Reply to: Supreme Court Decision - Share options and banker's bonuses

[StrengthInNumbers]

HMRC will not claim cost as most of litigation start with the arrangement that no party will claim cost.
Nothing is dead until it is done. But for HMRC to change stance they need to have a carrot. If HMRC lose against Rangers in Supreme Court and / or in FTT next year where first mass marketed scheme will be in court and/or fisher case to be heard in April goes against HMRC - then yes HMRC will soften the approach. Until then just on cost basis of going to Supreme Court even if HMRC gives 11% discount to us it does not mean much.

[flamel]

Tax bill will be covered by the bank, UBS in particular.

Which will ultimately be re-charged to their customers and shareholders

[Not Losing Any Sleep]

That internal time might be say a team averaging 25 for 12 years at £50k a year each = £15m.

I really doubt it.

[Iliketax]

I very much suspect that there are a number of follower banks who were doing something similar and will now settle so that the final tax collected will be substantially more than the headline value of £135m.

There is another £30m of tax to come from 27 others. Presumably, these will now get follower notices.

I can see no suggestion that HMRC is seeking costs but they may do.

Why would HMRC not seek costs? It would be normal for the winner to claim costs at the UTT and above.

[webberg]

Given the mention of Big Group, I'll comment.

The UBS/DB schemes were from a generation ago and were acceptable in their day. I very much suspect that there are a number of follower banks who were doing something similar and will now settle so that the final tax collected will be substantially more than the headline value of £135m.

Getting there has require 12 years of investigation and 4 stages of Courts. I can see no suggestion that HMRC is seeking costs but they may do. I would conservatively estimate HMRC costs (paid by you) as being close to £1m plus internal time. That internal time might be say a team averaging 25 for 12 years at £50k a year each = £15m.

Let's call that £15m all up. To collect £135m. That's 11% of the tax. (I'm ignoring interest).

That's substantially more than the usual cost of collecting tax revenue.

Contractor schemes pre 2011 might be collated into 3 types and a positive decision on each will be needed. Post 2011, perhaps 5 to 8 different types.

It is always possible for HMRC to take a totally uncommercial stance and spend (your) money on fighting them all. The time and cost might be seen as necessary to preserve policy. My guess however is that a well put together technical analysis that causes them to hesitate and even think about other analysis is going to be considered at the highest levels.

Is that a guarantee? no.

Is a win for HMRC in UBS/DB a guarantee that contractor schemes are dead? no.

Does this mean that litigation on contractor schemes is not worthwhile? no.

The point is, whilst the UBS/DB result has perhaps shifted the balance very slightly, it has not rendered Big Group (or other litigation groups) strategy obselete.

[neil99]

Unfortunately, for the bankers, in favour of HMRC.

Bankers' bonuses: Supreme Court sides with HMRC in appeal against UBS and Deutsche Bank, ruling out scheme designed to avoid income tax | City A.M.

Tax bill will be covered by the bank, UBS in particular.

[flamel]

Doesn't matter but one way or another seems like courts are aligned with HMRC's view. Whatever be the reason, whether we like it or not, we need to make decision based on all the information available. Until before this decision things were different but now I am not of the view that courts will help us. And if courts are with HMRC I don't understand how Big Group can motivate HMRC to change analysis.

The share option scheme judgement does not necessarily apply to other areas of the law - I'm sure this was part of an employees remuneration package.

Not only does the case involve banks, the largest hate target for a generation, but HMRC and the Courts know that the banks involved have got plenty of cash. All win for everyone involved.

Whereas individuals do not have the same resources so many are facing insolvency.

Even the most ardent to HMRC supporters are of the view that collecting a percentage of the tax they want as a certainty is better than years in court. Even then, HMRC will not be able to collect all the money from many individuals as they simply don't have the resources available - and bankruptcy won't get them anything either.

As one of the HMRC officers told us about the impending bankruptcy... "it's fully deserved".
Clearly no money spent on training at the charm school.

BG is helping many people stuck at the end of appalling treatment by HMRC. Treatment that is against their own charter and may well be illegal.
BG can at least campaign for a humane settlement, even if it can't fight retrospective interpretation of the law.

[StrengthInNumbers]

Doesn't matter but one way or another seems like courts are aligned with HMRC's view. Whatever be the reason, whether we like it or not, we need to make decision based on all the information available. Until before this decision things were different but now I am not of the view that courts will help us. And if courts are with HMRC I don't understand how Big Group can motivate HMRC to change analysis.

[DonkeyRhubarb]

The courts seem to have changed their approach to tax avoidance cases in recent years.

There's a lot more use of the purposive than the literal.

Direct political interference? Probably not. More likely they are just reflecting public opinion which, of course, has been whipped up by politicians. The Justice System, which is paid for by taxes, has also faced severe cuts in recent years. The legal aid budget has been slashed. Courts are closing. Jobs have been lost, pay frozen.

UK judges disillusioned after drop in pay and conditions, survey finds | Law | The Guardian

I wonder whether some of the decisions we're seeing now, in favour of HMRC, would have gone a different way 10 years ago.

[Iliketax]

Worth listening to. The will of parliament etc.

Bankers' bonus tax avoidance schemes named them after Houdini are illegal | Daily Mail Online

Definitely. Especially if you listen to it with "shares" replaced by "loan" and "company" replaced by "trust".

[Not Losing Any Sleep]

[QUOTE=Iliketax;2221272]No, this was a very contrived scheme to get around UK tax rules. It was a way of dressing up a bonus scheme as something else. It had absolutely nothing to do with anything being done in Germany (other than there being a German bonus scheme).

And pigs may fly.
The first part of the para 97 of the judgement would be worrying reading for employees who got loans (e.g. Murray Group):


Worth listening to. The will of parliament etc.

Bankers' bonus tax avoidance schemes named them after Houdini are illegal | Daily Mail Online

[Iliketax]

apparently the sort of scheme seen here was good in Germany at the time.

No, this was a very contrived scheme to get around UK tax rules. It was a way of dressing up a bonus scheme as something else. It had absolutely nothing to do with anything being done in Germany (other than there being a German bonus scheme).

DB may well go further yet with a case going to ECJ

And pigs may fly.

I'm not so sure that it means that much for contractor schemes

The first part of the para 97 of the judgement would be worrying reading for employees who got loans (e.g. Murray Group):

It may well be that, in an appropriate case, the statutory term “money”, construed purposively, might apply to arrangements which, viewed realistically, were no more than disguised or artificially contrived methods of paying cash to employees.

Although "money" is not relevant (in terms of income) to the self-employed, the message underlying the case is very clear.

[webberg]

Also worth noting that this case started in 2004.

It has taken 12 years to get this far and my sources tell me that DB may well go further yet with a case going to ECJ as apparently the sort of scheme seen here was good in Germany at the time.

UBS of course have no such fall back unless that have some sort of parallel agreement with the EU.

This is a complicated decision and whilst I expect the headline writers to grab the "HMRC Victory" angle, I'm not so sure that it means that much for contractor schemes (let's face it a win would have been better).

As such I'm going to take my time and read the thing first before making public any thoughts.

[webberg]

Probably the banks and not the bankers will pay.

Thus the bank's customers ultimately pay (or the shareholders).

[DonkeyRhubarb]

Appeal allowed.

Unfortunately, for the bankers, in favour of HMRC.

Bankers' bonuses: Supreme Court sides with HMRC in appeal against UBS and Deutsche Bank, ruling out scheme designed to avoid income tax | City A.M.