Reply to: EBT HELL: Assignment Solutions Isle Of Man / Premier Tax Strategies / DMS

[hobobond]

Maybe I just answered my own question from reading this FT article but if I am not in scope because I pre-date 2010, why are HMRC sending me letters? I'm so freaking confused!

The loan charge no longer applies to loans entered into as far back as April 1999 — instead it only applies on loans after December 9 2010

Loan charge deadline reignites debate over tax fairness | Financial Times (ft.com)
https://www.ft.com/content/3828b4ce-...2-a2a5f2da617f

The loan charge: a recap
The loan charge was announced in the 2016 Budget, to come into effect in 2019. The anti-avoidance measure was designed to address the tax lost to the exchequer from various “disguised remuneration” schemes — which avoided income tax and national insurance by paying people in loans not intended to be repaid. The policy required about 50,000 people who had used the schemes to settle their debts with HM Revenue & Customs before April 5 2019 or face the charge — and pay tax on up to 20 years of income in the 2018-19 financial year. Following an outcry from MPs, peers, professional bodies and campaigners over the extreme distress the policy was causing — including several reported suicides — the government commissioned an independent review in September 2019. Led by Sir Amyas Morse, former head of the National Audit Office, the review concluded the loan charge had failed to “get the balance right between tackling tax avoidance and protecting the rights of taxpayers”. He made 19 recommendations — all but one of which was accepted by the government. The key changes include: The loan charge no longer applies to loans entered into as far back as April 1999 — instead it only applies on loans after December 9 2010, as Sir Amyas argued the law was “not clear” before 2010. The loan charge no longer applies to loans entered into after December 2010 and up to April 6 2016 where a “reasonable disclosure” of the scheme was made to HMRC and the authority did not take action. Rather than needing to pay the loan charge all in one tax year, people can spread it evenly across three tax years: 2018-19, 2019-20 and 2020-21. 30 September deadline: Those affected need to file their 2018-19 self-assessment tax return by September 30 2020, reporting any loan balances subject to the loan charge. Individuals who are not settling, and therefore become liable to pay the loan charge, will need to pay the charge that is due on September 30 or agree a so-called “time to pay” arrangement with HMRC before then.

[hobobond]

Hi All, -

I just got my annual letter from HMRC referencing my use of ASIOM as a scheme. They have provided no additional details. I used ASIOM for about 6 to 9 months in 2003-2004. My tax returns online at HMRC don't go back that far and nor does my bank account statements. How will HMRC know the loan amount? I can only guess the amount myself. I moved to the US in 2008 and have not earned UK taxable income in about 10 years.

Also...... I signed up with Dow Schofield Watts Tax Resolution Services in October 2018 and paid them GBP 1500 to work with HMRC on my behalf. I sent them all my documentation but they didn't deliver anything and looks like the people I was working with have left. Has anybody else had a similar experience?

Thanks!

[webberg]

Toone & Ors v Ross & Anor, Re Implement Consulting Ltd [2019] EWHC 2855 (Ch) (30 October 2019)

This judgement may be of interest.

Yes it is.

I've been reading it this afternoon and have produced what is not so much an analysis as a series of questions as to how far the judgement extends.

In short, is this limited to companies in some form of insolvency - or which has completed an insolvency but can be reinstated - or is the decision that a payment to an EBT is an unlawful distribution of company capital, one that can apply in circumstances outside insolvency?

If it is the case that money taken from a company whilst in insolvency and there is a possibility/probability that HMRC wants tax, which the directors are responsible for, then all those who sold mass marketed schemes might be rather uncomfortable this afternoon.

[piebaps]

Toone & Ors v Ross & Anor, Re Implement Consulting Ltd [2019] EWHC 2855 (Ch) (30 October 2019)

This judgement may be of interest.

[webberg]

Agree with the above.

We often hear clients saying that they are

"self employed via my own company"

That makes no sense.

A self employed person will be a sole trader or perhaps in partnership.

If you have a company of which you are a director, you are an office holder and/or employee of the company.

In tax terms, in that situation, the company and you are separate tax personalities.

[malvolio]

And I would argue that you aren't an employee of YourCo anyway, you are an officer of it. Being employed is not the same as drawing a salary.

[webberg]

The "employer" i.e my Ltd company is still around and hasn't yet been closed down until the final accounts have been filed. HMRC are also already aware of the relationship between myself (as the director) and my Ltd company.

To say a director is employed by his/her company by default, without a salary, employment contract or anything else that makes somebody an employee of a company, is certainly incorrect in my view!

You were an office holder in the company and for many (virtually all) tax purposes that is equivalent to being an employee.

Also your "employer" may not have been your limited.

In the Hoey case it was argued that the end client was in fact the employer. I have views on that argument and the way it was put, but if nothing else it demonstrates that defining "employer" is not as easy as you might think.

[dangermaus]

They agreed because to claim otherwise meant that they should be chasing that employer and not you.

As the employer is likely long gone, the Choice for HMRC was collect nothing (because of their own incompetence) or collect something from you.

Easy choice to make.

The "employer" i.e my Ltd company is still around and hasn't yet been closed down until the final accounts have been filed. HMRC are also already aware of the relationship between myself (as the director) and my Ltd company.

To say a director is employed by his/her company by default, without a salary, employment contract or anything else that makes somebody an employee of a company, is certainly incorrect in my view!

[webberg]

Thats exactly how my scheme worked and that was fully explained to HMRC but they agreed that I was not an employed person

They agreed because to claim otherwise meant that they should be chasing that employer and not you.

As the employer is likely long gone, the Choice for HMRC was collect nothing (because of their own incompetence) or collect something from you.

Easy choice to make.

[dangermaus]

What happens though if money was transferred from your ltd business account to the scheme and then a percentage of that pays to your personal account. I’m probably veering away from the original query now.

Thats exactly how my scheme worked and that was fully explained to HMRC but they agreed that I was not an employed person

[Iter]

What happens though if money was transferred from your ltd business account to the scheme and then a percentage of that pays to your personal account. I’m probably veering away from the original query now.

[dangermaus]

Director/Employee

Agree if u were using the scheme as an umbrella you were an employee. If you were setup as ltd as sole director then you would still be an employee receiving the loan

Not strictly true.

I was a director of my Ltd company but never paid myself a salary, never set up a payroll etc

The retainer payment came from the promoter as self employed income and the loans came from the trust.

The only monies paid to my personal account from my Ltd company were dividends.
This was argued to HMRC and they then came back and accepted my settlement figure based on it being a self employed scheme i.e class 4 NI due instead of class 1. Effectively accepting the fact that being a ltd company director doesnt automatically make you an employee of your company as well unless you were receiving a salary from it.

It's quite logical too and certainly makes a difference in the settlement figure. (9% NI instead of 12% employee's NI and 13.8% employer's NI)

[Iter]

Agree if u were using the scheme as an umbrella you were an employee. If you were setup as ltd as sole director then you would still be an employee receiving the loan

[Paralytic]

Seems clear to me. If you were an employee, select yes. If you were an employee and a director, select yes. If you were a director only, select no.

[FTTM]

HMRC Loan Charge Form

Hi - just revisiting the thread I started 7 years ago.

EBT really is the gift that just on keeps giving!!

anyway , anyone know how to complete this bit of the HMRC LC form?

Seems contradictory , is the question were you an employee or is the question were you an employee AND a director of your own company?.

"Were you an employee while you were using the scheme?

If you were a director and an employee of your own company, answer ‘Yes’."

Im scared that if I answer this wrong it might add another 10 years on to the time frame to sort this out

Thanks