounteous arrangement" - Diana was not given (or in her case, did not buy) a share in the company in the expectation of earning income nor of saving tax. Hence it is not an artificial arrangement, in the context of the original act, and no additional tax is due.

The law itself is horribly vague, and contains a reference to "spouse" that is largely irrelevant in the modern world. However, Hector decided that he could ignore the clear intent of Parliament and apply his own interpretation. The CoA has very plainly told him to b***er off and obey the law as Parliament intended it to be applied.

[Alf W]

What I don't understand with this case was where the issue of interpretation came in.

If the tax law (whether you agree with it or not) states that it's designed to stop one man band contractor companies, where the wife is just set up on a technicality for tax purposes, then surely this couple would be clearly bang to rights. Let's be honest, this is exactly what this is.

However, if it's perfectly legit from a legal perspective then there should never have been a case to answer.

So, and I genuinely just don't understand it, what has been the point of confusion?

Glad they won though in the end.

[wendigo100]

Whilst I accept your point Malvolio, ISTM to me a fairly minor semantic issue. It hardly comes close to the "most biased report ever" as originally claimed.

tim

I've just read it for the first time, and it does come across to me as the country "losing" a billion on a technicality.

I'm with Malvolio on this one, because I don't think it was the country's money in the first place, and I too don't think the BBC have made that point.

[NoddY]

Just think of the tax advantages of having more than one wife...

...plus some other advantages...

[tim123]

Whilst I accept your point Malvolio, ISTM to me a fairly minor semantic issue. It hardly comes close to the "most biased report ever" as originally claimed.

tim

[malvolio]

See - nobody understands the proper use of English any more... No wonder Cambell was so successful.

One last time - the revenue have not lost anything other than a court case. The money was never theirs to take, so how can they have lost it? The hidden implication is that those nasty people have defrauded the country of £1bn that could have gone to build 8 new hospitals, or something.

I can tolerate spin from HMG, from politicians and from some bits of the press, but not an organisation chartered to be politically neutral.

Then I'm obviously out of date.