Reply to: Article in the Times

[Togoodtobetrue]

I had a really sad / bizarre conversation with a contractor this week who is being chased by hmrc for tax owed from using an umbrella that was an offshore loan scheme. Her tactic to deal with it was to shop round for an umbrella that can increase her take home pay now to repay the debt

[webberg]

I suppose the issue then rather than whether it is legal is whether it is sound advice for healthcare workers to sign up for these schemes, if they go into it with their eyes wide open aware of the risks fair enough but some of these workers are being promised that it’s completely safe and could be facing massive bills in the future that they can’t pay.

Totally agree.

We (and I'm sure others) would be happy to give a free opinion on anything anybody in this situation wants to share.

[Togoodtobetrue]

I suppose the issue then rather than whether it is legal is whether it is sound advice for healthcare workers to sign up for these schemes, if they go into it with their eyes wide open aware of the risks fair enough but some of these workers are being promised that it’s completely safe and could be facing massive bills in the future that they can’t pay.

[webberg]

What Tripod have is legal. And the courts will probably rule it so.

However HMRC will retrospectively determine it is illegal.

With respect I think that is incorrect.

The Courts will have no opinion on the legality of what is happening, unless what is happening is clearly illegal.

Instead, the courts could decide that the tax legislation should be interpreted in a way that does not produce the result claimed.

That does not mean that either party in the dispute has done anything illegal, just that the Courts prefer one interpretation over another.

There is no brightline threshold test here to determine which tax treatment is correct. It's all a question of opinion and analysis.

If you are tempted by this sort of arrangement, make sure that you subject it to as thorough an analysis as possible and if tax is not your area, take it to some body who is an expert for a view. If Tripod (and all the others out there in a similar space) are confident of their position, they should welcome such examination with open arms.

[GreenMirror]

What Tripod have is legal. And the courts will probably rule it so.

However HMRC will retrospectively determine it is illegal.

[webberg]

I don't know Tripod and have not spoken with them and I would agree that what they are said to be doing is legal.

However, as any fule noes, HMRC is against such schemes and have signaled in no uncertain terms that they will challenge.

Back in the 80's and perhaps 90's, it was perfectly acceptable to undertake a transaction in which the economic result and the tax result varied because reading the law in a very literal fashion permitted that.

A case came along called Ramsay which HMRC thought was the answer. This was about substance over form. In short, look at the start place for parties in a transaction, then the end place and if there were steps in the middle that were there for tax purposes, you can ignore or rewrite them.

This case became a little too sweeping for the Courts and later came what is called purposive interpretation.

In short, establish the facts, review the law as intended and written as it applies to those facts, work out how the transaction answers to the law.

Literal interpretation is no longer a safe haven in Court. Some can argue that we should be entitled to rely upon the rule of law. That is true, but it's the law as interpreted by the Courts.

So it may be that this company is acting within the law and that the loophole they have found is legal, but that will not stop a Court deciding, on the facts, that the law was intended to catch the transactions and applying tax.

I wonder where the comapny will be when that happens?

[Togoodtobetrue]

My contacts tell me that rather than get their house in order Tripod Partners have decided to ring all of their workers (and everyone else’s) to tell them that the article is nonsense and that the schemes they offer are a legal loophole.

[cojak]

Very interesting article, I am involved in the health care recruitment businesses but luckily for a responsible company that doesn’t permit dodgy umbrellas.

I can confirm that unfortunately the industry is riddled with agencies who are permitting or promoting these schemes to win over workers from rivals. The nhs and local councils make the right noises when told but always seem to fail to take any action.

Until hmrc make an example of an agency the industry in general will not fall into line!

Quite. No point in having legislation if it’s not enforced.

[me206et]

Unfortunately. The providers and the qc's just get away with it. I notice that one of the top "lawyers" for defending these cases is also a QC who said they were legal and above board. So paid to say it was ok and paid even more to defend his position. The gift that keeps on giving.

[QCApproved]

The whole HMRC function seems to have escaped the trend of offshoring to various locations where we know things can be done very much more cheaply - perhaps that delight will be the agenda at some point for them. Could be a welcome saving for the taxpayer for some of their activities to be handled there, may also stem the bright ideas from some of their alumni.

[QCApproved]

They have acted late in the day having stood on the sidelines for years when the bulk of the damage was done - there is now a lot of legislation for a problem that one would think is well and truly on the fringe now. The fees are now banked and the jurisdiction exited by promoters.

[jrock]

HMRC/the government are. Recent examples off of the top of my head include: Promoters of tax avoidance scheme legislation, enablers of defeated tax avoidance scheme legislation, Criminal Finance Act, using the Advertising Standards Agency to challenge adverts, some criminal prosecutions (but not many, some not successful), professional code of conduct in relation to taxation (professional institutes were encouraged to do this by HMRC), code of practice on taxation for banks, suspicious activity report...

The problem is the scummy end of the market. If you have suggestions about how to do this, post them here. HMRC do read the forum.

I know HMRC are reading these forums and probably laughing at how this is affecting us ex contractors! I bet they get pleasure on what they are putting us through. Hope they all suffer similar situations in life too.

If they had any soul they would now go after the scheme providers who have got off Scot free.

[Iliketax]

There should be pressure to force HMRC to go for the scheme promotors, some of whom are almost psychopathic in their lack of regard for their ‘employees’/partners.

HMRC/the government are. Recent examples off of the top of my head include: Promoters of tax avoidance scheme legislation, enablers of defeated tax avoidance scheme legislation, Criminal Finance Act, using the Advertising Standards Agency to challenge adverts, some criminal prosecutions (but not many, some not successful), professional code of conduct in relation to taxation (professional institutes were encouraged to do this by HMRC), code of practice on taxation for banks, suspicious activity report...

The problem is the scummy end of the market. If you have suggestions about how to do this, post them here. HMRC do read the forum.

[QCApproved]

As a great many of these scheme devisors and QCs are ex HMRC or do Government tax work they should be able able to track them down quite easily. it seemed to be a well trodden path to top the final salary pension up with a spot of tax avoidance devising. Not often by the sharpest of HMRC finest chaps either as we have all discovered.

HMRC - scheme - QC- spiv - end client

[phil@pmtc]

There should be pressure to force HMRC to go for the scheme promotors, some of whom are almost psychopathic in their lack of regard for their ‘employees’/partners.

I agree and think this is the best challenge that could be presented to HMRC. Their silence on the matter is deafening. Some would say that it’s due to the fact that it’s easier to take the low hanging fruit.