Reply to: High Take Home Pay Schemes - a warning

However we came across some umbrtella companies or accountant do not have the right knowledge to educate their clients. This kind of misleading providers are someone need to be blamed

Well put Taxless and absolutely right; it all comes down to calculated risk but the important word here is 'calculated' - anyone who doesn't fully understand the scheme and still enters into it is just taking a (big) risk

[geoff from contracta IOM]

I am in absolute agreement with you Taxless, I advise every potential client to go and do their own research and certainly not take my word that our scheme works and TBH if any provider doesn't give that advice or is not happy to discuss it with a clients tax advisor in intricate detail people should run a mile

[LisaContractorUmbrella]

Well put Taxless and absolutely right; it all comes down to calculated risk but the important word here is 'calculated' - anyone who doesn't fully understand the scheme and still enters into it is just taking a (big) risk

[Taxless]

Is this not all down to your attitude to risk?

No one likes to pay tax and the Courts have agreed in the past that there is nothing wrong with legally arranging your affairs so that you pay as little as possible.

HMRC are currently tasked with raising an additional £7Bn per year by 2015.

In this climate HMRC are obviously going to try and stop avoidance if they can, as more people are likely to be looking for ways to minimise what they have to pay.

Tax avoidance is legal and tax evasion is not, although I accept that HMRC and Government ministers either no longer understand the concept or are are trying to deliberately blur the picture (surely not!).

If someone comes up with a cunning plan to pay less tax and it is legal, whether through badly written legislation or otherwise, then it is down to me as an individual to do my own due diligence on the product and then decide whether to use it or not, based on my own attitude to risk.

Do I expect HMRC to like it, no of course not, particularly with their current targets, but that does not mean they can just ignore the legal position.

They can certainly challenge any avoidance where they think they might have a case and can make as much noise about avoidance that they don't like but can't stop, or they can legislate to change things in the future.

The concept of retrospective legislation doesn't sit too comfortably in a western democracy. I know what the law is today, but how am I supposed to organise my affairs, pay the right tax and complete my tax return correctly if someone is going to change the law that applies today, next week, month or year?

HMRC have a habit of delaying tactics or claiming they will close things down and that is just all part of their game plan of trying to stop more people taking similar action. I don't have a problem with that but just as with solution providers, I don't necessarily believe everything they say.

A case in point would be IR35 which HMRC told us would raise £000's of millions annually but earlier this year the Office for Tax Simplification revealed IR35 investigations had dropped significantly and they were now raising as little as £1million annually!

Gather as much information as you can and make an informed decision for yourself. If you claim not to have full detals of it then I would suggest that you certainly should not be considering it.

[LisaContractorUmbrella]

Lisa they might make the drink driving limit zero and I hope they do but if i'm stopped and breathalized tonight after half a pint can they come back if the legislation changes and prosecute me in two years time ?

Personally Geoff I wouldn't put it past them

[LisaContractorUmbrella]

Steven I might be 100% confident my house won't burn down but ..............................

Yes but the difference is that you would get back the money to rebuild your house and replace the contents - using your analogy, you might have some furniture but you'd have no house to put it in

[geoff from contracta IOM]

Geoff you also stated that you know that HMR&C will legislate and close the scheme at some point - does that not give them more impetus to their arguments in favour of restrospection

Lisa they might make the drink driving limit zero and I hope they do but if i'm stopped and breathalized tonight after half a pint can they come back if the legislation changes and prosecute me in two years time ?

[geoff from contracta IOM]

Geoff - is the insurance policy unique to yourselves?

It's interesting that some companies claim to be 100 per cent confident in their schemes but offering insurance in case of investigation would contradict this? I'm not referring to your scheme specifically.

Steven I might be 100% confident my house won't burn down but ..............................

[LisaContractorUmbrella]

Geoff you also stated that you know that HMR&C will legislate and close the scheme at some point - does that not give them more impetus to their arguments in favour of restrospection

[Steven@Parasol]

Would the insurance policy cover any tax that becomes payable as a result of the investigation?

With regard to the BN66 case - couldn't agree more

Geoff - is the insurance policy unique to yourselves?

It's interesting that some companies claim to be 100 per cent confident in their schemes but offering insurance in case of investigation would contradict this? I'm not referring to your scheme specifically.

[LisaContractorUmbrella]

No but any policy that did would only encourage " creative declarations " by the policy holder

I can understand that but the policy doesn't therefore cover the individual from potentially huge costs as I would assume that it would not cover any interest or fines either?

[geoff from contracta IOM]

Would the insurance policy cover any tax that becomes payable as a result of the investigation?

No but any policy that did would only encourage " creative declarations " by the policy holder

[LisaContractorUmbrella]

Agreed on some points but I have mentioned before that we insure our clients against an investigation by HMRC and the policy covers their accountants AND legal fees. HMRC will without doubt legislate to close this structure but the reality is that we are not at that point, when we will be is anyones guess and as much as HMRC would love to ride roughshod over fundamental legal principles our entire leglislative system is in grave danger if the LJ's find in favour of them in the BN66case without isolating the ruling and that is where I believe the problem lies. How do you tear up such a cornerstone of our justice system by retrospectively applying legislation, I notice they didn't try that with the EBT is this an indication of how unsure they are of the ground they are on ? For all the guys affected by BN66 I sincerely hope so !

Would the insurance policy cover any tax that becomes payable as a result of the investigation?

With regard to the BN66 case - couldn't agree more

[geoff from contracta IOM]

The trouble is though Geoff is that you can't claim that something is 'compliant' if HMR&C don't approve; we all know that avoidance schemes are not illegal and that many of the problems surrounding the industry now have been created by badly thought out legislation. Unfortunately, the fact of the matter is that, even though HMR&C may not win in a court of law, the costs involved in defending your position would be enormous and they would not be recoverable, HMR&C have already used the concept of retrospective legislation to fight what they don't agree with and again, even if you win your case, they will legislate to ensure you can't use it in future without breaking the law. This industry seems to be in a position now where 'compliant' = what HMR&C decide at the time and we all have to find a way to work with that or be prepared to fight our corner

Agreed on some points but I have mentioned before that we insure our clients against an investigation by HMRC and the policy covers their accountants AND legal fees. HMRC will without doubt legislate to close this structure but the reality is that we are not at that point, when we will be is anyones guess and as much as HMRC would love to ride roughshod over fundamental legal principles our entire leglislative system is in grave danger if the LJ's find in favour of them in the BN66case without isolating the ruling and that is where I believe the problem lies. How do you tear up such a cornerstone of our justice system by retrospectively applying legislation, I notice they didn't try that with the EBT is this an indication of how unsure they are of the ground they are on ? For all the guys affected by BN66 I sincerely hope so !

[LisaContractorUmbrella]

Lisa the broad details of my scheme are on are website obviously the intricate details are not but it is widely accepted in the tax specialist industry that schemes using this methodology are compliant assuming certain pitfalls are avoided. Of course HMRC don't approve, they need all the money they can get to pass over to the government to continue to waste, but disapproving and proving in a court of law are two very seperate issues. This is the underlying problem they try to work with crap legislation by making as much noise as possible in the hope it becomes accepted as law.

The trouble is though Geoff is that you can't claim that something is 'compliant' if HMR&C don't approve; we all know that avoidance schemes are not illegal and that many of the problems surrounding the industry now have been created by badly thought out legislation. Unfortunately, the fact of the matter is that, even though HMR&C may not win in a court of law, the costs involved in defending your position would be enormous and they would not be recoverable, HMR&C have already used the concept of retrospective legislation to fight what they don't agree with and again, even if you win your case, they will legislate to ensure you can't use it in future without breaking the law. This industry seems to be in a position now where 'compliant' = what HMR&C decide at the time and we all have to find a way to work with that or be prepared to fight our corner