Up to 90%

[centurian]

WHS - particularly on the fraud point.

I suspect there is prima facia evidence of fraud in the majority of the "legal" schemes. In order for many schemes to "work", somebody, somewhere along the chain must be telling an untruth - otherwise it really is a loan which you really will pay back, or you really have "lost money" in a film investment.

Proving someone is lying, rather than just simply mistaken/wrong is another thing entirely.

HMRC struggle enough to argue (balance of probabilities) someone is wrong, let along prove (beyond reasonably doubt) deceit. But the willingness of HMRC to let providers get away with this unchallenged just encourages them to keep doing it.

[malvolio]

WHS - particularly on the fraud point.

I suspect there is prima facia evidence of fraud in the majority of the "legal" schemes. In order for many schemes to "work", somebody, somewhere along the chain must be telling an untruth - otherwise it really is a loan which you really will pay back, or you really have "lost money" in a film investment.

Proving someone is lying, rather than just simply mistaken/wrong is another thing entirely.

HMRC struggle enough to argue (balance of probabilities) someone is wrong, let along prove (beyond reasonably doubt) deceit. But the willingness of HMRC to let providers get away with this unchallenged just encourages them to keep doing it.

HMRC would no doubt counter argue that the scheme providers aren't actually breaking any laws, it's up to the individual to ensure they pay the correct amount of tax on their total earnings. The providers also seem to be non-UK based in the main, so out of reach anyway.

The scheme promoters are guilty of false advertising, if anything, by failing to disclose the risks associated with their products. Of course, if they did, no sane person would buy them.

But as you say, the real injustice is that HMRC are attacking the victims rather than the perpetrators.

[LisaContractorUmbrella]

• HMG should go after the promoters and forensically look for evidence of Fraud.
• HMRC should actually use the GAAR against those schemes that fall outside DOTAS.
• They should get rid of the grandfathering clause that allows some schemes to bypass DOTAS. Although, in fairness, they are planning to change the law on this.

I think the first case of GAAR being used may shake things up and definitely agree that the scheme promoters should be targeted, not instead of scheme users, but alongside

[LisaContractorUmbrella]

HMRC would no doubt counter argue that the scheme providers aren't actually breaking any laws, it's up to the individual to ensure they pay the correct amount of tax on their total earnings. The providers also seem to be non-UK based in the main, so out of reach anyway.

The scheme promoters are guilty of false advertising, if anything, by failing to disclose the risks associated with their products. Of course, if they did, no sane person would buy them.

But as you say, the real injustice is that HMRC are attacking the victims rather than the perpetrators.

Not sure that would now be the case in our industry with the onshore and offshore intermediaries legislation but for normal investors it probably still holds true

[DonkeyRhubarb]

HMRC have attacked the users on a massive scale (many tens of thousands).

I still find it hard to comprehend that this hasn't killed the market off. But apparently it hasn't.

If HMRC really want to stamp it out then they'll have to find a way of going after those unscrupulous firms who continue to peddle these products. Maybe failure to register under DOTAS, which comes with up to £1M fines, would be a starting point.

HMRC should not assume, just because there is a QC opinion, that everything is legal and above board. These firms are probably not just playing fast and loose with the folks they're selling to. They are probably also sailing very close to the wind in other ways.

[NickNick]

Just a thought on these loan schemes. If the shemes started recalling the loans would that not make HMRC's case null and void? Wouldn't help the users of the schemes, I know.

(I'm not completely up to date on all of this so apologies if this has already been discussed elsewhere)

[LisaContractorUmbrella]

Just a thought on these loan schemes. If the shemes started recalling the loans would that not make HMRC's case null and void? Wouldn't help the users of the schemes, I know.

(I'm not completely up to date on all of this so apologies if this has already been discussed elsewhere)

I think it could affect HMRC's position in terms of collecting the tax but I am not sure they would let it go as they are trying to set a precedent and would probably still maintain that the arrangement had been a sham

[NickNick]

I think it could affect HMRC's position in terms of collecting the tax but I am not sure they would let it go as they are trying to set a precedent and would probably still maintain that the arrangement had been a sham

But (assuming the following is true) the paperwork involved with these schemes all shows a loan that is repayable. If the loan was called in then there is no tax to pay as I understand it.

Showing that the arrangement was a sham would mean that the providers would be up against it as opposed to the users? (i.e. fraud)

[TykeMerc]

But (assuming the following is true) the paperwork involved with these schemes all shows a loan that is repayable. If the loan was called in then there is no tax to pay as I understand it.

Showing that the arrangement was a sham would mean that the providers would be up against it as opposed to the users? (i.e. fraud)

In the scenario that the arrangement was found to be a fraudulent sham then the users would still be up against it with income that wasn't taxed properly at the time, so there would be the same liabilities of tax, penalties etc surely?

Income is income as far as HMRC are concerned, having a pop at the Scheme providers (if possible) would just be a bonus to the authorities, the users would still be firmly in the firing line.

[jbryce]

But (assuming the following is true) the paperwork involved with these schemes all shows a loan that is repayable. If the loan was called in then there is no tax to pay as I understand it.

Showing that the arrangement was a sham would mean that the providers would be up against it as opposed to the users? (i.e. fraud)

It's a kazillion times more complicated than that - you can have a loan and it might not be taxable. The EBTs aren't fraud - but, depending on how they were set up and implemented, any loan taken out of them could be viewed as income. HMRC are coming after EBTs using, primarily, ToAA and this doesn't really give a monkyyys about the loan.

The newer raft of schemes will not be caught in this manner which is why the GAAR needs to be used - when it is, anything post 2013 that fails the GAAR will be subject to tax simply because the GAAR sees it as avoidance.

In the old days, HMRC used to close the loopholes. Now they have

• The GAAR which saves an awful lot of technical argument.
• DOTAS which is being used with APNs etc.
• The removal of grandfathering, which means that existing schemes that pre-date DOTAS now become notifiable.

Schemes are f***ed.