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Previously on "Overdrawn Capital Account Scheme (Aston Mae / Glen Mae / Procorre)"

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  • mightyspur
    replied
    Originally posted by woody1 View Post

    It sounds like HMRC have deemed the acquisition as a taxable event under the Loan Charge, and then used this to tax the full valuation in the 2018/19 tax year.

    If, as Graham says, HMRC are reviewing the settlement terms, then they ought to put on hold the "settle or appeal to tribunal" notices that they've already issued to people like yourself.
    Yes, I assume HMRC have done that, which is understandable for acquisitions where the total valuation is the same as the the total people had received via the ODCA prior. Considering I didn't receive the total amount my company was valued at in total earn out payments over the 3 and a bit years and only had 14k received via ODCA beforehand, it still feels incredibly unfair, as I am affectively being taxed on income I didn't actually receive.

    Leave a comment:


  • woody1
    replied
    Originally posted by mightyspur View Post
    I guess it is HMRCs claim, that the acquisition is bogus, despite the paperwork of share transfer etc. If HMRC are saying the entire acquisition was not legitimate, then I assume these funds will have to be treated as income (unless I go to tribunal to argue), but I don't understand why I would have to pay tax on the full valuation for the year ending April 2019 and not in the actual years they payments were received i.e. 2019 - 21? I get it for the years 2017 - 19, but not after 2019. That is very confusing to me.

    Graham Webber had written another post a week ago that relates to this. I'm not sure if it is good news or not though - https://www.linkedin.com/feed/update...7937045532674/
    It sounds like HMRC have deemed the acquisition as a taxable event under the Loan Charge, and then used this to tax the full valuation in the 2018/19 tax year.

    If, as Graham says, HMRC are reviewing the settlement terms, then they ought to put on hold the "settle or appeal to tribunal" notices that they've already issued to people like yourself.
    Last edited by woody1; Today, 09:16.

    Leave a comment:


  • mightyspur
    replied
    Originally posted by woody1 View Post

    Is that because it's being subjected to the Loan Charge?

    One of the bad things about the LC is that all the loans are taxed in a single year, not in the years you received payments, thereby pushing more of the income into the higher rate bands. (I'm guessing you received more than 14k over the years, perhaps the 220k in total?)

    If it is the LC, then I'm not sure you've got a lot of choice other than to settle. If you can't come up with the money in one go, you could ask for a payment plan (time to pay).
    Yes, I suspect it is being subjected to the Loan Charge, but that's my point, I absolutely did NOT receive more than the £14K via the Overdrawn Capital Account prior to the acquisition in Dec 2017.

    Prior to signing up with Procorre at the start of 2017 I ran a standard Ltd company paying myself in salary and dividends. I received a few payments in early 2017 into my Personal account via the ODCA before stopping them, as I was having some cashflow issues at the time, so I put the partnership on hold. Procorre then contacted me and started the discussions around the Acquisition and in the meantime I resumed receiving funds via the ODCA from Sept and up until Dec 1st 2017.

    By Dec-17 I had signed the paperwork, share transfer documents etc and completed the acquisition. At that time, I enquired with Procorre what tax needed to be paid on the £14k funds received via the ODCA in 2017 and they said "it had been reconciled by themselves and I did not have to declare it". Why my accountant didn't raise a red flag to that, I have no idea.

    Over the next few years, up until I terminated my partnership with Procorre in Apr 2021, I had received circa £194k in "earn out" payments into my personal account. I had always assumed these were completely legitimate and I had paid CGT on in April 2019 on the £220k valuation in anticipation of these earn-outs being received.

    Up to Apr 2019 I had received around £78k in earn out payments
    By Apr 2021 I had received another £114k in earn out payments

    I guess it is HMRCs claim, that the acquisition is bogus, despite the paperwork of share transfer etc. If HMRC are saying the entire acquisition was not legitimate, then I assume these funds will have to be treated as income (unless I go to tribunal to argue), but I don't understand why I would have to pay tax on the full valuation for the year ending April 2019 and not in the actual years they payments were received i.e. 2019 - 21? I get it for the years 2017 - 19, but not after 2019. That is very confusing to me.

    Graham Webber had written another post a week ago that relates to this. I'm not sure if it is good news or not though - https://www.linkedin.com/feed/update...7937045532674/

    Leave a comment:


  • woody1
    replied
    Originally posted by mightyspur View Post

    As you say, HMRC are assuming the acquisition price equates to the overdrawn capital account balance. My advisor told me the settlement they are offering, is the total acquisition price minus 16% in fees, so in my case that is £220k - 16% = £184k as income. The tax illustration they sent in March last year had the full 220k listed as income and taxed calculated off the back of that figure (and my other income received in 2019), but I thought they had perhaps revised that position, as we are now 12 months down the line, but perhaps I misunderstood and your suggestion is correct and it is still on the £220k.

    My issue though, is I had only received 14k via the OCA prior to the acquisition. If Procorre had valued my company at 14k then I wouldn't be so frustrated with all this (and alarm bells would have started ringing a little earlier)
    Is that because it's being subjected to the Loan Charge?

    One of the bad things about the LC is that all the loans are taxed in a single year, not in the years you received payments, thereby pushing more of the income into the higher rate bands. (I'm guessing you received more than 14k over the years, perhaps the 220k in total?)

    If it is the LC, then I'm not sure you've got a lot of choice other than to settle. If you can't come up with the money in one go, you could ask for a payment plan (time to pay).

    Leave a comment:


  • mightyspur
    replied
    Originally posted by interestedparty View Post

    Hi, can i double-check something with you please? Is it correct that the figure HMRC are assessing you on is the total valuation of the company, as was used used for the purported acquisition, minus the total fees charged to you which I understand was 16%? My understanding was that the acquisition price equated to the overdrawn capital account balance which already represented the net of total fees minus the 16% charges - so if they allow you the fees deduction then this equates to a double deduction as they'd already been deducted?
    As you say, HMRC are assuming the acquisition price equates to the overdrawn capital account balance. My advisor told me the settlement they are offering, is the total acquisition price minus 16% in fees, so in my case that is £220k - 16% = £184k as income. The tax illustration they sent in March last year had the full 220k listed as income and taxed calculated off the back of that figure (and my other income received in 2019), but I thought they had perhaps revised that position, as we are now 12 months down the line, but perhaps I misunderstood and your suggestion is correct and it is still on the £220k.

    My issue though, is I had only received 14k via the OCA prior to the acquisition. If Procorre had valued my company at 14k then I wouldn't be so frustrated with all this (and alarm bells would have started ringing a little earlier)
    Last edited by mightyspur; 26 February 2024, 10:00.

    Leave a comment:


  • woody1
    replied
    Originally posted by eek View Post

    The previous person references the "Procorre cleanse scheme' and it's very possible that all he is talking about is the consequence of that scheme and there are still other Procorre schemes where HMRC believe money is owed.

    And you only have to look at Dan Neidle's report on Property 118 (https://taxpolicy.org.uk/2023/09/22/amazing/) to see how 1 bad decision can result in HMRC getting multiple bits of the same cherry.
    Unfortunately, it's a bit Hobson's choice in this case. It's either accept HMRC's settlement offer, or go to tribunal. And the clock is ticking to decide.

    Leave a comment:


  • interestedparty
    replied
    Originally posted by mightyspur View Post
    Had a chat with my advisor, who have said that HMRC have a very strict settlement arrangement based on their understanding of the "scheme". If I try to argue how I should be handled differently, they will simply refuse my settlement offer and I will have to go to tribunal to argue my case. Their interpretation of the Procorre cleanse scheme, is the amount that my company was valued at, is all to settle previous loans received, so the only settlement they are offering is the total valuation, minus 16% in the fees Procorre charged and the rest is considered income and that is what I have to pay the income tax on.

    They are ignoring the fact I actually only received circa 14k prior to the acquisition and to top it all off, if I decide to go ahead and pay that, there is still the likelihood they will also come after me for the actual money I did receive in the following years as earn outs payments. So I'll pay tax on income I didn't receive, then have to pay income tax on the actual payments I did receive and have already paid CGT on. Life gets better and better.
    Hi, can i double-check something with you please? Is it correct that the figure HMRC are assessing you on is the total valuation of the company, as was used used for the purported acquisition, minus the total fees charged to you which I understand was 16%? My understanding was that the acquisition price equated to the overdrawn capital account balance which already represented the net of total fees minus the 16% charges - so if they allow you the fees deduction then this equates to a double deduction as they'd already been deducted?

    Leave a comment:


  • eek
    replied
    Originally posted by woody1 View Post

    On the face of it, that sounds like a "full and final settlement". Which should mean the end of the matter, and nothing further to pay.

    I would query this with the advisor.
    The previous person references the "Procorre cleanse scheme' and it's very possible that all he is talking about is the consequence of that scheme and there are still other Procorre schemes where HMRC believe money is owed.

    And you only have to look at Dan Neidle's report on Property 118 (https://taxpolicy.org.uk/2023/09/22/amazing/) to see how 1 bad decision can result in HMRC getting multiple bits of the same cherry.

    Leave a comment:


  • woody1
    replied
    Originally posted by mightyspur View Post
    Had a chat with my advisor, who have said that HMRC have a very strict settlement arrangement based on their understanding of the "scheme". If I try to argue how I should be handled differently, they will simply refuse my settlement offer and I will have to go to tribunal to argue my case. Their interpretation of the Procorre cleanse scheme, is the amount that my company was valued at, is all to settle previous loans received, so the only settlement they are offering is the total valuation, minus 16% in the fees Procorre charged and the rest is considered income and that is what I have to pay the income tax on.

    They are ignoring the fact I actually only received circa 14k prior to the acquisition and to top it all off, if I decide to go ahead and pay that, there is still the likelihood they will also come after me for the actual money I did receive in the following years as earn outs payments. So I'll pay tax on income I didn't receive, then have to pay income tax on the actual payments I did receive and have already paid CGT on. Life gets better and better.
    On the face of it, that sounds like a "full and final settlement". Which should mean the end of the matter, and nothing further to pay.

    I would query this with the advisor.

    Leave a comment:


  • mightyspur
    replied
    Had a chat with my advisor, who have said that HMRC have a very strict settlement arrangement based on their understanding of the "scheme". If I try to argue how I should be handled differently, they will simply refuse my settlement offer and I will have to go to tribunal to argue my case. Their interpretation of the Procorre cleanse scheme, is the amount that my company was valued at, is all to settle previous loans received, so the only settlement they are offering is the total valuation, minus 16% in the fees Procorre charged and the rest is considered income and that is what I have to pay the income tax on.

    They are ignoring the fact I actually only received circa 14k prior to the acquisition and to top it all off, if I decide to go ahead and pay that, there is still the likelihood they will also come after me for the actual money I did receive in the following years as earn outs payments. So I'll pay tax on income I didn't receive, then have to pay income tax on the actual payments I did receive and have already paid CGT on. Life gets better and better.

    Leave a comment:


  • GregRickshaw
    replied
    One of the big contributors on here jamesbrown I think wrote a very good piece on representing yourself at tribunals.

    Leave a comment:


  • woody1
    replied
    If it's any comfort, judges at tribunals are very sympathetic and understanding of taxpayers who represent themselves. They do not allow HMRC and their lawyers to bamboozle people with legal jargon.

    If it was me, I would focus on the central fact that you received £X remuneration but HMRC are asking for a disproportionate amount of tax £Y.

    Leave a comment:


  • mightyspur
    replied
    Originally posted by woody1 View Post

    But you may have to go to the FTTT to argue the amount if the "review" just confirms the assessment.

    Would you be willing to go to the FTTT on your own, without an advisor? You'd have nothing to lose, and I believe there are no court costs. The alternative, as I said, would be to use an advisor but that could cost ££££ (or £££££).
    Yes, I guess I could go to the FTTT on my own without an advisor, in an effort to keep costs down. My only concern with that is I get caught up in taxation terms or process that I don't fully understand, and I fail to effectively prove my point. It would be quite intimidating as I know nothing about how they work and what is/isn't important. I often have to read the replies from HMRC several times to understand what they are saying, and why they are saying it, but I guess it depends on what happens between now and the outcome of this review and how confident I would be in arguing my case.

    It's really getting me down though. I find myself constantly thinking about it. How I basically feel scammed by Procorre and my stupidity for getting involved. How I feel like HMRC are just making massive assumptions in a kind of "one size fits all" approach to their enquiries and not considering the actual facts in my case e.g. How can I possibly owe tax on "income" that I never actually received? The more I think about it, the more upset I get... I'm practically in tears writing this and keep thinking that perhaps it will all just go away if I go away.

    Leave a comment:


  • woody1
    replied
    Originally posted by mightyspur View Post

    Yes, I am sure you are correct, but that's why I want to settle. I'm not arguing against the premise, just the amount they think I should be taxed on. Hopefully I can make them understand and see it as I do, but hey it's just something else to worry about
    But you may have to go to the FTTT to argue the amount if the "review" just confirms the assessment.

    Would you be willing to go to the FTTT on your own, without an advisor? You'd have nothing to lose, and I believe there are no court costs. The alternative, as I said, would be to use an advisor but that could cost ££££ (or £££££).

    Leave a comment:


  • GregRickshaw
    replied
    Originally posted by mightyspur View Post

    When I agreed to engage with WTT, I paid a flat fee (fairly significant) to cover settlement with HMRC and the associated appeals.

    They offered another service, I believe it is called the "big group" or something, where you pay the fee, plus a monthly payment, which is working towards fighting HMRC. I just want to settle what I believe is reasonable and fair. I am hoping now things have started to move again, WTT can present my case and what I believe the settlement should be, but who knows.
    There are many with an opinion on "Big Group" I have no comment.

    I would cut ties with WTT find another company, get your settlement, your TTP and move on.

    I seriously doubt WTT or anyone can ever win any of these cases.

    Good luck with it all

    Leave a comment:

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