Originally posted by GregRickshaw
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Previously on "Overdrawn Capital Account Scheme (Aston Mae / Glen Mae / Procorre)"
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Originally posted by frontmen242 View PostJust noticed on LinkedIn from Graham - WTT Procorre UK the following post... just to quote
"Active cases update - Procorre
It would seem that one of the Procorre entities - Procorre UK Ltd company number 07644727 - has applied for and been granted the appointment of a liquidator.
This is one of several Procorre entities which we believe may be liable for tax on sums paid to those who used their services.
We will therefore take some advice and in all probability make a claim on that liquidator.
If you have used Procorre and HMRC is chasing you, I would recommend a similar action."
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Just noticed on LinkedIn from Graham - WTT Procorre UK the following post... just to quote
"Active cases update - Procorre
It would seem that one of the Procorre entities - Procorre UK Ltd company number 07644727 - has applied for and been granted the appointment of a liquidator.
This is one of several Procorre entities which we believe may be liable for tax on sums paid to those who used their services.
We will therefore take some advice and in all probability make a claim on that liquidator.
If you have used Procorre and HMRC is chasing you, I would recommend a similar action."
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Originally posted by GregRickshaw View Post
I believe, from experience and from following what has been going on/is currently going on with anything 'loan charge' related, there is nothing you can really do.
Cut your losses with WTT fighting for you (it's a cost which makes you feel good but ultimately will just be money down the drain). I have nothing against WTT or any of the big name advisers they do a job but they can't win anything for you.
Not a single case has been won properly enough to help you, every precedence is against you. HMRC ignore everyone from parliament so the AP group won't help you.
Possibly use them (WTT as you already have a relationship) to talk with HMRC to get yourself a long TTP, get your MPs help on the lengthy TTP. If HMRC believe they will get their money back over 10 years they'll take it.
Time to get on with your life by getting a settlement, I'm not saying this can happen but good tax lawyers may be able to help you remove some late payment fees (and the interest on the late payment fees - probably two or three thousand ££) it's worth trying.
I starred down the barrel many years ago, got a long TTP and managed to pay it off long before the term, getting the settlement was a huge relief to me, after years of anger.
Obviously all the above is massive assumptions I don't know your life situation so please bear that in mind.
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Originally posted by ProcorreVictim View PostSo I’ve been discussing with WTT over the last couple of weeks about this whole situation and they have looked at bank statements and returns etc and they have calculated the taxable amount as circa £200k. I have no idea what to do.
Cut your losses with WTT fighting for you (it's a cost which makes you feel good but ultimately will just be money down the drain). I have nothing against WTT or any of the big name advisers they do a job but they can't win anything for you.
Not a single case has been won properly enough to help you, every precedence is against you. HMRC ignore everyone from parliament so the AP group won't help you.
Possibly use them (WTT as you already have a relationship) to talk with HMRC to get yourself a long TTP, get your MPs help on the lengthy TTP. If HMRC believe they will get their money back over 10 years they'll take it.
Time to get on with your life by getting a settlement, I'm not saying this can happen but good tax lawyers may be able to help you remove some late payment fees (and the interest on the late payment fees - probably two or three thousand ££) it's worth trying.
I starred down the barrel many years ago, got a long TTP and managed to pay it off long before the term, getting the settlement was a huge relief to me, after years of anger.
Obviously all the above is massive assumptions I don't know your life situation so please bear that in mind.
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Originally posted by ProcorreVictim View PostSo I’ve been discussing with WTT over the last couple of weeks about this whole situation and they have looked at bank statements and returns etc and they have calculated the taxable amount as circa £200k. I have no idea what to do.
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So I’ve been discussing with WTT over the last couple of weeks about this whole situation and they have looked at bank statements and returns etc and they have calculated the taxable amount as circa £200k. I have no idea what to do.
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And from HMRC list of dodgy tax avoidance schemes
Originally posted by cojak View PostOne that slipped the net.
29th February 2024:
Abchurch Ltd
and how the Hell did I miss this one???
A drum roll pulease for….
Procorre LLP!
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Originally posted by mightyspur View Post
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.
The scheme you used was complex/convoluted (as well as contrived), as exemplified by Iliketax's analysis above.
Is HMRC's interpretation of the Loan Charge legislation correct in this case? Who knows.
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Originally posted by mightyspur View Post
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/
1. It is likely that your shares in your limited company are "employment-related securities" (see s421B(3) ITEPA). Being an ERS brings in more anti-avoidance legislation (see Part 7 ITEPA).
2. If you sell an employment-related for more than their market value then employment income tax is due on the excess (see Chapter 3D Part 7 ITEPA). The Supreme Court's has heard a case on this legislation (search for Grays Timber Products supreme court).
3. The excess would be subject to PAYE and NIC. It would be your employer (i.e. your limited company) that has the obligation to operate PAYE/NIC.
4. So the key question is what was the market value of the shares in your company? That market value is, very basically, what would a random stranger (a prudent prospective purchaser) would pay to become the owner of the shares you sold (see s273 TCGA).
5. My guess is that HMRC would say that a purchaser would pay pretty much nothing for the shares. If they can say that then pretty much all the sales proceeds are subject to tax.
6. Why would they say pretty much nothing? I guess that they would say that the only way that the company would get income would be if you (or someone like you) was paid a market wage and, if the company paid that, it would make little profit and so not be worth much.
7. That's not the only answer though. HMRC could say that some or all of the earn-out wasn't really sales consideration but just earnings. Their guidance lists what they think that these characteristics are (see ERSM110940 in a slightly different context). If they did then the excessive amount would be subject to PAYE/NIC. Again, it would be your employer (i.e. your limited company) that had to pay the PAYE/NIC.
8. They could also say that the sums that you received are taxed under the disguised remuneration rules (see s554C(1)(a) ITEPA) and no deduction is given for the value of your shares (see s554Z8 ITEPA). Again, it would be your limited company that had to pay PAYE/NIC.
9. There's no double tax in that whatever amount is subject to employment income tax is not subject to capital gains tax. Any CGT you've paid will offset the employment income tax due.
10. When is any employment income tax due? It will depend on the underlying documents and what route HMRC use to challenge. This could be when the cash is received (if they say that the earn-out wasn't really sales consideration or if the disguised remuneration rules did applied) or when the shares were disposed (if they say that you got more than market value). The underlying documents might push them one way or another.
11. You say HMRC claim "the acquisition is bogus". I've no idea what that means. HMRC don't need to say anything was "bogus" or that the sale did not happen to get an employment income tax charge.
12. In relation to the £14k that was withheld to repay your overdrawn loan account, that probably does not stop the April 2019 loan charge on that amount (see para 4 Schedule 11 F(No2)A 2017). But there should not be two lots of tax on the same amount (see the complicated double tax rules in Part 7A ITEPA).
13. If HMRC challenge you under the excess market value rule (my point 2) or the disguised remuneration rules (my point 8) then there would be a penal tax charge too (see s222 ITEPA). This doesn't apply if HMRC challenge you under the payments just being your earnings.
From my perspective, to be successful you would need to be able to demonstrate that a hypothetical person would have paid the same price for the shares you sold. As I say, I have no knowledge of what has happened to you or the scheme, other than what you've written.
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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.
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Originally posted by mightyspur View PostI 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/
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; 28 February 2024, 09:16.
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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).
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/
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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)
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).
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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?
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.
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