Reply to: APNs Imminent - your help needed

[regron]

So I think that there are schemes out there still being done but they are becoming increasingly bespoke.

I can confirm these schemes are going on in a different capacity, as there are contractors I know who are still working through them. Personally, I got out when all this kicked off, but still have the COP8 and APN c**p hanging over me for the years I was involved.

Even though I have shared with them all the information I've collated on this subject, they still seem to shrug it off and say they will deal with it when it happens, even though they have COP8's and the SO letter through their doors.

Pure b*lls or stupidity.....you decide !

[Rob79]

Is it not the case that the recent legislation will have driven all the contractor schemes to the wall? They can't still be going surely.

Depends again on how you define a "scheme".

Most schemes that rely on a tax break work in one of three ways.

1. Generate a tax relief that is more than the economic cost
2. Generate a receipt that is not taxed
3. Convert income to gains (and then sometimes do a gains planning exercise)

Contractor schemes and all forms of EBT are in category 2. Most of those have been stopped and NOBODY in their right mind would contemplate them at the moment.

We are seeing variations on 3. Imagine, that you contract via a limited company and you take from that company a minimal salary. The company builds cash reserves (probably loaned to you in part but taxed as appropriate). At some point you want to cash in and move on. Liquidate the company and you pay CGT (28% or perhaps 10%) rather than income tax.

Perhaps even better you put the company into a partnership and sell the goodwill (getting a base cost uplift) and you are the other partner who gets a return of capital which is not taxed.

I have seen the latter scheme today.

Does it work? It might if executed properly (and the one I have on my desk was not) but will it survive HMRC enquiry and counteraction? Almost certainly not.

So I think that there are schemes out there still being done but they are becoming increasingly bespoke.

[jemb]

I would say that their estimate is on the low side. It depends on how you measure "marketed tax avoidance schemes".

As an example: many marketed tax avoidance schemes are structured as something called a UCIS (Unregulated Collective Investment Scheme). These are commonly used for high risk investments where the "return" is a tax relief. The FSA did a review on how these were sold and concluded that of the 140,000 investors put into these schemes, around 120,000 were the product of bad advice.

Now not all of those would be in HMRC's 65,000 but a good chunk are.

This type of scheme is just one example. Property schemes (EZ's, BPRA's) would probably be another 10,000 or so. Sole traders = 5,000 to 8,000. Share loss schemes perhaps 10,000.

Add in contractor schemes.

I just don't buy 65,000. I think the scale of the problem is much bigger.

Is it not the case that the recent legislation will have driven all the contractor schemes to the wall? They can't still be going surely.

[Rob79]

What about HMRC's estimate of 65,000 for the total number of open cases involving marketed tax avoidance schemes (both DOTAS and non-DOTAS)?

Is this a fabrication too?

https://www.gov.uk/government/upload..._avoidance.pdf

"HMRC is currently investigating around 65,000 individuals and small businesses that have used marketed avoidance schemes."

I would say that their estimate is on the low side. It depends on how you measure "marketed tax avoidance schemes".

As an example: many marketed tax avoidance schemes are structured as something called a UCIS (Unregulated Collective Investment Scheme). These are commonly used for high risk investments where the "return" is a tax relief. The FSA did a review on how these were sold and concluded that of the 140,000 investors put into these schemes, around 120,000 were the product of bad advice.

Now not all of those would be in HMRC's 65,000 but a good chunk are.

This type of scheme is just one example. Property schemes (EZ's, BPRA's) would probably be another 10,000 or so. Sole traders = 5,000 to 8,000. Share loss schemes perhaps 10,000.

Add in contractor schemes.

I just don't buy 65,000. I think the scale of the problem is much bigger.

[DotasScandal]

More lies decrypted...this time, the infamous "80% success rate":

80% of cases are won by HMRC? | C3Insight

[DonkeyRhubarb]

What about HMRC's estimate of 65,000 for the total number of open cases involving marketed tax avoidance schemes (both DOTAS and non-DOTAS)?

Is this a fabrication too?

https://www.gov.uk/government/upload..._avoidance.pdf

"HMRC is currently investigating around 65,000 individuals and small businesses that have used marketed avoidance schemes."

[Rob79]

If what you are saying is correct then HMRC have lied about the impact of the proposals.

https://www.gov.uk/government/upload...DOTAS_GAAR.pdf

Summary of Impacts
This measure and the Autumn Statement 2013 follower measure will require Payment Notices to be issued to around 43,000 taxpayers involved in avoidance schemes currently under dispute with HMRC.

Lies, damned lies and statistics

[DonkeyRhubarb]

It's because the HMRC numbers include only those cases being actively worked. For example, a lead case on a film scheme might have say 200 partners but there might be between 3 and 30 partnerships. Only the lead case is quoted in the numbers.

My personal opinion is that to quote outstanding cases of perhaps 2x, 3x 5x, the original number would cause those overseeing HMRC to be severely criticized and their efficiency (lack of) hel;d to account.

It's all politics to MP's and the Civil Service neither of whom have any idea how this impacts real people doing commercial jobs.

If what you are saying is correct then HMRC have lied about the impact of the proposals.

https://www.gov.uk/government/upload...DOTAS_GAAR.pdf

Summary of Impacts
This measure and the Autumn Statement 2013 follower measure will require Payment Notices to be issued to around 43,000 taxpayers involved in avoidance schemes currently under dispute with HMRC.

[Rob79]

So, the total number of open DOTAS cases is probably a lot more than 43,000. Possibly as high as 100,000.

Why do you think HMRC have under-reported this? Does the 43,000 perhaps represent just the target areas they want to crack down on?

PS.

If you add up the numbers in the table on page 7 of the consultation they come to 42,800 (the 43,000 number).

https://www.gov.uk/government/upload..._avoidance.pdf

It's because the HMRC numbers include only those cases being actively worked. For example, a lead case on a film scheme might have say 200 partners but there might be between 3 and 30 partnerships. Only the lead case is quoted in the numbers.

My personal opinion is that to quote outstanding cases of perhaps 2x, 3x 5x, the original number would cause those overseeing HMRC to be severely criticized and their efficiency (lack of) hel;d to account.

It's all politics to MP's and the Civil Service neither of whom have any idea how this impacts real people doing commercial jobs.

[DonkeyRhubarb]

Unfortunately that's too simple an analysis.

Example - some film partnerships have in excess of 800 members.

Some bespoke structures have perhaps 1 person or up to maybe 6 or 7.

The 43,000 number is nonsense. It's just a newspaper piece of fiction. Same as the 1,200 schemes.

The real calculation should be how many users of DOTAS registered schemes, not already settled, are still waiting settlement?

Our own analysis (admittedly with a fair chunk of guesswork) says that of the 1200 schemes, perhaps 800 are "real". We also think that just our sector of the market has perhaps in excess of 50,000 users of those schemes. Add in the contractor numbers and you start to get real.

So, the total number of open DOTAS cases is probably a lot more than 43,000. Possibly as high as 100,000.

Why do you think HMRC have under-reported this? Does the 43,000 perhaps represent just the target areas they want to crack down on?

PS.

If you add up the numbers in the table on page 7 of the consultation they come to 42,800 (the 43,000 number).

https://www.gov.uk/government/upload..._avoidance.pdf

[Rob79]

The list of tax avoidance schemes HMRC published contained approximately 1200 SRNs.

HMRC say 43000 taxpayers are in the frame.

That only averages at 36 users per scheme.

Unfortunately that's too simple an analysis.

Example - some film partnerships have in excess of 800 members.

Some bespoke structures have perhaps 1 person or up to maybe 6 or 7.

The 43,000 number is nonsense. It's just a newspaper piece of fiction. Same as the 1,200 schemes.

The real calculation should be how many users of DOTAS registered schemes, not already settled, are still waiting settlement?

Our own analysis (admittedly with a fair chunk of guesswork) says that of the 1200 schemes, perhaps 800 are "real". We also think that just our sector of the market has perhaps in excess of 50,000 users of those schemes. Add in the contractor numbers and you start to get real.

[DonkeyRhubarb]

Something has been puzzling me

The list of tax avoidance schemes HMRC published contained approximately 1200 SRNs.

HMRC say 43000 taxpayers are in the frame.

That only averages at 36 users per scheme.

[BrilloPad]

I wouldn't have thought so for the thousands who won't be able to pay.

I am unable to pay. And the sooner this is out of the way the better. I hate my job. Make me bankrupt. The state can support me and my dependants.

[DonkeyRhubarb]

Is it good news that we don't have long to wait now?

I wouldn't have thought so for the thousands who won't be able to pay.

[Rob79]

I would tend to agree with centurian.

Action against a law on the statute book but not actually used would seem to have no basis for challenge. Until you see how the intentions of Parliament are interpreted in action, it's difficult (impossible?) to have an argument that a judge can interpret.

I think therefore until an APN is delivered there are no grounds for action.

Is it good news that we don't have long to wait now?