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Rob79
24th July 2014, 15:57
HM Revenue & Customs: Settlement opportunity: tax on contractor loans (http://www.hmrc.gov.uk/avoidance/contractorloans.htm)

I have yet to read this in detail other than to note it expires 9th January 2015.

Might be worth a thread of its own?

lastManStanding
24th July 2014, 16:06
HM Revenue & Customs: Settlement opportunity: tax on contractor loans (http://www.hmrc.gov.uk/avoidance/contractorloans.htm)

I have yet to read this in detail other than to note it expires 9th January 2015.

Might be worth a thread of its own?

Erm, doesn't this say that you can settle with them for the whole amount now if you like - PAYE and NIC? You will only get relief on the benfits in kind you paid for the loan.

What's the incentive to settle now?

lastManStanding
24th July 2014, 16:15
On second reading - it seems to imply that it is open to users of a scheme

"Who can do this?
You can take up this opportunity if you're an individual who has used a contractor loan scheme"

But then follow the link to read more about the settlement opportunity and the first line tells you

"HM Revenue & Customs (HMRC) is offering employers who have used Employee Benefit trusts ('EBT') (and similar arrangements) the opportunity to resolve outstanding enquiries."

Seems bit confusing as to who it is actually aimed at.

fielder
24th July 2014, 17:35
I have a question relating to this if I may? Where HMRC have clearly got their costings wrong, would this be an opportunity to get the facts straight, specifying monies received only as I did nothing wrong in the eyes of the law then. Even thought I only used EBT for 14 months there calculation are pretty much the same over for both 08/09 and 09/10, clearly wrong plus I have no way of paying this back straight away if they do issue an APN, or should I wait for the APN assuming I will get one before January 2015, thank you.

convict
24th July 2014, 19:35
Why are they even bothering with this? Basically this is no different to what one could always do; withdraw one's appeal in line with S54 TMA 1970 and then pay within 30 days.
http://www.legislation.gov.uk/ukpga/1970/9/section/54/enacted

Rob79
25th July 2014, 09:35
I will have a proper read of this over the weekend and feedback any thoughts.

In other areas of tax, this sort of settlement opportunity arrives from HMRC in advance of what they consider to be a tipping point in a Court decision. That is usually in the build up to a case going to Court or in the interegnum between hearing and decision.

This gives HMRC the ability to play hardball in any discussion post a positive decision (for them) in calculating tax, interest and penalties. It also allows them to splinter action and litigation support groups as some will always be tempted to settle and not continue.

These offers are rarely "commercial" and in some cases the amounts being asked for have little or no concession to common sense. In many cases therefore the effect achieved is the opposite to that hoped for. For some however the prospect of a loss in Court and the resulting heavy interest and penalty applications is enough. In other tax product areas, liability can be many times the amount invested and that can also be a significant factor.

As I said, I'll have a proper read and report back my thoughts for whatever they're worth.

lastManStanding
25th July 2014, 09:41
I have a question relating to this if I may? Where HMRC have clearly got their costings wrong, would this be an opportunity to get the facts straight, specifying monies received only as I did nothing wrong in the eyes of the law then. Even thought I only used EBT for 14 months there calculation are pretty much the same over for both 08/09 and 09/10, clearly wrong plus I have no way of paying this back straight away if they do issue an APN, or should I wait for the APN assuming I will get one before January 2015, thank you.

If you believe the amount of tax HMRC deem is due is incorrect, and even if it were correct you don't have the money straight away, perhaps your best bet is to wait for the APN, wait until the 90 days to pay are nearly up, and then send a letter by recorded delivery to arrive with hmrc before the 90 day deadline requesting that the amount be changed as you believe it is incorrect. You will have to support your reasoning with proof of the actual amounts you received, and then if hmrc agree with you they will issue a re-calculation which I believe gives you a further 30 days to pay.

Its not much of an improvement on your situation, but its probably better than appealing the amount now, in which case you would only get 90 days to pay when the apn arrives

fielder
25th July 2014, 19:11
If you believe the amount of tax HMRC deem is due is incorrect, and even if it were correct you don't have the money straight away, perhaps your best bet is to wait for the APN, wait until the 90 days to pay are nearly up, and then send a letter by recorded delivery to arrive with hmrc before the 90 day deadline requesting that the amount be changed as you believe it is incorrect. You will have to support your reasoning with proof of the actual amounts you received, and then if hmrc agree with you they will issue a re-calculation which I believe gives you a further 30 days to pay.

Its not much of an improvement on your situation, but its probably better than appealing the amount now, in which case you would only get 90 days to pay when the apn arrives

Thank you!

Aisling81
26th July 2014, 12:40
Hi,

Just wanted to ask- we have enquiries open on 2010/2011 and 2011/2012.

Hmrc are being very evasive about how matters are settled after this. Has anyone had any feedback from hmrc about what they plan to do? They say u may not be able to settle as in previous years.. Which makes me think they will put further penalties on these years??

Also- we used the scheme 2012/2013 but have no enquiry... Cascade update say if you don't have a query open on a year then that makes attractive to settle.. Does that mean we would never get charged for that year if we settled for the above mentioned 2 years??

Sorry for all the questions- all these updates are pretty baffling.. And tend to say very little in my opinion!

Thanks for your help!

EBTContractor
26th July 2014, 13:03
It would be silly to settle unless you have other stuff going on in the tax years in question that HMRC hasn't found out about and a settlement is beneficial to you.

HMRC's point of view is really one sided, they only make references to Boyle, not their defeat in the Rangers Tax Case.

Another scare tactic to hit payment targets and aimed at those who didn't cough up when the first round of letters were sent.

If I had a spam button on my letterbox I'd click it.

dirk
26th July 2014, 13:50
I received my lovely letter from them this morning. I won't get the 30 minutes of my life back unfortunately but it was slightly entertaining as a piece of Government propaganda.

I won't be settling.

doordarshini
26th July 2014, 14:01
Did any one approached HMRC for caluclations?

EBTContractor
26th July 2014, 14:52
Did any one approached HMRC for caluclations?

Goodness no. Do not engage them in conversation.

doordarshini
26th July 2014, 15:40
Goodness no. Do not engage them in conversation.

Any suggestions on next steps? Is anyone planning to form pool and represents...mine goes back to year 2007 and 2008 and that company does not exists now. Don't know what to do?

retrodeath
26th July 2014, 16:40
Why not engage them?

LordF
26th July 2014, 17:11
Hi guys

Yes, received my letter this morning too, re tax year to 5/4/2011.

My loans for that year were £21.8k in total .... anyone got any idea how much they would ask for on that figure? (Tax plus interest)

varunksingh
26th July 2014, 18:17
I don't understand why we should not engage with HMRC. They put in a second class stamp and send out whatever shit they want.
We all should be reply that we wish to settle if they can clearly explain how Boyle case applies to ours.
I am sure they cannot come back with an answer.

retrodeath
26th July 2014, 18:24
They provide an explanation in the letter as to why they deem Boyle similar

Dylan
26th July 2014, 20:19
I don't understand why we should not engage with HMRC. They put in a second class stamp and send out whatever tulip they want.
We all should be reply that we wish to settle if they can clearly explain how Boyle case applies to ours.
I am sure they cannot come back with an answer.

The main reason not to engage unless you plan on settling is you don't want them correctly calculating the APN value, when they get a letter on day 89 post APN stating they've got the sum wrong they'll then need to calculate the correct figures which knowing how bad they are at basic maths may take some time, then get back to you with the correct figure and another 30 days :smile

Note also section 14 - once the amount is agreed they talk about 90 days to pay, leave it until Jan even if you do want to settle.

Christop
27th July 2014, 19:30
Trying to work out some things but don't currently understand the interest, so...
If I owed 10,000 in tax year 2010/11 would I only be liable for 3% on that amount in total or would that be 3% per year? i.e. would I owe

300 for 2010/11 300 for 2011/12 300 for 2012/13 300 for 2013/14 = £1,200 or would it just be £300 or is it even worse than that :(

lastManStanding
27th July 2014, 19:47
Trying to work out some things but don't currently understand the interest, so...
If I owed 10,000 in tax year 2010/11 would I only be liable for 3% on that amount in total or would that be 3% per year? i.e. would I owe

300 for 2010/11 300 for 2011/12 300 for 2012/13 300 for 2013/14 = £1,200 or would it just be £300 or is it even worse than that :(

It's my understanding that it is 3% simple interest for each year.

So £1,200 seems about right.

And every year longer it takes to get a ruling you can add another £300. If you pay the APN I believe the tax accumulation for the amount of the APN would stop.

Aisling81
27th July 2014, 20:50
Hi,

Can someone tell me why they are treating that after April 2011 differently??

They say they will not be able to 'offer arrangements' on these years as easily as they have pre 2011.

From what I can see the settlement offer is of now advantage- so not really sure what they are implying?

I saw someone on here saying legislation changed post 2011 and hmrc treating it differently as they know they will win if they bring a case from that year to court.. So will go after that later and believe they will undoubtedly win.. Is this true?

lastManStanding
27th July 2014, 21:04
Hi,

Can someone tell me why they are treating that after April 2011 differently??

They say they will not be able to 'offer arrangements' on these years as easily as they have pre 2011.

From what I can see the settlement offer is of now advantage- so not really sure what they are implying?

I saw someone on here saying legislation changed post 2011 and hmrc treating it differently as they know they will win if they bring a case from that year to court.. So will go after that later and believe they will undoubtedly win.. Is this true?

They changed the law to stop avoidance using ebt benfits from trusts in April 2011, backdated to December 2010 when the law change was announced.

I'm sure any ebt scheme still operating after dec 2010 would have changed there arrangement so as to not fall foul of the new legislation. If they did not, then yes they would be an easy target for hmrc.

Aisling81
27th July 2014, 21:25
They changed the law to stop avoidance using ebt benfits from trusts in April 2011, backdated to December 2010 when the law change was announced.

I'm sure any ebt scheme still operating after dec 2010 would have changed there arrangement so as to not fall foul of the new legislation. If they did not, then yes they would be an easy target for hmrc.

Thanks for the info!

So this means they will just have to argue those years differently in court?? Or is it taking longer for them to figure out how to go after those years (as companies would have changed their arrangements their arrangements not to fall foul of the new legislation)?

Sorry for all the questions.

They never opened an enquiry on my 2012/2013 year... Could they still do this? I have one for 2010/2011 and 2011/2012

ShouldLiveinSwitz
27th July 2014, 21:51
I to have received a letter from HMRC yesterday morning and would like to know the best course of action.

I used a scheme promoted by Cascade and overseen by Kingston Smith tax advisors from 22-10-09 until 01-11-10.

The letter seems to be quite general and doesn't include an amount I should be paying back, only that I should contact them to find out the amount I need to pay (shouldn't they already have this information as it is clearly stated on my tax form that was sent to them?)

The only thing that I am required to do is to contact them by the 09-01-15, nothing other than that. No amount to be paid.

At this present moment, any tax rebate would effectively bankrupt me, as I have been out of work for over 18 months and have no real cash to pay this.

As far as I I knew this tax scheme was legal in 2009 when I used it, so to have this changed and then backdated seems somewhat out of order? They only state that:


HMRC strongly believes that these arrangements do not work and the amounts described as loans are taxable.

Only a belief? no law change? illegal operations?

I will contact Cascade in the morning and see what they say.

I am interested to know what other people have done in the same situation previously and what other people would recommend.

Thanks

Michael J Perry FCA
28th July 2014, 09:39
The details of the Contractor Settlement Opportunity were available well in advance but the effective start and closing dates were not certain until last week.

The devil is in the detail . . . example . . . two contractors in the same scheme, for the same tax years and the same amount of loans. One can settle for £50,000 but the other would need to pay £180,000 . . . How is that equitable? Answer: It is not . . . but apparently that is how it works.

Nissan07
28th July 2014, 10:40
If I have been PAYE since 2010 - used similar schemes prior to that, does that make me exempt technically if the law was only backdated to 2010 and therefore those prior years are perfectly within the law.

My letter states up to 2011

AnotherContractor
28th July 2014, 10:53
If I have been PAYE since 2010 - used similar schemes prior to that, does that make me exempt technically if the law was only backdated to 2010 and therefore those prior years are perfectly within the law.

My letter states up to 2011


Correct me if I'm wrong but i think it means 6 years to 2010/11 i.e. backdated

convict
28th July 2014, 11:32
No it means years for which you have either an open enquiry or an appeal against a discovery assessment.

Boobetty
28th July 2014, 12:02
Afternoon, first ever post so apologies for it being a question.

I do not understand the mention of IHT in the offer letter from HMRC. I appreciate that IHT has a £325k threshold but for argument's sake lets say we are above this threshold: do they plan on calculating a charge to IHT AND to Income Tax on the same funds?

AnotherContractor
28th July 2014, 12:29
No it means years for which you have either an open enquiry or an appeal against a discovery assessment.

Thanks for the clarification
But according to the Q&A leaflet HMRC can still open a new query 6 years previous from 2010/11 ?

eek
28th July 2014, 12:45
Afternoon, first ever post so apologies for it being a question.

I do not understand the mention of IHT in the offer letter from HMRC. I appreciate that IHT has a £325k threshold but for argument's sake lets say we are above this threshold: do they plan on calculating a charge to IHT AND to Income Tax on the same funds?

I think its quite simple. HMRC think that you owe them money. One way or another they will try and get money from you and IHT is one tactic they have identified could be used if other attacks fail...

However I don't think anyone knows how HMRC want to use it....

dezze
28th July 2014, 12:53
Thanks for the clarification
But according to the Q&A leaflet HMRC can still open a new query 6 years previous from 2010/11 ?

I'm unclear about the time limits for all this. There is the provision for going back 20 years, but is based on;


brought about deliberately by the person
attributable to a failure to notify liability under Section 7, or
attributable to a tax avoidance scheme which is a notifiable arrangement or a listed or hallmarked scheme and the user of the scheme failed to disclose details to HMRC at the proper time.


Not sure if the first DOTAS number was used in 2004/5 or 2005/6. What happens about the schemes before that, that didn't have DOTAS numbers? Does this fall under point 3. ? If so, how would you have 'disclosed details' when you didn't know details had to be disclosed?

I've search for 'Section 7' and can't find it - sorry, does anyone know?

malvolio
28th July 2014, 13:41
I'm unclear about the time limits for all this. There is the provision for going back 20 years, but is based on;


brought about deliberately by the person
attributable to a failure to notify liability under Section 7, or
attributable to a tax avoidance scheme which is a notifiable arrangement or a listed or hallmarked scheme and the user of the scheme failed to disclose details to HMRC at the proper time.

Not sure if the first DOTAS number was used in 2004/5 or 2005/6. What happens about the schemes before that, that didn't have DOTAS numbers? Does this fall under point 3. ? If so, how would you have 'disclosed details' when you didn't know details had to be disclosed?

I've search for 'Section 7' and can't find it - sorry, does anyone know?
How hard was that...? (http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCAQFjAA&url=http%3A%2F%2Fwww.hmrc.gov.uk%2Fmanuals%2Fsalfm anual%2Fsalf210.htm&ei=CFLWU8DvDurT7Ab_74DwAg&usg=AFQjCNEhfeXXcCj6bSPFLoRBL6LcxS4eGA&sig2=18v_FG52f5pcaVUamjP08w&bvm=bv.71778758,d.ZWU)

Basically it's saying you're the taxpayer, it's up to you as the core principle of Self Assessment to tell HMRC about any taxable income you get each year, even if you don't normally fill in an SAR. As you have discovered, this is difficult if you don't know you have something to tell them, but sadly that is not an excuse.

dezze
28th July 2014, 14:01
How hard was that...? (http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCAQFjAA&url=http%3A%2F%2Fwww.hmrc.gov.uk%2Fmanuals%2Fsalfm anual%2Fsalf210.htm&ei=CFLWU8DvDurT7Ab_74DwAg&usg=AFQjCNEhfeXXcCj6bSPFLoRBL6LcxS4eGA&sig2=18v_FG52f5pcaVUamjP08w&bvm=bv.71778758,d.ZWU)

Basically it's saying you're the taxpayer, it's up to you as the core principle of Self Assessment to tell HMRC about any taxable income you get each year, even if you don't normally fill in an SAR. As you have discovered, this is difficult if you don't know you have something to tell them, but sadly that is not an excuse.
Thank you.

FTTM
28th July 2014, 16:24
It seems fairly clear from the letter received that one of the benefits implied is that National Insurance Contributions will not be levied if you settle but they will pursue these under ToAA if you choose to fight and lose. With interest on NI as well this could make a difference of 20-30% on the final bill. Does anyone else agree?

Rob79
28th July 2014, 16:28
I'm unclear about the time limits for all this. There is the provision for going back 20 years, but is based on;


brought about deliberately by the person
attributable to a failure to notify liability under Section 7, or
attributable to a tax avoidance scheme which is a notifiable arrangement or a listed or hallmarked scheme and the user of the scheme failed to disclose details to HMRC at the proper time.


Not sure if the first DOTAS number was used in 2004/5 or 2005/6. What happens about the schemes before that, that didn't have DOTAS numbers? Does this fall under point 3. ? If so, how would you have 'disclosed details' when you didn't know details had to be disclosed?

I've search for 'Section 7' and can't find it - sorry, does anyone know?

HMRC tend to use 20 year time limits for the more extreme cases of fraud. Normally this would require the serving of a notice (COP 8 etc) and as far as I can see, nobody has had that suggested?

DOTAS numbers came into being in August 2004 but implementation was largely delayed until April 2006. Any scheme in place before the DOTAS regime was underway was not obliged to register. The extent tom which this "grandfathering" could be pushed varied from provider to provider.

Self assessment and DOTAS have a very uneasy relationship. You have nailed the central conundrum here. It is a prime tenet of UK tax law that the onus is upon the recipient of income who considers that he has a tax liability to volunteer that information. Failure to do so is an automatic penalty.

With DOTAS, failure to provide a reference number carries a penalty. However if there is no reference number (pre DOTAS or grandfathered) then there can be no penalty. Even if a scheme is subsequently caught by a "discovery" or change of interpretation or retrospective change of law, there can be no penalty for not disclosing a DOTAS number if none was ever given.

Boobetty
28th July 2014, 17:48
It seems fairly clear from the letter received that one of the benefits implied is that National Insurance Contributions will not be levied if you settle but they will pursue these under ToAA if you choose to fight and lose. With interest on NI as well this could make a difference of 20-30% on the final bill. Does anyone else agree?

I think your % is high. Are you including employer's and employee's NIC together? Employees is a mere 12% up to whatever the upper limit is and 2% thereafter. As an employee we are only responsible for the employee contribution. I do not think that HMRC can pursue us for employer's NIC.

dezze
28th July 2014, 18:47
HMRC tend to use 20 year time limits for the more extreme cases of fraud. Normally this would require the serving of a notice (COP 8 etc) and as far as I can see, nobody has had that suggested?

DOTAS numbers came into being in August 2004 but implementation was largely delayed until April 2006. Any scheme in place before the DOTAS regime was underway was not obliged to register. The extent tom which this "grandfathering" could be pushed varied from provider to provider.

Self assessment and DOTAS have a very uneasy relationship. You have nailed the central conundrum here. It is a prime tenet of UK tax law that the onus is upon the recipient of income who considers that he has a tax liability to volunteer that information. Failure to do so is an automatic penalty.

With DOTAS, failure to provide a reference number carries a penalty. However if there is no reference number (pre DOTAS or grandfathered) then there can be no penalty. Even if a scheme is subsequently caught by a "discovery" or change of interpretation or retrospective change of law, there can be no penalty for not disclosing a DOTAS number if none was ever given.

Can HMRC apply the 20 year rule pre DOTAS? How would the taxpayer back (and it's 10 years ago now) then know that they 1. 'consider they have a tax liability' and therefore declare the scheme, and 2. how would they have done it?

convict
28th July 2014, 19:32
lots of talk re 4/6/20 (http://forums.contractoruk.com/hmrc-scheme-enquiries/86442-hmrc-enquiry-letters-loans-ebt-other-schemes-15.html#post1842789)

FTTM
28th July 2014, 22:03
I think your % is high. Are you including employer's and employee's NIC together? Employees is a mere 12% up to whatever the upper limit is and 2% thereafter. As an employee we are only responsible for the employee contribution. I do not think that HMRC can pursue us for employer's NIC.

Agree your rate but i was referring to a % of the total liability and in fact I think I under estimated it. For example 50K salary under paye as of today would result in deductions of £9627 in tax and £4231 in personal NI contributions. Therefore adding NI on to your liability in this instance results in an increase of over 44%. vs an income tax only liability.

Page 2 of the settlement opportunity letter states " We will apply a charge to income tax only on the sums received as loans. In future litigation other approaches could apply higher charges.... and there might be a personal NIC liability. In contrast no further NIC will be sought from you personally under the settlement opportunity."

Under what powers they will be able to charge NIC I do not know. Would be good if someone with more knowledge could advise how likely this could be as I think the possibility of this happening will make settlement more attractive for a lot of people with mid range liabilities.

Rob79
29th July 2014, 14:11
Agree your rate but i was referring to a % of the total liability and in fact I think I under estimated it. For example 50K salary under paye as of today would result in deductions of £9627 in tax and £4231 in personal NI contributions. Therefore adding NI on to your liability in this instance results in an increase of over 44%. vs an income tax only liability.

Page 2 of the settlement opportunity letter states " We will apply a charge to income tax only on the sums received as loans. In future litigation other approaches could apply higher charges.... and there might be a personal NIC liability. In contrast no further NIC will be sought from you personally under the settlement opportunity."

Under what powers they will be able to charge NIC I do not know. Would be good if someone with more knowledge could advise how likely this could be as I think the possibility of this happening will make settlement more attractive for a lot of people with mid range liabilities.

There are situations in which recipients of income from an offshore source can be liable to both employee and employer NIC. This is because the recipient of income is also deemed to be an "employer" for the purposes of PAYE rules.

DMC777
30th July 2014, 11:03
So got my letter saturday morning, finally got through to someone on the helpline to be advised I was being chased for 08/09 which I had already paid the settlement figure (and the lady I spoke to said the system showed I had paid) ?

Im confused, did anyone get asked to settle for any other years previous to 08/09 as most of the threads Ive looked at only seem to mention this year? Im assuming that HRMC do not seem to know what loans have been paid and are basically asking us to fill in the blanks for them??

Bunnyfuture
30th July 2014, 15:49
So got my letter saturday morning, finally got through to someone on the helpline to be advised I was being chased for 08/09 which I had already paid the settlement figure (and the lady I spoke to said the system showed I had paid) ?

Im confused, did anyone get asked to settle for any other years previous to 08/09 as most of the threads Ive looked at only seem to mention this year? Im assuming that HRMC do not seem to know what loans have been paid and are basically asking us to fill in the blanks for them??

So can I ask what other information did you provide them with then ?
Do you have other outstanding payments due.
I have a bill for 08/09 only at this point but I'm scared to call as I have no idea what other info they would want.

DMC777
31st July 2014, 09:54
So can I ask what other information did you provide them with then ?
Do you have other outstanding payments due.
I have a bill for 08/09 only at this point but I'm scared to call as I have no idea what other info they would want.

Ive never provided them with any information. I briefly used TRM in 2008, was presented last year with a settlement bill which was small so I thought pay it and get it out the way. The woman I spoke to at HMRC confirmed that my account for 2008/09 was showing as paid so she didnt know why I had got the letter hence why Ive requested someone call me.

Bunnyfuture
31st July 2014, 10:02
Ive never provided them with any information. I briefly used TRM in 2008, was presented last year with a settlement bill which was small so I thought pay it and get it out the way. The woman I spoke to at HMRC confirmed that my account for 2008/09 was showing as paid so she didnt know why I had got the letter hence why Ive requested someone call me.

Thanks! That's useful

bhavvy
31st July 2014, 11:14
So got my letter saturday morning, finally got through to someone on the helpline to be advised I was being chased for 08/09 which I had already paid the settlement figure (and the lady I spoke to said the system showed I had paid) ?

Im confused, did anyone get asked to settle for any other years previous to 08/09 as most of the threads Ive looked at only seem to mention this year? Im assuming that HRMC do not seem to know what loans have been paid and are basically asking us to fill in the blanks for them??


I also rang the number on the Settlement Opportunity letter. To my surprise she was actually very helpful. She said although they had looked into my 'employers' from 2004, that they were only interested in 'tax owed' for the years 2007 - 2008 and 2008 - 2009 tax years (I presume the 6 year cut-off). I asked how much I owed. She gave me a figure for those years. I informed her that I had declared everything for those years in SA's and P11D's. Then to my surprise, she said 'yes you did, you don't owe us anything'. I obviously asked for this in writing and she said she would send me the letter. I hope she wasn't lying ! Nice of them to send me a letter after all these years, threatening me with lengthy and costly tribunals when I don't even owe them anything.

I would ring them but obviously don't divulge any information except your NI number.

costo
31st July 2014, 11:52
I also rang the number on the Settlement Opportunity letter. To my surprise she was actually very helpful. She said although they had looked into my 'employers' from 2004, that they were only interested in 'tax owed' for the years 2007 - 2008 and 2008 - 2009 tax years (I presume the 6 year cut-off). I asked how much I owed. She gave me a figure for those years. I informed her that I had declared everything for those years in SA's and P11D's. Then to my surprise, she said 'yes you did, you don't owe us anything'. I obviously asked for this in writing and she said she would send me the letter. I hope she wasn't lying ! Nice of them to send me a letter after all these years, threatening me with lengthy and costly tribunals when I don't even owe them anything.

I would ring them but obviously don't divulge any information except your NI number.

Did you have any open enquiries for those years?

dezze
31st July 2014, 12:21
I also rang the number on the Settlement Opportunity letter. To my surprise she was actually very helpful. She said although they had looked into my 'employers' from 2004, that they were only interested in 'tax owed' for the years 2007 - 2008 and 2008 - 2009 tax years (I presume the 6 year cut-off). I asked how much I owed. She gave me a figure for those years. I informed her that I had declared everything for those years in SA's and P11D's. Then to my surprise, she said 'yes you did, you don't owe us anything'. I obviously asked for this in writing and she said she would send me the letter. I hope she wasn't lying ! Nice of them to send me a letter after all these years, threatening me with lengthy and costly tribunals when I don't even owe them anything.

I would ring them but obviously don't divulge any information except your NI number.

I'm confused - did you have open enquiries for those years where you used a Loan scheme? If you have, then I'm very surprised and it may be they didn't understand??? Did you get her name because I'm going to call her!

LordF
31st July 2014, 13:35
The Settlement Opportunity is for all the years that you have had an HMRC letter for. I called them and they had it going back to the first year I was with a Tax Scheme (2005/06).

bhavvy
31st July 2014, 13:35
Did you have any open enquiries for those years?

I'm not sure what constitutes an open enquiry, but the only letter I have had from them before the Settlement Opportunity letter was in 2009 saying they were checking my Self Assessment for 2008.

dezze
31st July 2014, 13:48
I'm not sure what constitutes an open enquiry, but the only letter I have had from them before the Settlement Opportunity letter was in 2009 saying they were checking my Self Assessment for 2008.

Sounds like an open enquiry for 2007/08. And they saying you don't owe anything?

andyc2000
31st July 2014, 14:06
Sounds like HMRC are sending out generic e-mails to anyone who might fit the bill, presumably to get the 'not quite as low hanging fruit' they they didn't get when they sent the first round of demands out.

bhavvy
31st July 2014, 16:55
Sounds like an open enquiry for 2007/08. And they saying you don't owe anything?

She started saying that I owed x amount for those two years and then when I informed her that I declared all loans correctly on my SA and P11d, she said went off to check and the informed me that I did and didn't owe anything. Very strange. I just hope the letter from her comes through.

costo
31st July 2014, 17:30
I'm not sure what constitutes an open enquiry, but the only letter I have had from them before the Settlement Opportunity letter was in 2009 saying they were checking my Self Assessment for 2008.

Bhavy, do you still have that letter? if you can find it and let us know what it said? e.g. does it mention COP8 on it? What your suggesting has some important implications... as it sounds like you had a open enquiry and yet HMRC are saying they are not pursuing it??

bhavvy
31st July 2014, 21:58
Bhavy, do you still have that letter? if you can find it and let us know what it said? e.g. does it mention COP8 on it? What your suggesting has some important implications... as it sounds like you had a open enquiry and yet HMRC are saying they are not pursuing it??

I will pm you.

tman786
31st July 2014, 22:13
Remember... HMRC are reading these posts

Oldcontract
1st August 2014, 01:26
Does anyone know what constitutes an open enquiry? On the letter I received for the settlement opportunity, the Enquiry Ref field is blank. Does that mean I dont have any open enquiries? (I haven't contracted since 2007/08)

The people who phoned and were told they owed nothing, were their enquiry ref fields blank?

Apparently these numbers start with s ‘CFS, CFSS or CFSC’. I dont have these refs. and they weren't on my original letter they sent stating "Check of Self Assessment Tax Return" for 08.

Rob79
1st August 2014, 08:31
Does anyone know what constitutes an open enquiry? On the letter I received for the settlement opportunity, the Enquiry Ref field is blank. Does that mean I dont have any open enquiries? (I haven't contracted since 2007/08)

The people who phoned and were told they owed nothing, were their enquiry ref fields blank?

Apparently these numbers start with s ‘CFS, CFSS or CFSC’. I dont have these refs. and they weren't on my original letter they sent stating "Check of Self Assessment Tax Return" for 08.

An open enquiry is where either a return/claim has been submitted and HMRC has informed you, in writing, within the relevant time limits that they are or will be making enquiries into the entries on that return/claim, or where HMRC has issued an assessment or a closure notice and an appeal has been made that has yet to be abandoned or agreed.

A 2007/08 return/claim had a filing date no later than 31/1/09. HMRC had until 31/1/10 to advise you of an enquiry (in normal circumstances). If your return/claim was filed after 31/1/09, the deadline extends to 12 months after that.

If you have not had notice of enquiry within that period, chances are that you are now outside HMRC's jurisdiction for that period UNLESS they issue a discovery assessment or can prove fraud.

Discovery used to mean that HMRC uncovered more information about a return/claim which rendered their initial decision untenable. That has been widened in more recent times to include situations where HMRC decides that although they had enough information, they have "discovered" that their view was incorrect. Unfortunately challenges to discovery assessments have been knocked down by Courts who appear to be anxious to support HMRC, often mangling logic in the process.

Fraud claims would normally be preceded with an interview/letter which includes one of the notices about the process. These have been variously COP 8/9 notices. You would know if you've had one.

I suggest:

Write (do not call) a letter or email to HMRC asking them which, if any, years are "open" asking for evidence from them of that fact.

Do not volunteer information about which schemes you were part of.

Do not give them a history of which schemes (including going ltd) you may have used in the past 10 years.

Keep is super simple and ask one question.

Nissan07
1st August 2014, 13:43
I'm intrigued as the letter i received simply states Arrangements used up to 5 April 2011

I recall one letter of enquiry to the scheme that the umbrella dealt with which may constitute and open enquiry but nothing else. This according to my accountant could allow HMRC to go back more than the 6 years if they have an open enquiry lodged.

So is everybody else receiving specific letters for specific years or are they also generic

slatt
1st August 2014, 14:01
They're all generic at the moment

The April 2011 reference is because that's when they changed the law, so any scheme used after that date needs to be dealt with differently

jbryce
2nd August 2014, 09:51
I'm intrigued as the letter i received simply states Arrangements used up to 5 April 2011

I recall one letter of enquiry to the scheme that the umbrella dealt with which may constitute and open enquiry but nothing else. This according to my accountant could allow HMRC to go back more than the 6 years if they have an open enquiry lodged.

So is everybody else receiving specific letters for specific years or are they also generic

it's generic - I spoke to HMRC last week - and will apply to any outstanding enquiries. New ones would need to be opened under the existing rules.

silvys
4th August 2014, 14:06
I too received a settlement opportunity letter a few days ago..

I used in the Nola/Edge EBT scheme for a short period back in 2006. Luckily I was only part of the scheme for a short period of time and I can get hold of the funds required to meet any settlement.

However, I'm unclear how much money an early settlement could potentially save me (my gut feel is HMRC will probably get hold of the money eventually). Reading the letter the 3 things early settlement could save me are:
(i) Interest on Income Tax owed,
(ii) National Insurance which they may aim to pursue if I don't settle early, and
(iii) Inheritance Tax.

I'm not even going to give the time of day to the (iii) inheritance tax comment, and with accelerated payment notices being sent out the funds will probably be sitting with the HMRC shortly anyway, so the (i) interest argument goes away as I will no longer being be accruing additional interest.

It is the (ii) national Insurance argument that most interests me. Does anyone know if that is something that HMRC are likely to attempt to reclaim? (I'm no expert on the Boyle case - did that include reclaiming national insurance?) If so, I'd be tempted to settle up early - saving myself the national insurance means I'm not getting out of this too badly at all. After all there any many umbrella solutions out there where contractors are paying both employers and employees NI.

However, if HMRC are unlikely to come after the NI then I've got nothing to lose from holding on and waiting to see what happens.

I'm not expert on any of this, so please feel free to shout at me if I'm talking rubbish

Poppy
5th August 2014, 17:51
Close down the arrangers (still advertising HMRC compliant schemes) and then will see. Need to stop harassing and bullying the earners.

And pull, the government trust - users.

One rule for all and not be deliberately selective - double standards.

Where possible, make a claim for the fees (c.10%) paid over all these years, get technical advisor appointed asap.

We want the same sweetheart deals as Bernie E, Goldmans, Vodafone - the list is endless, you can't create a precedent and then impose these so-called 'legal' rules.

Not my fault, the government is constantly in deficit.

Just about had a enough.

jbryce
6th August 2014, 10:27
The sttlement opportunity relates to those years for which HMRC have open enquiries. It gives you an opportunity to get it over and done with for those years. There are multiple reasons why you would want to settle and a myriad of reasons why you wouldn't. Read the threads.

You are not obliged to settle for years which are not under some form of COP 8 enquiry.

So, should you feel the urge to lessen the administrative burden on HMRC and avoid the APNs which will cause them a massive headace, then write to them and ask them what years they are after.

..oh and start saving...

Poppy
6th August 2014, 12:05
Get ready to appoint strong defense teams, to fight legality and not be threatened by illegality !.

Not Losing Any Sleep
6th August 2014, 14:10
Get ready to appoint strong defense teams, to fight legality and not be threatened by illegality !.

Just because HMRC has focussed on a couple of years and you settle these, don't think you are out of the woods for prior years.
Any settlement will open the door for HMRC to go back and review past years.

dirk
6th August 2014, 14:35
This government really has no clue, alienate a large selection of voters in order to garner votes from the same group of voters when they turn round and say "look at how much we reduced the deficit by!"...."Just don't worry about those bankrupted guys over there, we have a strong feeling they are guilty of something"

DonkeyRhubarb
6th August 2014, 14:49
Just because HMRC has focussed on a couple of years and you settle these, don't think you are out of the woods for prior years.
Any settlement will open the door for HMRC to go back and review past years.

It depends what sort of response they've had.

If thousands approach them offering to settle, and they are inundated, then they may not dig any deeper.

However, if it's only a few hundred, those individuals could find themselves under the microscope.

jbryce
8th August 2014, 11:08
It depends what sort of response they've had.

If thousands approach them offering to settle, and they are inundated, then they may not dig any deeper.

However, if it's only a few hundred, those individuals could find themselves under the microscope.

Talking the Rangers case through with my accountant yesterday. his view is that, for EBTs, FN will be an issue if they try and use Boyle. HMRC wanted to use Rangers.

As for APNs, they may choose to issue them, but then they *have* to go to court at some point. The Rangers case *may* suggest that they will lose a lot, clog the courts up and destroy their 80% success rate.

The settlement opportunity is an attempt by HMRC to wriggle off the hook they have put thmselves on.

centurian
8th August 2014, 16:51
Get ready to appoint strong defense teams, to fight legality and not be threatened by illegality !.

Actually you need a good prosecution team - HMRC don't take you to court - they just issue a debt against you - effectively via an edict, for which you cannot "defend" in the traditional sense if they go to court to seize your assets.

To "defend" - you have to get HMRC's edict-imposed debt removed - and for this, you have to take HMRC to court and prove them wrong. That's why tax-cases are Taxpayer v HMRC.

gettingangry
10th August 2014, 18:12
Hi, has anyone asked for a settlement figure?

Just interested to know if they have one to give or whether they are asking for more info

meanttobeworking
10th August 2014, 20:20
Hi, has anyone asked for a settlement figure?

Just interested to know if they have one to give or whether they are asking for more info

I asked for one on the day I received the letter (I only supplied them information they already had from my response to the enquiry letter two years ago).

No reply yet.

K12AN
11th August 2014, 17:25
HMRC will collect lots of money from their APNs...undoubtedly there will be court cases which follow regarding EBT's...some (hopefully most or all :tongue) which they will lose and have to refund those concerned.
Surely, if they are regularly loosing EBT cases they will return these funds to those in similar situations in order to avoid costly court cases and further embarrassment?
I'm sure barristers would be rubbing their hands together at the thought of an 'easy case' against HMRC where they have a very solid defence and track record.
Out of interest, if HMRC lose their case - do they have to pay the court fees?

gettingangry
11th August 2014, 18:07
HMRC will collect lots of money from their APNs...undoubtedly there will be court cases which follow regarding EBT's...some (hopefully most or all :tongue) which they will lose and have to refund those concerned.
Surely, if they are regularly loosing EBT cases they will return these funds to those in similar situations in order to avoid costly court cases and further embarrassment?
I'm sure barristers would be rubbing their hands together at the thought of an 'easy case' against HMRC where they have a very solid defence and track record.
Out of interest, if HMRC lose their case - do they have to pay the court fees?

Question is who will be taking who to court. If we have already paid - is the onus on us to take them to court to reclaim it?
If we then lose we can add a few thousand on to the bill - our fees and no doubt their's as well as they employ some t**t barrister on £2000 an hour. If we win, will we get court fees back - probably not after an almighty struggle, and I can't see a cheque for any refunded payments dropping on the doormat straightaway either. This is another of their immoral underhand tactics as they hope people will decide to throw in the towel.

By this time they will have ruined countless lives and families and there will be a few that can't take it anymore - HMRC I hope you are prepared for a spate of suicides. You're probably looking forward to a bit extra coming in through inheritance tax.

AsISeeIt
12th August 2014, 06:35
Speaking of inheritance tax, they are now looking to take this from you whilst your still living on a very similar basis...

h..p://www.dailymail.co.uk/news/article-2721524/Savers-forced-pay-inheritance-tax-alive-Move-attempt-stop-wealthy-using-schemes-cut-pay-die.html

alphabet
19th August 2014, 10:44
Apologies if I've missed something...

But if HMRC are asking taxpayers to provide loan amounts in regards to settlement, how can they issue accurate APNs if people ignore the settlement opportunity?

costo
19th August 2014, 14:20
Has anyone been successful in taking out a mortgage to pay a potential HMRC debt?

Whilst I'm not considering settling yet I did start investigating if either I do or I get an APN how I could finance the debt.

After speaking to a mortgage broker and giving a true representation of whats going on (e.g. need money if a APN comes in) NO lender they approached would offer a mortgage to pay a HMRC debt - full stop!

The second approach was to give a different reason why you need a mortgage - e.g. to purchase a second property, once the lenders have offered the money you can in theory use this to pay the debt.

HOWEVER - whilst this is unconfirmed, the broker informed me that when there is an HMRC debt, whilst this does not go on the normal credit checking files (e.g. equifax) there is (apparently) a register that HMRC put names on who owe a debt to them? does anyone know if that is true?

The broker said that the lenders may check this register and if they found you were on it would mean you not only would not get the mortgage but also the lenders would know you have told them a lie and not offer you money in the future?

The only alternative it would appear is to take out a commercial loan on a much higher interest rate.... which I guess in theory later down the line you could remortgage to pay off the commercial loan... either way its even more cash to spend!

If above is correct your damned either way and only alternative would be to sell your home....

TheDandy
20th August 2014, 12:20
The stress of this is going to cause a few to take their lives no doubt.

I wonder for how long??

Until the majority of voters are targeted.

sl4
20th August 2014, 13:07
Has anyone been successful in taking out a mortgage to pay a potential HMRC debt?

Whilst I'm not considering settling yet I did start investigating if either I do or I get an APN how I could finance the debt.

After speaking to a mortgage broker and giving a true representation of whats going on (e.g. need money if a APN comes in) NO lender they approached would offer a mortgage to pay a HMRC debt - full stop!

The second approach was to give a different reason why you need a mortgage - e.g. to purchase a second property, once the lenders have offered the money you can in theory use this to pay the debt.

HOWEVER - whilst this is unconfirmed, the broker informed me that when there is an HMRC debt, whilst this does not go on the normal credit checking files (e.g. equifax) there is (apparently) a register that HMRC put names on who owe a debt to them? does anyone know if that is true?

The broker said that the lenders may check this register and if they found you were on it would mean you not only would not get the mortgage but also the lenders would know you have told them a lie and not offer you money in the future?

The only alternative it would appear is to take out a commercial loan on a much higher interest rate.... which I guess in theory later down the line you could remortgage to pay off the commercial loan... either way its even more cash to spend!

If above is correct your damned either way and only alternative would be to sell your home....


I think all of this sounds true. I spoke to a big contractor Mortgage Broker a while back and asked the question. Very quickly being told, under no circumstances would a mortgage be offered to pay HMRC. I asked if a loan could be taken out for an extension on the house etc and was told due to the sums involved the bank would want plans and a lot more details to substantiate it.

coder
20th August 2014, 20:03
Hi

I requested a valuation as part of the "settlement opportunity". One thing I'm wondering is that if I decide the value is acceptable, and am willing to settle, then is it worth doing this through a professional representative or should I just settle it myself?

My concern is that if I do settle I want to ensure that is the end of the matter, and using professional help will hopefully ensure this

Thanks

gettingangry
3rd September 2014, 12:00
Had a reply from HMRC regarding settlement terms - bit vague but may be helpful to some...

I can assure you that HMRC are committed to helping our customers settle any outstanding liability in respect of their involvement with Contractor Loan Avoidance. If, you are unable to obtain the funds to settle the outstanding duties from a third party then we may agree additional time to pay, however, as mentioned above, the amount of time that we can allow will depend on your individual circumstances and we may need to ask more questions about your financial situation. As a guide we are considering between 30 days and 2 years to settle any outstanding liabilities, in exceptional circumstance we may allow longer.

I don't think 2 years is going to help

Rob79
3rd September 2014, 12:25
Hi

I requested a valuation as part of the "settlement opportunity". One thing I'm wondering is that if I decide the value is acceptable, and am willing to settle, then is it worth doing this through a professional representative or should I just settle it myself?

My concern is that if I do settle I want to ensure that is the end of the matter, and using professional help will hopefully ensure this

Thanks

Normally a settlement is done under contract. You offer to pay £x in return for liabilities over period "y". HMRC accept the offer and agree that absent any subsequent discovery of fraud or deliberate default, they will seek no further amounts from you.

Whilst a professional adviser would help, they would not get any better guarantee as the above is pretty much standard practice.

jbryce
3rd September 2014, 12:54
Normally a settlement is done under contract. You offer to pay £x in return for liabilities over period "y". HMRC accept the offer and agree that absent any subsequent discovery of fraud or deliberate default, they will seek no further amounts from you.

Whilst a professional adviser would help, they would not get any better guarantee as the above is pretty much standard practice.

...for the sake of argument - if we ignore the settlement opportunity (tax+interest) and wait for the FN and then subsequent APN (tax) - will HMRC still consider reasonable time to pay arrangements or will they play hard ball?

?

Rob79
3rd September 2014, 13:41
...for the sake of argument - if we ignore the settlement opportunity (tax+interest) and wait for the FN and then subsequent APN (tax) - will HMRC still consider reasonable time to pay arrangements or will they play hard ball?

?

jbryce, I've PM'd you.

For the benefit of others.

The inspectorate and the collector of taxes operate pretty much independently, however...

If the Inspector makes a recommendation as to payment terms, the Collector listens.

An APN (derived in any way) creates a liability and if there is no Inspector making a recommendation as to payment, the Collector will be directly involved. Time to pay is available under their general terms of business and the secret is to contact them AS SOON AS POSSIBLE if you will need to take advantage of an instalment plan.

DO NOT WAIT until the due date of whatever demand you have.

v8gaz
3rd September 2014, 21:14
The one thing I am intrigued by is how bankrupting someone who (now) pays a significant tax amount each year, has never taken any benefits from the state, has a contract that is likely to run for a few more years, is earning well now is going to appear to any same person who sanctions the bankruptcy. After the bankruptcy HMRC will get what I have, a small subset of what they want, leave me with no credit so unable to pass credit checks for rent, or get a mortgage, not allow me to work in the finance industry which is where my skills lie and probably make every other industry suspicious of me. I'll have to get socialbecause I have the bankruptcy.

Its not about what makes sense in your individual case - its about the deterrent effect of your head being impaled on the fencepost.

dezze
4th September 2014, 06:13
It's the deterrent effect on others not to do the same.

AlCapone
4th September 2014, 10:00
Really interesting last couple of posts and they mimic what my accountant said. It's unusual to see payment terms beyond 2 years although he has seen longer in exceptional circumstances. What's exceptional though? Assuming the APN comes in Jan for my EBT I will prob be able to lay my hands on 20-30k by dipping into my company account. My demands total roughly 200k. Problem with dipping into company reserves is that I will of course stray into the higher tax bracket and subsequently have to pay 40% tax on the money I take. I can see quickly that I'm going to be chasing my tail. My assets extend to a jalopy, bicycles and the usual household stuff. I rent. I have maintenance to my ex and kids. Nobody will lend for a tax debt so it's hard to see any point in doing anything other than wait in the vain hope that something will happen in my favour.

If I call HMRC now I can't see that they're going to suggest any different. They can't bankrupt me until the debt is enforced and as their self stated settlement terms max at 2 years I can't see what value the settlement offer is or that it's worth contacting them.

I'm a ticking time bomb. No way out. All I can do is carry on working and gather as much money as possible but knowing it's not likely to be enough to satisfy them so they'll take what I do have and bankrupt me anyway.

The one thing I am intrigued by is how bankrupting someone who (now) pays a significant tax amount each year, has never taken any benefits from the state, has a contract that is likely to run for a few more years, is earning well now is going to appear to any same person who sanctions the bankruptcy. After the bankruptcy HMRC will get what I have, a small subset of what they want, leave me with no credit so unable to pass credit checks for rent, or get a mortgage, not allow me to work in the finance industry which is where my skills lie and probably make every other industry suspicious of me. I'll have to get socialbecause I have the bankruptcy.

Is 200k the actual settlement figure you have received or is that your own estimate?

meanttobeworking
4th September 2014, 11:30
Has anyone asked for a settlement figure and received one? I emailed a request (using the form they referenced in their letter - DO3) five weeks ago (the day the letter arrived) but have had no response or acknowledgement to date. I don't know why I'm surprised really...

Rob79
4th September 2014, 12:58
I've been asked by some how the "settlement" process works. As such I've prepared some notes on the general process and modified these to account for some of the circumstances here. These I have laid out below.

A word of caution. I do undertake this sort of thing in my day job. My focus is in tax avoidance schemes which do not usually involve contractors. It is entirely possible that the process HMRC wish to follow may vary from that I've seen and dealt with elsewhere.

Further disclaimer. I am not looking for work. I cannot afford to spend a lot of time organizing a group who may wish to settle nor in the inevitable calculation of liability and negotiation with HMRC, without recompense for time and effort. My day job is keeping very much occupied.

HMRC extend "settlement opportunities" in line with their LSS (Litigation and Settlement Strategy). Usually an offer to settle is made in advance of litigation at the first stage. The terms offered are usually in line with a standard template which says that you get tax relief on the cash you've paid for a scheme but nothing else.

That said, in this case HMRC appear to have no reliable numbers, no template analysis to calculate liability even if they had those numbers and no legal decision backing up an analysis. Their current position is therefore relatively weak.

I have found that in this situation "getting your retaliation in first" is effective. In other words, discuss principles with HMRC such as period, treatment of fees paid, treatment of sums received, treatment of post scheme payments. Then go away and calculate a position based on known information and professional analysis. Present that number to HMRC. The agency is relatively ill informed about contractor schemes, has little hard data and little real idea of technical analysis. Somebody doing this work for them means that they may be inclined to accept parts of the analysis without much more than an arithmetic check.

Ensure that all discussions up to the making of a formal offer are "without prejudice". Do not commit to accepting a figure until you know what it is.

Ensure that "time to pay" arrangements are part of the settlement. To a degree this relies upon individual circumstances but an agreed provision in the settlement is always good to have as the Inspector of HMRC will always trump the Collector of HMRC.

Ensure that the period of the agreement is understood. HMRC is offering settlement for the periods loans were received. Those loans remain outstanding. What happens if and when those loans ware written off or unwound? You do not want to face another tax bill for that, be that income tax or IHT. You need to include unwind in the process.

The process will therefore be to collect your numbers, get a calculation done and speak with HMRC "without prejudice".

Would you get a better deal going via a professional adviser? Probably not. HMRC are obliged to make the same offer to all. Therefore if somebody has paid several tens of thousands for top notch advice and has got a particular analysis agreed, it should be on offer to all.

Would you get a better deal going via a group? Usually it makes little difference. In this instance however where HMRC's position is relatively weak, you might. If as a result of a group settling HMRC now has data and an analysis which they can apply against all those not settling, then they might be inclined to cut a little slack. No guarantee of that and you might instead just get requests for more and more information. As long as you are "without prejudice" you can terminate your involvement in any group settlement discussion (or individual discussion) if you such requests and that should not prejudice you.

There is a deadline on the opportunity. As long as you are in discussion or have at least indicated you'd like to discuss a settlement before that deadline, you will be entitled to its terms.

A group approach does NOT oblige you to accept the terms agreed. The choice of acceptance remains yours.

The downside of groups and settlements is that they tend to go for the lowest common denominator and a settlement may actually be worse than a position arrived at via litigation. Once you have accepted a settlement, you are not entitled to the litigation outcome. That is one of the terms of accepting the "deal".

Be under no illusions here. HMRC DOES NOT NEGOTIATE.

They will arrive at the "right amount of tax" and once there, will not alter their view unless (usually) a judge makes a decision otherwise.

What the "right amount of tax" actually is though is a question of analysis.

Groups normally are organized as having a leading person or small group who collate communications and deal with disseminating results and requests. That group engages the various professionals required and instructs them. It takes feedback from those professionals and keeps the members informed. The steering person/group is NOT responsible for fees to the professionals. Those are the obligations of all. Consequently there is usually a simple constitution setting out the aims of the group, the process, the ways in which the group will operate and terminate. That usually requires a positive action (signing a copy and returning it) and payment of a fee. That fee is used to pay the professionals and meet admin costs. It would be usual for the steering person/group to keep the funds with a third party - normally a solicitor - and pay the professionals only when work is done and invoiced.

Pretty sure that the internet has a template available.

If you join a group, pay your fee and disagree with process, progress, result, it is usually the case that your fee in non refundable. That is the risk you take.

As mentioned, the above is dealing with HMRC. You need to think about how to deal with the trust/promoter who might still have some call on the loans. That requires legal analysis. Whilst I think that there are legal advisers acting for settlement groups, that is outside my experience and I have no views as to whether they could be accommodated in the type of arrangement above.

My apologies for the length of this post.

AlCapone
5th September 2014, 08:46
I've been asked by some how the "settlement" process works. As such I've prepared some notes on the general process and modified these to account for some of the circumstances here. These I have laid out below.

A word of caution. I do undertake this sort of thing in my day job. My focus is in tax avoidance schemes which do not usually involve contractors. It is entirely possible that the process HMRC wish to follow may vary from that I've seen and dealt with elsewhere.

Further disclaimer. I am not looking for work. I cannot afford to spend a lot of time organizing a group who may wish to settle nor in the inevitable calculation of liability and negotiation with HMRC, without recompense for time and effort. My day job is keeping very much occupied.

HMRC extend "settlement opportunities" in line with their LSS (Litigation and Settlement Strategy). Usually an offer to settle is made in advance of litigation at the first stage. The terms offered are usually in line with a standard template which says that you get tax relief on the cash you've paid for a scheme but nothing else.

That said, in this case HMRC appear to have no reliable numbers, no template analysis to calculate liability even if they had those numbers and no legal decision backing up an analysis. Their current position is therefore relatively weak.

I have found that in this situation "getting your retaliation in first" is effective. In other words, discuss principles with HMRC such as period, treatment of fees paid, treatment of sums received, treatment of post scheme payments. Then go away and calculate a position based on known information and professional analysis. Present that number to HMRC. The agency is relatively ill informed about contractor schemes, has little hard data and little real idea of technical analysis. Somebody doing this work for them means that they may be inclined to accept parts of the analysis without much more than an arithmetic check.

Ensure that all discussions up to the making of a formal offer are "without prejudice". Do not commit to accepting a figure until you know what it is.

Ensure that "time to pay" arrangements are part of the settlement. To a degree this relies upon individual circumstances but an agreed provision in the settlement is always good to have as the Inspector of HMRC will always trump the Collector of HMRC.

Ensure that the period of the agreement is understood. HMRC is offering settlement for the periods loans were received. Those loans remain outstanding. What happens if and when those loans ware written off or unwound? You do not want to face another tax bill for that, be that income tax or IHT. You need to include unwind in the process.

The process will therefore be to collect your numbers, get a calculation done and speak with HMRC "without prejudice".

Would you get a better deal going via a professional adviser? Probably not. HMRC are obliged to make the same offer to all. Therefore if somebody has paid several tens of thousands for top notch advice and has got a particular analysis agreed, it should be on offer to all.

Would you get a better deal going via a group? Usually it makes little difference. In this instance however where HMRC's position is relatively weak, you might. If as a result of a group settling HMRC now has data and an analysis which they can apply against all those not settling, then they might be inclined to cut a little slack. No guarantee of that and you might instead just get requests for more and more information. As long as you are "without prejudice" you can terminate your involvement in any group settlement discussion (or individual discussion) if you such requests and that should not prejudice you.

There is a deadline on the opportunity. As long as you are in discussion or have at least indicated you'd like to discuss a settlement before that deadline, you will be entitled to its terms.

A group approach does NOT oblige you to accept the terms agreed. The choice of acceptance remains yours.

The downside of groups and settlements is that they tend to go for the lowest common denominator and a settlement may actually be worse than a position arrived at via litigation. Once you have accepted a settlement, you are not entitled to the litigation outcome. That is one of the terms of accepting the "deal".

Be under no illusions here. HMRC DOES NOT NEGOTIATE.

They will arrive at the "right amount of tax" and once there, will not alter their view unless (usually) a judge makes a decision otherwise.

What the "right amount of tax" actually is though is a question of analysis.

Groups normally are organized as having a leading person or small group who collate communications and deal with disseminating results and requests. That group engages the various professionals required and instructs them. It takes feedback from those professionals and keeps the members informed. The steering person/group is NOT responsible for fees to the professionals. Those are the obligations of all. Consequently there is usually a simple constitution setting out the aims of the group, the process, the ways in which the group will operate and terminate. That usually requires a positive action (signing a copy and returning it) and payment of a fee. That fee is used to pay the professionals and meet admin costs. It would be usual for the steering person/group to keep the funds with a third party - normally a solicitor - and pay the professionals only when work is done and invoiced.

Pretty sure that the internet has a template available.

If you join a group, pay your fee and disagree with process, progress, result, it is usually the case that your fee in non refundable. That is the risk you take.

As mentioned, the above is dealing with HMRC. You need to think about how to deal with the trust/promoter who might still have some call on the loans. That requires legal analysis. Whilst I think that there are legal advisers acting for settlement groups, that is outside my experience and I have no views as to whether they could be accommodated in the type of arrangement above.

My apologies for the length of this post.

That last line is a bit worrying. Does anyone know of any cases where schemes have successfully called the loans in?

AlCapone
5th September 2014, 10:03
I've been asked by some how the "settlement" process works. As such I've prepared some notes on the general process and modified these to account for some of the circumstances here. These I have laid out below.

A word of caution. I do undertake this sort of thing in my day job. My focus is in tax avoidance schemes which do not usually involve contractors. It is entirely possible that the process HMRC wish to follow may vary from that I've seen and dealt with elsewhere.

Further disclaimer. I am not looking for work. I cannot afford to spend a lot of time organizing a group who may wish to settle nor in the inevitable calculation of liability and negotiation with HMRC, without recompense for time and effort. My day job is keeping very much occupied.

HMRC extend "settlement opportunities" in line with their LSS (Litigation and Settlement Strategy). Usually an offer to settle is made in advance of litigation at the first stage. The terms offered are usually in line with a standard template which says that you get tax relief on the cash you've paid for a scheme but nothing else.

That said, in this case HMRC appear to have no reliable numbers, no template analysis to calculate liability even if they had those numbers and no legal decision backing up an analysis. Their current position is therefore relatively weak.

I have found that in this situation "getting your retaliation in first" is effective. In other words, discuss principles with HMRC such as period, treatment of fees paid, treatment of sums received, treatment of post scheme payments. Then go away and calculate a position based on known information and professional analysis. Present that number to HMRC. The agency is relatively ill informed about contractor schemes, has little hard data and little real idea of technical analysis. Somebody doing this work for them means that they may be inclined to accept parts of the analysis without much more than an arithmetic check.

Ensure that all discussions up to the making of a formal offer are "without prejudice". Do not commit to accepting a figure until you know what it is.

Ensure that "time to pay" arrangements are part of the settlement. To a degree this relies upon individual circumstances but an agreed provision in the settlement is always good to have as the Inspector of HMRC will always trump the Collector of HMRC.

Ensure that the period of the agreement is understood. HMRC is offering settlement for the periods loans were received. Those loans remain outstanding. What happens if and when those loans ware written off or unwound? You do not want to face another tax bill for that, be that income tax or IHT. You need to include unwind in the process.

The process will therefore be to collect your numbers, get a calculation done and speak with HMRC "without prejudice".

Would you get a better deal going via a professional adviser? Probably not. HMRC are obliged to make the same offer to all. Therefore if somebody has paid several tens of thousands for top notch advice and has got a particular analysis agreed, it should be on offer to all.

Would you get a better deal going via a group? Usually it makes little difference. In this instance however where HMRC's position is relatively weak, you might. If as a result of a group settling HMRC now has data and an analysis which they can apply against all those not settling, then they might be inclined to cut a little slack. No guarantee of that and you might instead just get requests for more and more information. As long as you are "without prejudice" you can terminate your involvement in any group settlement discussion (or individual discussion) if you such requests and that should not prejudice you.

There is a deadline on the opportunity. As long as you are in discussion or have at least indicated you'd like to discuss a settlement before that deadline, you will be entitled to its terms.

A group approach does NOT oblige you to accept the terms agreed. The choice of acceptance remains yours.

The downside of groups and settlements is that they tend to go for the lowest common denominator and a settlement may actually be worse than a position arrived at via litigation. Once you have accepted a settlement, you are not entitled to the litigation outcome. That is one of the terms of accepting the "deal".

Be under no illusions here. HMRC DOES NOT NEGOTIATE.

They will arrive at the "right amount of tax" and once there, will not alter their view unless (usually) a judge makes a decision otherwise.

What the "right amount of tax" actually is though is a question of analysis.

Groups normally are organized as having a leading person or small group who collate communications and deal with disseminating results and requests. That group engages the various professionals required and instructs them. It takes feedback from those professionals and keeps the members informed. The steering person/group is NOT responsible for fees to the professionals. Those are the obligations of all. Consequently there is usually a simple constitution setting out the aims of the group, the process, the ways in which the group will operate and terminate. That usually requires a positive action (signing a copy and returning it) and payment of a fee. That fee is used to pay the professionals and meet admin costs. It would be usual for the steering person/group to keep the funds with a third party - normally a solicitor - and pay the professionals only when work is done and invoiced.

Pretty sure that the internet has a template available.

If you join a group, pay your fee and disagree with process, progress, result, it is usually the case that your fee in non refundable. That is the risk you take.

As mentioned, the above is dealing with HMRC. You need to think about how to deal with the trust/promoter who might still have some call on the loans. That requires legal analysis. Whilst I think that there are legal advisers acting for settlement groups, that is outside my experience and I have no views as to whether they could be accommodated in the type of arrangement above.

My apologies for the length of this post.

It seems to me, in a way, that it would be better if HMRC prevail at tribunal in proving that these are not genuine loans. Surely then the scheme provider doesn’t have a leg to stand on with regards to calling in the loans if a judge has ruled that they are not genuine. I’d rather pay HMRC the tax than pay back the full amount of the loans which was my money in the first place.

Rob79
5th September 2014, 11:02
It seems to me, in a way, that it would be better if HMRC prevail at tribunal in proving that these are not genuine loans. Surely then the scheme provider doesn’t have a leg to stand on with regards to calling in the loans if a judge has ruled that they are not genuine. I’d rather pay HMRC the tax than pay back the full amount of the loans which was my money in the first place.

I'm not so sure.

The ability of HMRC to ignore the loan document and instead classify it as a payment of remuneration is limited to the calculation of tax liability.

The legal position remains that there is a loan and that analysis probably holds for all purposes other than tax.

There could therefore arise the worst of all worlds which would be a tax liability AND a loan repayment. (I'm not sure at the moment how repayment of the loan might be seen for tax purposes and it's something I need to think on further).

You would need to examine the loan documents carefully to understand how the loan might fall to be repaid or written off or otherwise be deemed ultra vires.

vern19
5th September 2014, 11:15
I've been asked by some how the "settlement" process works. As such I've prepared some notes on the general process and modified these to account for some of the circumstances here. These I have laid out below.
.....

Thanks for this. There is so much rubbish on these threads touted by tax amateurs, mostly by people who are not even affected by these schemes.

Fortunately, I was not heavily exposed and settled some time ago. Rob is correct, HMRC will not negotiate.

AlCapone
5th September 2014, 11:16
I'm not so sure.

The ability of HMRC to ignore the loan document and instead classify it as a payment of remuneration is limited to the calculation of tax liability.

The legal position remains that there is a loan and that analysis probably holds for all purposes other than tax.

There could therefore arise the worst of all worlds which would be a tax liability AND a loan repayment. (I'm not sure at the moment how repayment of the loan might be seen for tax purposes and it's something I need to think on further).

You would need to examine the loan documents carefully to understand how the loan might fall to be repaid or written off or otherwise be deemed ultra vires.

Does anyone know of any scheme providers calling in the loans? I can't find any cases online.

Rob79
5th September 2014, 11:31
Does anyone know of any scheme providers calling in the loans? I can't find any cases online.

I'm assuming that in many cases the loans have come from trusts or from companies owned by the participants? These may have been managed by the promoters originally but some of those firms may have failed subsequently?

If a trust is involved, the trustee can decide whether the loan terms have been breached sufficiently for a loan to be foreclosed. If that was the case, then the trustee might be obliged to use the proceeds to pay the beneficiary who I assume is also the person who repaid the loan. Subject to fees, the money would move in a circle. Question - would that trigger a tax charge? I think it might trigger an IHT charge at the very least. As the trust is offshore, it might also trigger an income tax charge.

If a company is involved, then again repaying the loan would put cash into the company which I'm assuming would be used to pay dividends to the same people who repaid the loan? Those dividends are certainly taxable.

The above analysis has a long way to go so please DO NOT rely upon it.

I do though suggest that if you are interested in the settlement opportunity, you ask about and get comfort from HMRC that the situation above does not create liabilities in the future.

bandemelbs
5th September 2014, 11:52
How on earth could a promoter enforce these loans? They are technically unsecured creditors. There's so much rubbish & speculation on these forums, it's becoming laughable.

Rob79
5th September 2014, 11:55
So you have a loan from a company offshore. That company becomes insolvent and an administrator or liquidator is appointed by the Court.

Why would said person not seek to have the loans repaid?

TheDandy
5th September 2014, 12:14
full amount of the loans which was my money in the first place.

And there was me thinking you were an employee of a company. Please don't provide and answer to that.

sl4
5th September 2014, 12:28
Does anyone know of any scheme providers calling in the loans? I can't find any cases online.

The loans are issued by a trust which has received monies from your employer. The trust is setup for the benefit of the employee, therefore it should not be in the benefit of the employee for the trust to recall the loan.

Your employer should not be able to ask the trust to recall the loans, or at least that request should be ignored. Monies in the trust are for the employees.

BUT the big question is what happens if the trust goes bust ?? Administrators come in, see a loan book and that would be the first thing to be called in.

AlCapone
5th September 2014, 13:12
I do though suggest that if you are interested in the settlement opportunity, you ask about and get comfort from HMRC that the situation above does not create liabilities in the future.

I assume if I did settle HMRC can only give me assurances about future tax liabilities, not whether or not I am still liable to repay any so called loans? So in layman’s terms is it unlikely that these schemes will able to extract the loan payments from us?

Rob79
5th September 2014, 13:21
I assume if I did settle HMRC can only give me assurances about future tax liabilities, not whether or not I am still liable to repay any so called loans? So in layman’s terms is it unlikely that these schemes will able to extract the loan payments from us?

Correct. HMRC will be able to give you an indication of the taxation position and will not comment upon the legal position.

However it's worth running various scenarios past HMRC in a discussion on settlement so as to get their view. As that will be tax possibly due in the future, you will not get a guaranteed position, just a "this is our present view and it may change if we have more information or the law changes". That is about as good as it gets.

As to whether the "schemes" can extract the loans from you - I don't know. You'd need to examine the details.

Rob79
5th September 2014, 13:28
The loans are issued by a trust which has received monies from your employer. The trust is setup for the benefit of the employee, therefore it should not be in the benefit of the employee for the trust to recall the loan.

Your employer should not be able to ask the trust to recall the loans, or at least that request should be ignored. Monies in the trust are for the employees.

BUT the big question is what happens if the trust goes bust ?? Administrators come in, see a loan book and that would be the first thing to be called in.

If nothing was done about the loan and the time comes when the employee is entitled to benefit, would the trustee not be obliged to cash up the loan?

Perhaps the trustee would just write the loan off? That would be a transfer of value to the beneficiary and I'd need to think about whether that is a taxable event.

I would also not be so sure about whether the employer should not be able to do anything.

I would probably agree that the trustee, so long as he is operating according to the trust deed, could ignore pretty much anything the settlor wants or prefers.

These trusts are probably cash light? They will inevitably have some costs (filing returns etc). If the original trustee has been paid in advance for say 20 years worth of fees but has since gone bust, the trust probably still needs to file etc and therefore find the means to pay for that.

If a trust is insolvent I think the position gets to be very messy. An application can be made for the trust to be dissolved. That may require either a recovery of the loan and a settling of outstanding charges before the balance goes to the beneficiary. A distribution to a UK taxpayer from a foreign trust may well be taxable.

HMM. One to ponder over the weekend

AlCapone
5th September 2014, 13:39
If a trust is insolvent I think the position gets to be very messy. An application can be made for the trust to be dissolved. That may require either a recovery of the loan and a settling of outstanding charges before the balance goes to the beneficiary. A distribution to a UK taxpayer from a foreign trust may well be taxable.

HMM. One to ponder over the weekend

Would you be able to simplfy the answer above? Perhaps with an example please?

Rob79
5th September 2014, 14:01
Would you be able to simplfy the answer above? Perhaps with an example please?

Bear in mind I'm guessing and the rules in the jurisdiction in which the trust resides may be different.

Let's say the trust has loaned you 100.

Back in the day, the fees you paid went to Company A who promised to meet the annual admin bills of 3 for a period of say 15 years.

Company A is bust.

The trust has to file a return at a cost of 3.

The trust has no cash.

The local authority/Court puts the trust into administration.

The administrator needs 3 to pay the filing fee, plus perhaps 5 for his own costs.

The only asset is the loan, which is called in.

You pay 100 loan repayment.

Administrator keeps 8 and pays you 92.

The 92 is a distribution to a beneficiary and as no UK tax has been paid on that amount BY THE TRUST, you may be liable to tax on it.

Tax would be around 40/45?

It's that tax bill that you need to discuss with HMRC in any settlement.

AlCapone
5th September 2014, 14:30
Bear in mind I'm guessing and the rules in the jurisdiction in which the trust resides may be different.

Let's say the trust has loaned you 100.

Back in the day, the fees you paid went to Company A who promised to meet the annual admin bills of 3 for a period of say 15 years.

Company A is bust.

The trust has to file a return at a cost of 3.

The trust has no cash.

The local authority/Court puts the trust into administration.

The administrator needs 3 to pay the filing fee, plus perhaps 5 for his own costs.

The only asset is the loan, which is called in.

You pay 100 loan repayment.

Administrator keeps 8 and pays you 92.

The 92 is a distribution to a beneficiary and as no UK tax has been paid on that amount BY THE TRUST, you may be liable to tax on it.

Tax would be around 40/45?

It's that tax bill that you need to discuss with HMRC in any settlement.

ok thank you I think I understand. So it's not as if I have to pay back 100% of the loan (well I do initially but the net result is I don't). If that's the case I guess it's not a great situation but we're not talking bankruptcy at least.

TheDandy
5th September 2014, 14:40
ok thank you I think I understand. So it's not as if I have to pay back 100% of the loan (well I do initially but the net result is I don't). If that's the case I guess it's not a great situation but we're not talking bankruptcy at least.

Why not just contact the trustees and throw them some cash to keep going for a hundred years.........

Rob79
5th September 2014, 15:10
Why not just contact the trustees and throw them some cash to keep going for a hundred years.........

Because the trust deed will have a sunsetter in it, i.e. an end date. It will then say what should happen.

Also whilst a beneficiary can (probably) pay money into the trust, there will be implications.

Also the trustee may have been the promoter who has now disappeared.

TheDandy
5th September 2014, 15:44
Because the trust deed will have a sunsetter in it, i.e. an end date. It will then say what should happen.

Also whilst a beneficiary can (probably) pay money into the trust, there will be implications.

Also the trustee may have been the promoter who has now disappeared.

Sorry I was being flippant which is not really helpful, and doesn't come across as twisted humour. I just think people spend significant amounts of time running through numerous scenarios on here and it doesn't really help anyone. They need to get, and pay for (unfortunately) proper legal advice. And they should equally be careful about what they write in these forums.

AlCapone
5th September 2014, 15:55
Sorry I was being flippant which is not really helpful, and doesn't come across as twisted humour. I just think people spend significant amounts of time running through numerous scenarios on here and it doesn't really help anyone. They need to get, and pay for (unfortunately) proper legal advice. And they should equally be careful about what they write in these forums.

sorry thought that was the idea of forums - for every day contractors to discuss issues with people in a similar situation to themselves. If the posts bother you don't read them.

TheDandy
5th September 2014, 16:05
sorry thought that was the idea of forums - for every day contractors to discuss issues with people in a similar situation to themselves. If the posts bother you don't read them.

Sigh!

centurian
6th September 2014, 15:12
sorry thought that was the idea of forums - for every day contractors to discuss issues with people in a similar situation to themselves. If the posts bother you don't read them.

TheDandy was trying to be subtle in his rebuke, so I'll spell it out for you in clearer terms.

In your previous posts, you've come very close to admitting that the loans were not loans at all - it was "my money in the first place".

If that is the case, you have committed fraud, because you made a deliberately false statement/omission in your tax returns.

Now every man and his dog knows that these loans are not loans, but HMRC can't prove that to a criminal standard. But if you admit that you knew that from the outset that these were not loans, you have committed tax evasion, not avoidance.

cojak
6th September 2014, 15:25
I haven't been keeping a close eye on this thread. I will in the future...

AlCapone
6th September 2014, 18:15
TheDandy was trying to be subtle in his rebuke, so I'll spell it out for you in clearer terms.

In your previous posts, you've come very close to admitting that the loans were not loans at all - it was "my money in the first place".

If that is the case, you have committed fraud, because you made a deliberately false statement/omission in your tax returns.

Now every man and his dog knows that these loans are not loans, but HMRC can't prove that to a criminal standard. But if you admit that you knew that from the outset that these were not loans, you have committed tax evasion, not avoidance.

What is said is irrelevant. These schemes were based on legitimate tax loop holes. It's avoidance not evasion no matter what comments are made here. If it was evasion why are the letters coming from the ANTI AVOIDANCE team?

DonkeyRhubarb
6th September 2014, 18:20
http://learning.blogs.nytimes.com/2011/10/17/oct-17-1931-al-capone-guilty-of-tax-evasion/?_php=true&_type=blogs&_r=0

AlCapone
6th September 2014, 18:34
http://learning.blogs.nytimes.com/2011/10/17/oct-17-1931-al-capone-guilty-of-tax-evasion/?_php=true&_type=blogs&_r=0

Yes the similarities between the murdering, bootlegging gangster and what we're discussing here are spookily similar. You're a genius.

vern19
6th September 2014, 18:54
Yes the similarities between the murdering, bootlegging gangster and what we're discussing here are spookily similar. You're a genius.

Ha, Ha. Let's not get off track. We're all on the same side here... Well apart from a few sanctimonious muppets chipping in now and again

TykeMerc
6th September 2014, 19:48
sorry thought that was the idea of forums - for every day contractors to discuss issues with people in a similar situation to themselves. If the posts bother you don't read them.

The warning about being careful what you write is simply because not only are these forums visible to HMRC we know and I believe have evidence that they DO read them.

Discussing things in a way that will either tip your hand to them or undermine part of your tax case isn't just unwise, it's suicidal.

centurian
6th September 2014, 19:56
What is said is irrelevant. These schemes were based on legitimate tax loop holes. It's avoidance not evasion no matter what comments are made here. If it was evasion why are the letters coming from the ANTI AVOIDANCE team?

On the contrary, what is known/said is exactly the difference between avoidance and evasion.

Making a deliberately false statement as part of using any tax claim is evasion. If you are claiming a loan relief, yet know full well at the outset that it is not a loan and is "your money" - that's evasion.

It's coming from the avoidance team - because they can't prove what you knew to a criminal standard - unless of course, you admit it.

DonkeyRhubarb
7th September 2014, 11:57
Typically when you join these schemes the only legal entitlement you have is for a small salary. You forfeit any right whatsoever to the monies invoiced from the agencies.

No matter what AlCapone says about it being "his money", it never was. In law, it belonged to the company. The company could have kept it and there would have been sod all he could have done about it.

Now HMRC may view the loans as disguised remuneration but there's never been any suggestion of fraud.

FINN
15th September 2014, 20:13
Hi,
apologies if this question has been discussed before, there are so many pages to read..

Apparently I owe £150k for 2 years of using EBTs 2009/10 & 2010/11 - the numbers on the notices sent by HMRC are very wrong and I asked an accountant to check them. The actual amount would have been approx. £90k if I had gone PAYE at the time. Given that I don't have any of this money, I may be able to re-mortgage and get £25k, does anyone think HMRC will accept this on the basis the scheme was legal at the time blah blah blah - I just want this problem to go away and I don't think hiring a specialist tax advisor to take my case will help my finances.

Has any one tried to just settle in this way? Sorry I know its giving in to those evil people at HMRC but the stress is too much for me and the family!

Cheers FINN

Rob79
16th September 2014, 07:53
Hi,
apologies if this question has been discussed before, there are so many pages to read..

Apparently I owe £150k for 2 years of using EBTs 2009/10 & 2010/11 - the numbers on the notices sent by HMRC are very wrong and I asked an accountant to check them. The actual amount would have been approx. £90k if I had gone PAYE at the time. Given that I don't have any of this money, I may be able to re-mortgage and get £25k, does anyone think HMRC will accept this on the basis the scheme was legal at the time blah blah blah - I just want this problem to go away and I don't think hiring a specialist tax advisor to take my case will help my finances.

Has any one tried to just settle in this way? Sorry I know its giving in to those evil people at HMRC but the stress is too much for me and the family!

Cheers FINN

Good morning.

You cannot be asked to pay tax that has been incorrectly calculated. If HMRC are asking you for £150k, ask them how it has been calculated both in terms of analysis of the sums received and the arithmetic. (You'd probably not be surprised that they make errors in both).

Once you have the correct number, talk to HMRC (Debt Management and Banking) about "time to pay". Don't leave things until the bill is due to be paid. Speak to them EARLY.

Will HMRC accept less than the amount calculated?

In all but the most serious of circumstances, I doubt it.

One of the maddening issues in this whole debacle is that fact that HMRC have their APN's etc but nobody (and I mean NOBODY) in HMRC can explain to me what their policy is for people in your position.

It would make absolutely no sense (and be bad politics) to make several thousand people bankrupt. Not only is that expensive but also leads to a large reduction in tax collected.

Therefore you'd think that they had some plan in place to allow extended periods for payment of tax (say up to 5 years) and some form of policy to forgive tax in some circumstances.

I would love to report that HMRC has this plan, but I can detect no sign of it and suggestions to this effect are met with a brick wall.

So I'm afraid it's be prepared to pay all the tax (plus interest) but perhaps over an extended period.

gettingangry
17th September 2014, 00:10
Emailed HMRC about 5 times now asking for a settlement figure (just to see what the come up with) - they have read the emails (return reciept on them) but nothing - not even an acknowledgement that something is being done. Useless t**ts.

meanttobeworking
17th September 2014, 06:23
Emailed HMRC about 5 times now asking for a settlement figure (just to see what the come up with) - they have read the emails (return reciept on them) but nothing - not even an acknowledgement that something is being done. Useless t**ts.

I emailed them as soon as the settlement opportunity landed (for the same reasons) and I've not had a reply either. I asked this forum about a week ago if anyone had heard from them and nobody replied. No doubt we'll finally get figures about 24 hours before the deadline...

Safe
17th September 2014, 08:13
I emailed them as soon as the settlement opportunity landed (for the same reasons) and I've not had a reply either. I asked this forum about a week ago if anyone had heard from them and nobody replied. No doubt we'll finally get figures about 24 hours before the deadline...

Did you provide the details of the loans in your email?

FINN
17th September 2014, 17:57
Good morning.

You cannot be asked to pay tax that has been incorrectly calculated. If HMRC are asking you for £150k, ask them how it has been calculated both in terms of analysis of the sums received and the arithmetic. (You'd probably not be surprised that they make errors in both).

Once you have the correct number, talk to HMRC (Debt Management and Banking) about "time to pay". Don't leave things until the bill is due to be paid. Speak to them EARLY.

Will HMRC accept less than the amount calculated?

In all but the most serious of circumstances, I doubt it.

One of the maddening issues in this whole debacle is that fact that HMRC have their APN's etc but nobody (and I mean NOBODY) in HMRC can explain to me what their policy is for people in your position.

It would make absolutely no sense (and be bad politics) to make several thousand people bankrupt. Not only is that expensive but also leads to a large reduction in tax collected.

Therefore you'd think that they had some plan in place to allow extended periods for payment of tax (say up to 5 years) and some form of policy to forgive tax in some circumstances.

I would love to report that HMRC has this plan, but I can detect no sign of it and suggestions to this effect are met with a brick wall.

So I'm afraid it's be prepared to pay all the tax (plus interest) but perhaps over an extended period.

many thanks for your reply Rob79.

I can see how they calculated it. They took figures entered by the accountants on the P11D forms. On the forms you have to specify the loan amount for year 1 then on year 2 you specify how much year 2 loan was then there is a box asking you to fill in the outstanding loans from previous years, For some reason they add year 2 to the combined year 1 and year 2 figures. Bizarre.

I was interested to see that you seem resigned to the fact we will all have to pay up, no fighting talk, hang in there don't pay etc :-)

regards FINN.

ps to the guys waiting for replies to emails, I wouldn't rely on emails. A letter sent recorded delivery is the only way to know for sure.

Rob79
18th September 2014, 08:02
I was interested to see that you seem resigned to the fact we will all have to pay up, no fighting talk, hang in there don't pay etc :-)



Resigned? I would have said not but rather I think I'm asking everybody to be practical in their approach.

If the scheme you used has not been struck down in a decision that is final, then you have every right to request not to pay the tax that HMRC say is due.

If your scheme has been struck down but the calculation is incorrect or the HMRC interpretation of the decision is incorrect, then again I would resist paying until the final figure is known.

An APN unfortunately does not obey the above rules. It requires you to pay regardless of the final decision. If you don't, then a penalty of up to 15% can be due.

For an APN I recommend waiting until you get one, check it carefully, marshal your arguments against and make them one at a time towards the end of the permitted period of 90 days.

(I would caution that the idea of making separate representations on an APN, consecutively rather than concurrently, is not tested and may be deemed invalid. I spoke about this yesterday with a tax barrister who could see no real flaw in doing this but equally thought HMRC would amend the rules.)

If and when you reach a point where you have no more arguments on the APN, then I would recommend payment rather than risk the penalty.

You also need to think about interest. An interest charge runs from the date the tax is due (check this) to the date paid. The APN is a payment on account. Interest on the amount covered by the APN will run until the APN is paid. Interest is 3% at the moment and as a general rule will be 2.5% to 3% above base rate.

All of the above is predicated on the basis that you have the resources to pay. Many don't. If you are genuinely struggling to pay, speak with HMRC as early as you can to arrange time to pay.

lara400
18th September 2014, 08:24
Hello - can I ask a stupid question....if for arguemnt sake I did say a year of EBT and supposedly got paid loans of say 5k a month for 12 months = 60k....does this mean that I have to pay HMRC 60k back...surely not? Or do you have to pay a percentage of the tax that is due - if it is the percentage does anyone how much that will be?

Rob79
18th September 2014, 08:42
Hello - can I ask a stupid question....if for arguemnt sake I did say a year of EBT and supposedly got paid loans of say 5k a month for 12 months = 60k....does this mean that I have to pay HMRC 60k back...surely not? Or do you have to pay a percentage of the tax that is due - if it is the percentage does anyone how much that will be?

With a warning that I have yet to find time to get to the fine print, I think it works something like this.

HMRC consider that you have received a net £60k. Let's assume you have personal allowances of £8,000. Tax rates are 20% on the first £30,000 of taxable income and 40% after that.

So you need to calculate what the gross salary would have been to leave you with £60k.

Back of an envelope that's a gross of £84,000 and tax due around £24,000.

I'm assuming there is no NI as you are already paying that.

Interest will be due as well.

Anybody else have any views on this?

dangerouswhensober
18th September 2014, 08:48
Hello - can I ask a stupid question....if for arguemnt sake I did say a year of EBT and supposedly got paid loans of say 5k a month for 12 months = 60k....does this mean that I have to pay HMRC 60k back...surely not? Or do you have to pay a percentage of the tax that is due - if it is the percentage does anyone how much that will be?

The basic argument of HMRC is that the loans were not loans, but were income - so should be treated the same way as other income (e.g. salary). So they are claiming the tax on that extra income at whatever your marginal rate was for that period - normally 50%, as this was the top rate of tax in past years.

(I personally received assessments for three years consisting of the loan amounts for each year multiplied by 50% - that is the total amount claimed from me by HMRC as unpaid tax).

So in your case you should have received or should expect a "discovery" assessment in the region of £30k, if HMRC know how much your loan totals were.

BTW - I was under the impression that all "discovery" assessments for years up to and including 2010-2011 had been sent out already - have you not received an actual assessment, or is your hypothetical situation later than that ?

dangerouswhensober
18th September 2014, 08:54
The basic argument of HMRC is that the loans were not loans, but were income - so should be treated the same way as other income (e.g. salary). So they are claiming the tax on that extra income at whatever your marginal rate was for that period - normally 50%, as this was the top rate of tax in past years.

(I personally received assessments for three years consisting of the loan amounts for each year multiplied by 50% - that is the total amount claimed from me by HMRC as unpaid tax).

So in your case you should have received or should expect a "discovery" assessment in the region of £30k, if HMRC know how much your loan totals were.

BTW - I was under the impression that all "discovery" assessments for years up to and including 2010-2011 had been sent out already - have you not received an actual assessment, or is your hypothetical situation later than that ?

Just to clarify (and to add to Rob's comment) - the amount of your loans is considered by HMRC to be income on top of the basic salary you presumably received (and paid tax & NI on) - since most EBT schemes worked by making you an employee and paying you a basic net salary. This is why HMRC claim tax at the relevent marginal rates, assuming that all of your personal allowance was claimed in paying tax on your basic salary.

(Anybody - if I'm wrong, please correct me a.s.a.p.)

lara400
18th September 2014, 09:18
The basic argument of HMRC is that the loans were not loans, but were income - so should be treated the same way as other income (e.g. salary). So they are claiming the tax on that extra income at whatever your marginal rate was for that period - normally 50%, as this was the top rate of tax in past years.

(I personally received assessments for three years consisting of the loan amounts for each year multiplied by 50% - that is the total amount claimed from me by HMRC as unpaid tax).

So in your case you should have received or should expect a "discovery" assessment in the region of £30k, if HMRC know how much your loan totals were.

BTW - I was under the impression that all "discovery" assessments for years up to and including 2010-2011 had been sent out already - have you not received an actual assessment, or is your hypothetical situation later than that ?

Hi - I have received a discovery assessment for a single year 09/10 (yet to get one for another year). I have no idea if that is right but by the numbers above it does seem slightly correct...although could be well off! It is about 12k after about 6 months of work (as I started in October/Nov until April is about 6 months of tax for the year).

So, 24k for the year after (10/11) plus 12k for the one I have got would put me in the region of 36k to pay...hmm....I could settle now and pay half with money I have and the other half in a loan I take out (more bl**dy loans!).

Alternativly I could wait for a APN and wait 90 days after that and also argue that to give me a further 30 days but it is really something I want to get off my back....(I don't want to go on holiday next summer and think about this continuously)...

FTTM
18th September 2014, 14:08
With a warning that I have yet to find time to get to the fine print, I think it works something like this.

HMRC consider that you have received a net £60k. Let's assume you have personal allowances of £8,000. Tax rates are 20% on the first £30,000 of taxable income and 40% after that.

So you need to calculate what the gross salary would have been to leave you with £60k.

Back of an envelope that's a gross of £84,000 and tax due around £24,000.

I'm assuming there is no NI as you are already paying that.

Interest will be due as well.

Anybody else have any views on this?

Well if this is true then its going to screw me and everyone else even more.

How can they possibly calculate it this way? How can you pay income tax on an amount you haven't even earned?

I had always based my calculations that tax would be applied to the value of the loans received. Which to me would seem fair and equitable.

To treat the loans at net income and work out the tax payable in order to receive that net income is punitive to say the least.

I was considering settling but if they are indeed calculating the tax this way they can go whistle

Rob79
18th September 2014, 15:02
Well if this is true then its going to screw me and everyone else even more.

How can they possibly calculate it this way? How can you pay income tax on an amount you haven't even earned?

I had always based my calculations that tax would be applied to the value of the loans received. Which to me would seem fair and equitable.

To treat the loans at net income and work out the tax payable in order to receive that net income is punitive to say the least.

I was considering settling but if they are indeed calculating the tax this way they can go whistle

The above calculation is how HMRC has done a calculation in similar cases.... BUT it's not the only one.

This is why it's CRITCAL that you understand HMRC's basis of calculation before agreeing to anything.

I could perhaps produce 2 or 3 options other than the above, dependent upon circumstances but all that would do is create more confusion.

If somebody wants to send me some details of their scheme and some nominal (not actual) numbers, I'll have a look.

AlCapone
18th September 2014, 15:03
With a warning that I have yet to find time to get to the fine print, I think it works something like this.

HMRC consider that you have received a net £60k. Let's assume you have personal allowances of £8,000. Tax rates are 20% on the first £30,000 of taxable income and 40% after that.

So you need to calculate what the gross salary would have been to leave you with £60k.

Back of an envelope that's a gross of £84,000 and tax due around £24,000.

I'm assuming there is no NI as you are already paying that.

Interest will be due as well.

Anybody else have any views on this?

This makes no sense to me. Say I invoice for £60k. I take £20k as salary and £40k (more or less after fees) as loans. I’ve already paid PAYE on the £20k so that’s out of the equation. HMRC are saying that the £40k is income not a loan so assuming you’re in the higher tax bracket (40%) your tax liability is £16k plus interest.

dangerouswhensober
18th September 2014, 15:15
This makes no sense to me. Say I invoice for £60k. I take £20k as salary and £40k (more or less after fees) as loans. I’ve already paid PAYE on the £20k so that’s out of the equation. HMRC are saying that the £40k is income not a loan so assuming you’re in the higher tax bracket (40%) your tax liability is £16k plus interest.

Yes - that's exactly how they calculated the figures for me on the discovery assessments for the three years - except that they applied the rate of 50% - presumably that was the top rate of tax for those years.

(As suggested by several other people, I'm going to ask them for a detailed written calculation before doing anything else ...)

Rob79
18th September 2014, 15:23
This makes no sense to me. Say I invoice for £60k. I take £20k as salary and £40k (more or less after fees) as loans. I’ve already paid PAYE on the £20k so that’s out of the equation. HMRC are saying that the £40k is income not a loan so assuming you’re in the higher tax bracket (40%) your tax liability is £16k plus interest.

It depends on whether HMRC see the £40k (in your case) as gross income to be taxed or NET income already taxed.

In many EBT/EFURB cases, Company pays trust £40k - trust loans employee £40k - HMRC says that amounts to £40k of NET income.

My example assumed no other income and therefore treated the whole amount as NET income.

If HMRC treats the amount as gross income, then they are presumably accepting that it's received by you are income from self employment (or perhaps income from a foreign source)?

AlCapone
18th September 2014, 15:26
Yes - that's exactly how they calculated the figures for me on the discovery assessments for the three years - except that they applied the rate of 50% - presumably that was the top rate of tax for those years.

(As suggested by several other people, I'm going to ask them for a detailed written calculation before doing anything else ...)

Don't think there's ever been a 50% bracket. 45% was introduced not long ago for £150k plus earners. Sounds like they slapped you with the NI too?

Rob79
18th September 2014, 15:39
Don't think there's ever been a 50% bracket. 45% was introduced not long ago for £150k plus earners. Sounds like they slapped you with the NI too?

NO. Tax was charged at 50% on taxable income over £150,000 from 6/4/2010 to 5/4/2013

FTTM
18th September 2014, 16:43
It depends on whether HMRC see the £40k (in your case) as gross income to be taxed or NET income already taxed.

In many EBT/EFURB cases, Company pays trust £40k - trust loans employee £40k - HMRC says that amounts to £40k of NET income.

My example assumed no other income and therefore treated the whole amount as NET income.

If HMRC treats the amount as gross income, then they are presumably accepting that it's received by you are income from self employment (or perhaps income from a foreign source)?

And on what basis can they argue this is NET income? , taking PAYE element out of the equation, to receive 100K in net loans , you would probably have invoiced for approx 120K ( EBT co taking their 20% cut).

If they calculate the income tax owed to give a 100K take home ( net) this would require a gross salary of approx 160K.

How can they calculate income tax on an ammt that was never ever earned or received by any party?

meanttobeworking
18th September 2014, 19:25
Did you provide the details of the loans in your email?

Yes, although I was only restating information I had previously provided them when they first asked for details of loans received, back when they first opened the enquiry 18 months ago.

Rob79
19th September 2014, 08:50
And on what basis can they argue this is NET income? , taking PAYE element out of the equation, to receive 100K in net loans , you would probably have invoiced for approx 120K ( EBT co taking their 20% cut).

If they calculate the income tax owed to give a 100K take home ( net) this would require a gross salary of approx 160K.

How can they calculate income tax on an ammt that was never ever earned or received by any party?

If you were on PAYE and received £100k of cash from your employer why would HMRC consider that was not net pay?

HMRC's perspective here is that they would like to treat you as an employee receiving salary. This is a common approach and I found HMRC applying this in the early days of IR35 which caused a massive problem for the bank I was working at when it was introduced.

If you are genuinely self employed, then your analysis has a good chance of being accepted.

FTTM
19th September 2014, 12:12
surely if it is net pay then they should go and speak to my employer to work out why they haven't deducted the correct amount of tax? cant have it both ways.

Safe
19th September 2014, 15:07
If you were on PAYE and received £100k of cash from your employer why would HMRC consider that was not net pay?

HMRC's perspective here is that they would like to treat you as an employee receiving salary. This is a common approach and I found HMRC applying this in the early days of IR35 which caused a massive problem for the bank I was working at when it was introduced.

If you are genuinely self employed, then your analysis has a good chance of being accepted.

Rob,

I'm afraid to say that you are wrong. I'll explain the reason as below:

Assume my total invoice with Sanzar was 100K in 2010-2011 tax year. Sanzar deducted 15% fee and gave me 85k in combination of salary and loan. The salary portion was around 9K (net) and the rest paid in loan which is: 85k-9k=76k

Now the tax code

- For 2010-2011 is 647L which means £6,475 is tax free.

- 20% tax from £0 to £37,400 (I have already deducted the allowance)

- 40% tax between £37,400 to £150,000

- 50% tax for anything above £150,000


Simple online calculator shows that in order to achieve the net income of 85K I should earn 138K. This is well above the total invoice (100K) which I earned in 2010-2011. The tax only due based on 138k will be circa 47k.
So I paid 15k for Sanzar fee plus additional 47k tax which is in total will be 62K or 62%.

Do you think this is feasible and believable?

If any of you want detail calculation i can provide here for info.

Rob79
19th September 2014, 17:46
surely if it is net pay then they should go and speak to my employer to work out why they haven't deducted the correct amount of tax? cant have it both ways.

They certainly can.

If this is deemed to be salary from which tax should have been deducted under PAYE but has not been, then there is a priority order for who is liable for that PAYE.

This starts with the employer and includes in due course the employee or recipient of the cash.

It would not be the first time that this argument has been used.

centurian
19th September 2014, 17:47
I think Rob is saying that HMRC are taking this approach - please correct me if I am wrong Rob


You received a wodge of cash in the bank - and as far as we are concerned, that's net salary - and we are basing the tax demand on that. We don't care how much was on some invoice with some tin-pot offshore company - there is no relationship between the two. If that invoice doesn't cover the full gross amount, tough - not our problem

Can they get away with this, no idea. I'd like to think any final calculation in front of a court would expose this as excessively punitive and get knocked back. Whether that argument can be applied against an APN calculation, I am less sure.

Rob79
19th September 2014, 17:51
Rob,

I'm afraid to say that you are wrong. I'll explain the reason as below:

Assume my total invoice with Sanzar was 100K in 2010-2011 tax year. Sanzar deducted 15% fee and gave me 85k in combination of salary and loan. The salary portion was around 9K (net) and the rest paid in loan which is: 85k-9k=76k

Now the tax code

- For 2010-2011 is 647L which means £6,475 is tax free.

- 20% tax from £0 to £37,400 (I have already deducted the allowance)

- 40% tax between £37,400 to £150,000

- 50% tax for anything above £150,000


Simple online calculator shows that in order to achieve the net income of 85K I should earn 138K. This is well above the total invoice (100K) which I earned in 2010-2011. The tax only due based on 138k will be circa 47k.
So I paid 15k for Sanzar fee plus additional 47k tax which is in total will be 62K or 62%.

Do you think this is feasible and believable?

If any of you want detail calculation i can provide here for info.

I think that your calculation is feasible but I'm not convinced that the analysis falling out of a Court will agree with you.

The fact is that you can be taxed on more than your invoice value because:

1. Your company/agent has invoiced the contractor.
2. Your contractor has then paid you (not the invoiced party).
3. HMRC nay consider that your company/agent has income elsewhere and can therefore pay you NET salary £100k

If I was an HMRC Inspector (I'm not) why would I not find a way to charge the maximum amount of tax as a means of at least forcing people to think about settlement?

turbowoowoo
19th September 2014, 19:26
I think that your calculation is feasible but I'm not convinced that the analysis falling out of a Court will agree with you.

The fact is that you can be taxed on more than your invoice value because:

1. Your company/agent has invoiced the contractor.
2. Your contractor has then paid you (not the invoiced party).
3. HMRC nay consider that your company/agent has income elsewhere and can therefore pay you NET salary £100k

If I was an HMRC Inspector (I'm not) why would I not find a way to charge the maximum amount of tax as a means of at least forcing people to think about settlement?

Hold on a minute

The income in question is not deemed Net income, just income which has not been taxed. This is about tax avoidance from the contractor, otherwise the employer would be liable.

the whole premise is we took the income as a loan which wasn't subject to tax, now with Hector on our tails it will be.

I am sure if they try and say this is net tax this would be classed as criminal!!

silvys
22nd September 2014, 10:17
Has anyone actually received a settlement figure yet?

I phoned HMRC just over a month ago to request a settlement quote. I was informed they already had details of the loan amounts and I would would receive a settlement figure within 3 weeks.

I still haven't got anything back yet.

Anyone interested in getting a settlement figure, I would recommend requesting it ASAP if you want to get anything back before Jan 2015

Safe
22nd September 2014, 16:11
I think that your calculation is feasible but I'm not convinced that the analysis falling out of a Court will agree with you.

The fact is that you can be taxed on more than your invoice value because:

1. Your company/agent has invoiced the contractor.
2. Your contractor has then paid you (not the invoiced party).
3. HMRC nay consider that your company/agent has income elsewhere and can therefore pay you NET salary £100k

If I was an HMRC Inspector (I'm not) why would I not find a way to charge the maximum amount of tax as a means of at least forcing people to think about settlement?

Rob,

What you said doesn't make sense at all. Sorry.
100K is the total invoice (Total income) so there is no other income. In addition if you read page 2 of 8 settlement Q& A third bullet point it states:
"We will apply a charge to income tax only on the sums you have actually received as 'loans'. In the future litigation other approaches could apply higher charges, including an income tax charge on all sums paid on your behalf to the offshore employer and there might be a personal NIC liability. In contrast, no further NIC will be sought from you personally under the settlement opportunity".

It clearly says they are going to charge income tax on the loan we have received. It means the loans are gross not net.

Boobetty
22nd September 2014, 19:23
I agree, there is no way that HMRC can say the loans are net income, because implicit in this is that they were taxed in the first place.

I think I have read in the APN guidance or elsewhere that the amount of the APN will be the same as the amount of the assessment under dispute. I have had two discovery assessments and neither mention grossing up my loans.

Rob79
23rd September 2014, 08:01
I agree, there is no way that HMRC can say the loans are net income, because implicit in this is that they were taxed in the first place.

I think I have read in the APN guidance or elsewhere that the amount of the APN will be the same as the amount of the assessment under dispute. I have had two discovery assessments and neither mention grossing up my loans.

If you're both happy, then I have nothing more to add.

I suppose we'll have to wait and see.

AlCapone
25th September 2014, 09:49
Hi - I have a question about interest.

I found this statement on http://www.contractorumbrella.com/news/827-contractor_pay_schemes_-_enquiries_and_appeals.html:

"Interest will continue to accrue on all amounts outstanding and is calculated from the original due date up to the date of payment. This may also include interest on payments that should have been made on account on the relevant due dates."

To me this implies that you pay interest twice; once on the overall amount and twice more for each missed payment on account. Using HMRC's own interest calculator tool confirms this.

http://www.hmrc.gov.uk/campaigns/19years-calc.pdf

Settlement figures given by HMRC seem only to include interest for the overall interest due, not for the missed payments on account.

Probably something else to think about if there are people considering settling?

DonkeyRhubarb
25th September 2014, 10:34
Hi - I have a question about interest.

I found this statement on http://www.contractorumbrella.com/news/827-contractor_pay_schemes_-_enquiries_and_appeals.html:

"Interest will continue to accrue on all amounts outstanding and is calculated from the original due date up to the date of payment. This may also include interest on payments that should have been made on account on the relevant due dates."

To me this implies that you pay interest twice; once on the overall amount and twice more for each missed payment on account. Using HMRC's own interest calculator tool confirms this.

http://www.hmrc.gov.uk/campaigns/19years-calc.pdf

Settlement figures given by HMRC seem only to include interest for the overall interest due, not for the missed payments on account.

Probably something else to think about if there are people considering settling?

You don't pay interest twice. The issue is about when the interest starts accruing from.

Take for example 2008/9. The normal due date would be January 2010.

However, payments on account (PoA) of 50% may (I believe) have been due in January 2009 and July 2009.

The bottom line is that the interest, if it's taken from the PoA dates, may be slightly higher.

AlCapone
25th September 2014, 11:00
You don't pay interest twice. The issue is about when the interest starts accruing from.

Take for example 2008/9. The normal due date would be January 2010.

However, payments on account (PoA) of 50% may (I believe) have been due in January 2009 and July 2009.

The bottom line is that the interest, if it's taken from the PoA dates, may be slightly higher.

Not sure I agree or maybe I don’t understand. Using HMRC’s tool http://www.hmrc.gov.uk/campaigns/19years-calc.pdf, enter an example: Select year 06/07 and enter £10,000 as income due. It gives you a total of £14,573 and it breaks it down with 3 interest charges:

1. £2,380.15 in interest for the balancing payment of £10.000.
2. £1190.10 in interest on the first PoA of £5,000
3. £1,003.62 in interest on second PoA of £5,000

This gives a total interest charge of £4,573.

The first amount (£2,380.15) would be the correct amount of accrued interest for £10,000 from 06 to present day. So how can being charged interest on the two missed PoA payments not be seen as paying interest twice on the same amount?

LadyPenelope
25th September 2014, 15:05
Has anyone actually received a settlement figure yet?

I phoned HMRC just over a month ago to request a settlement quote. I was informed they already had details of the loan amounts and I would would receive a settlement figure within 3 weeks.

I still haven't got anything back yet.

Anyone interested in getting a settlement figure, I would recommend requesting it ASAP if you want to get anything back before Jan 2015

Yes, I have been quoted a figure of £28590 on a loan figure of approx. £63,000 from 2006/7. They are only charging me for this year as this is the one with a COP8 enquiry.

Fred Flinstone
25th September 2014, 18:06
Yes, I have been quoted a figure of £28590 on a loan figure of approx. £63,000 from 2006/7. They are only charging me for this year as this is the one with a COP8 enquiry.

Is this the full settlement figure incl interest and penalties?

LadyPenelope
25th September 2014, 18:27
Is this the full settlement figure incl interest and penalties?
I am still waiting for the paperwork but it's according to the original Settlement letter, i.e. tax plus interest. They have finished the calculation and have posted the letter to me second class so it should arrive Saturday. I haven't seen a breakdown or anything written yet, so I don't know if it includes IHT or not.

When I first called them (yes I have been nagging them on the phone) I was quoted £25k but the calc hadn't been finalised. I posted on here before I got the letter in the hope of putting some minds at rest, as there has been some scary speculation. I'd still rather keep the money but really don't need the whole thing dragging on for years.

Will update when I get the lovely brown letter. The amount quoted is rather less than my own estimated calculation of interest plus 6 years tax.

AlCapone
25th September 2014, 23:39
Yes, I have been quoted a figure of £28590 on a loan figure of approx. £63,000 from 2006/7. They are only charging me for this year as this is the one with a COP8 enquiry.

That's 45%. Sounds high. Could be 40% tax and 5% IHT. Did you eat up your 20% allowance in salary?

centurian
26th September 2014, 06:43
That's 45%. Sounds high. Could be 40% tax and 5% IHT. Did you eat up your 20% allowance in salary?

It's also suspiciously close to the value it would be if HMRC were treating the amounts paid as net of tax - and grossing them up.

Look back a couple of pages - Rob79 suggested this is what might be happening (and was promptly shot down for saying so).

LadyPenelope
26th September 2014, 07:49
I haven't got the figures with me (I'm at work) but I was paid a salary on which I paid PAYE, NI which would have eaten up some up the 20% allowance.

At a guess:
23000 @ 20% = 4600
40000 @ 40% = 16000
20,600

Interest at say 4% x 6 years = 24%. 24% x 20600 = £4944.

£20600 + £4944 = approx. £25600. Since £25k was the original figure quoted I am not sure where the extra £4.5k has come from. Hmmm...It's a settlement figure so it won't be on gross. Calculations based on gross were part of HMRC's threat in the original letter, if you remember. My guess is that it's IHT since Al Capone mentioned that a friend of his had received a calc with IHT on it.

When I called the HMRC lady she was checking her original figure and had to query it with her manager. This might be the question of whether or not to charge IHT.

Again, please note the calcs are back of a fag packet. I used to be an chartered accountant but changed career. Until I get the paperwork I can't confirm anything. This might give people a few percentages to estimate their bill, which was what I was desperate to do, because until you know that, it is a little hard to know if your finances will really be screwed by all this cr*p or not. I really wish they didn't use 2nd class post.

Rob79
26th September 2014, 08:00
I haven't got the figures with me (I'm at work) but I was paid a salary on which I paid PAYE, NI which would have eaten up some up the 20% allowance.

At a guess:
23000 @ 20% = 4600
40000 @ 40% = 16000
20,600

Interest at say 4% x 6 years = 24%. 24% x 20600 = £4944.

£20600 + £4944 = approx. £25600. Since £25k was the original figure quoted I am not sure where the extra £4.5k has come from. Hmmm...It's a settlement figure so it won't be on gross. Calculations based on gross were part of HMRC's threat in the original letter, if you remember. My guess is that it's IHT since Al Capone mentioned that a friend of his had received a calc with IHT on it.

When I called the HMRC lady she was checking her original figure and had to query it with her manager. This might be the question of whether or not to charge IHT.

Again, please note the calcs are back of a fag packet. I used to be an chartered accountant but changed career. Until I get the paperwork I can't confirm anything. This might give people a few percentages to estimate their bill, which was what I was desperate to do, because until you know that, it is a little hard to know if your finances will really be screwed by all this cr*p or not. I really wish they didn't use 2nd class post.

I'd be interested in seeing the calculation.

You are entitled to see the calculation and to challenge it if necessary. Paying tax on a guesswork figure is not recommended.

LadyPenelope
26th September 2014, 08:14
I'd be interested in seeing the calculation.

You are entitled to see the calculation and to challenge it if necessary. Paying tax on a guesswork figure is not recommended.

I know, thanks Rob. Hoping the brown envelope turns up tomorrow, and hoping that it will include a breakdown of the calculation. As we all know, they are on shaky legal ground to even ask for the money. Since they are sending it second class I daresay I won't get it until Monday/Tuesday, especially since they are in the North and I'm in the South. Aargh!

Rob79
26th September 2014, 08:25
I know, thanks Rob. Hoping the brown envelope turns up tomorrow, and hoping that it will include a breakdown of the calculation. As we all know, they are on shaky legal ground to even ask for the money. Since they are sending it second class I daresay I won't get it until Monday/Tuesday, especially since they are in the North and I'm in the South. Aargh!

I interpret the settlement opportunity as being an exercise in exchanging information and HMRC producing a calculation.

Once you are sure the calculation is accurate and accords with a sensible interpretation of the loans/income as taxable items, the exercise moves into agreeing the amount to pay.

If you do agree an amount to pay, i.e. accept the settlement, then HMRC can demand the money and would be on very solid ground.

Make sure that any discussion on the settlement opportunity is on a "without prejudice" basis as this gives you the right to pull out of discussions even at the very last minute.

I also have it on very good authority (HMRC) that they carefully plan demands etc to arrive on Friday/Saturday.

LadyPenelope
26th September 2014, 08:40
I interpret the settlement opportunity as being an exercise in exchanging information and HMRC producing a calculation.

Once you are sure the calculation is accurate and accords with a sensible interpretation of the loans/income as taxable items, the exercise moves into agreeing the amount to pay.

If you do agree an amount to pay, i.e. accept the settlement, then HMRC can demand the money and would be on very solid ground.

Make sure that any discussion on the settlement opportunity is on a "without prejudice" basis as this gives you the right to pull out of discussions even at the very last minute.

I also have it on very good authority (HMRC) that they carefully plan demands etc to arrive on Friday/Saturday.

OK, thanks for the clarification. I have heard about this plan to make sure demands arrive at weekends and indeed the original letter arrived on Saturday. What I don't understand for the life of me is why?

Is it for their benefit, so people don't ring them up until they've had a chance to calm down?

Or is it for the taxpayer's benefit so that they can have additional (i.e. when not at work) time to work out how to make the payment arrangements/decide how to proceed?

Or another reason I haven't thought of?

Rob79
26th September 2014, 08:42
OK, thanks for the clarification. I have heard about this plan to make sure demands arrive at weekends and indeed the original letter arrived on Saturday. What I don't understand for the life of me is why?

Is it for their benefit, so people don't ring them up until they've had a chance to calm down?

Or is it for the taxpayer's benefit so that they can have additional (i.e. when not at work) time to work out how to make the payment arrangements/decide how to proceed?

Or another reason I haven't thought of?

It's part of a physiological war to make people feel that their lives are being ruined by dabbling in tax avoidance and wouldn't it be better to just pay the tax and get on with living.

Crude but effective.

DonkeyRhubarb
26th September 2014, 08:44
Or another reason I haven't thought of?

Ruin your weekend. Hit you when can't get hold of any professional advisors.

Another favourite time is just before Xmas.

LadyPenelope
26th September 2014, 08:58
It's part of a physiological war to make people feel that their lives are being ruined by dabbling in tax avoidance and wouldn't it be better to just pay the tax and get on with living.

Crude but effective.


Ruin your weekend. Hit you when can't get hold of any professional advisors.

Another favourite time is just before Xmas.

Oh. Horrible, horrible people HMRC. :sick

So, tomorrow then. Er, yay!

jbryce
26th September 2014, 09:45
It's also suspiciously close to the value it would be if HMRC were treating the amounts paid as net of tax - and grossing them up.

Look back a couple of pages - Rob79 suggested this is what might be happening (and was promptly shot down for saying so).

.....Oh lord. Has anyone asked HMRC this? I'm still waiting for them to get back to me - although they said I could calculate the amount owed as the total amounts gross of tax.
So if I received X in loans I would be paying tax on X.

Given that we are being dragged over the coals, grossing the amounts up would just be 'grossly' unfair.

Rob79
26th September 2014, 10:14
http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j8002/TC04027.pdf

It's worth reading this short (7 pages) case.

Essentially the taxpayer relied upon an accountant who was subsequently found to be very naughty indeed. The accountant was routinely adjusting his clients' income between self employment and companies and over claiming expenses. HMRC raided his premises and he was subsequently barred from being an agent.

HMRC wrote to all clients telling them what happened and inviting them to revisit their tax returns with a view to settling. The taxpayer in the case did not indicate she wanted to settle but subsequently made various adjustments to her return although she was very clear that much of the detail and analysis was beyond her capability of understanding.

The tax and interest was subsequently agreed and paid.

HMRC then wanted penalties for her being careless. She objected on the grounds that she was unaware of the illegal practices of the accountant and that a penalty on her was unfair.

Appeal rejected.

The FTT thought that she should have taken more care to understand her position and in particular ignoring the offer to settle was a key element.

Some parallels with various contractor schemes but more instructive about how HMRC are seeing this sort of situation as a revenue raising activity.

jbryce
26th September 2014, 10:26
http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j8002/TC04027.pdf

It's worth reading this short (7 pages) case.

Essentially the taxpayer relied upon an accountant who was subsequently found to be very naughty indeed. The accountant was routinely adjusting his clients' income between self employment and companies and over claiming expenses. HMRC raided his premises and he was subsequently barred from being an agent.

HMRC wrote to all clients telling them what happened and inviting them to revisit their tax returns with a view to settling. The taxpayer in the case did not indicate she wanted to settle but subsequently made various adjustments to her return although she was very clear that much of the detail and analysis was beyond her capability of understanding.

The tax and interest was subsequently agreed and paid.

HMRC then wanted penalties for her being careless. She objected on the grounds that she was unaware of the illegal practices of the accountant and that a penalty on her was unfair.

Appeal rejected.

The FTT thought that she should have taken more care to understand her position and in particular ignoring the offer to settle was a key element.

Some parallels with various contractor schemes but more instructive about how HMRC are seeing this sort of situation as a revenue raising activity.

...so, basically, HMRC are being horrid, but if you ignore the Settlement opportunity they will just get plain nasty :)

Rob79
26th September 2014, 10:36
...so, basically, HMRC are being horrid, but if you ignore the Settlement opportunity they will just get plain nasty :)

One swallow does not make a summer but chasing this unfortunately lady who was clearly out of her depth and looking at penalties of around £1,600 or so does rather indicate a very hard line.

TheDandy
26th September 2014, 11:38
One swallow does not make a summer but chasing this unfortunately lady who was clearly out of her depth and looking at penalties of around £1,600 or so does rather indicate a very hard line.

It certainly represents a very easy target. People need to tread very carefully if they are thinking of making a settlement without taking professional advice - IMHO at least. Are you sure your settlement will actually be the last of it.....?

Safe
26th September 2014, 11:54
.....Oh lord. Has anyone asked HMRC this? I'm still waiting for them to get back to me - although they said I could calculate the amount owed as the total amounts gross of tax.
So if I received X in loans I would be paying tax on X.

Given that we are being dragged over the coals, grossing the amounts up would just be 'grossly' unfair.

Disagree with both of you. If they treat 63K as a net income for 2006-2007 tax year then the total gross income will be circa 98k with tax only 31k. If you add couple of years interest and IHT on this then it will be well above 36K which lower than 28.5k from HMRC. I think we need to wait and see the breakdown calcs and how they calculated. Even with the figure i have given here I have calculated the 63K as total income (including salary part) so in reality the tax well over 31K as you are exceeding 100K and losing half of your tax allowance for every £2 over 100K.

Rob79
26th September 2014, 12:02
It certainly represents a very easy target. People need to tread very carefully if they are thinking of making a settlement without taking professional advice - IMHO at least. Are you sure your settlement will actually be the last of it.....?

A contract settlement does not in theory allow HMRC to reopen that year.

I've not seen HMRC renege on such a settlement except where a subsequent fraud investigation covered the period.

I would agree that professional help is a must (but then I am a professional so I would say that wouldn't I?)

Rob79
26th September 2014, 12:07
Disagree with both of you. If they treat 63K as a net income for 2006-2007 tax year then the total gross income will be circa 98k with tax only 31k. If you add couple of years interest and IHT on this then it will be well above 36K which lower than 28.5k from HMRC. I think we need to wait and see the breakdown calcs and how they calculated. Even with the figure i have given here I have calculated the 63K as total income (including salary part) so in reality the tax well over 31K as you are exceeding 100K and losing half of your tax allowance for every £2 over 100K.

It'll be interesting to see the calculation.

Administratively an assessment for income tax and an assessment for IHT are different beasts. In this case the figures are not assessments but even so it would be surprising if an HMRC person on the phone could not at least distinguish between the two taxes.

LadyPenelope
26th September 2014, 12:11
I do think that if it were gross it would be more than the 29.5k.

I also doubt there will be penalties since they state in their letter that if you settle you avoid penalties, and they have stated this in writing so would be unlikely to refute as much in a tribunal. Unless they have somehow weasel-worded it which is not beyond realms of possibility. I'm at work so can't check the exact wording of the letter, but I will later. Maybe the additional £4.5k is penalties, I just don't know yet.

As an aside, I also think that the girl claiming her gym membership and understating her income by £30k was taking the p1ss, so I can understand the penalties here. I think the principle here is that ignorance of the law constitutes no excuse.

But yeah, we need to see the computations and also see what happens next. Unless we have another example of settlement calcs, which I haven't seen as yet.

Rob79
26th September 2014, 14:13
I do think that if it were gross it would be more than the 29.5k.

I also doubt there will be penalties since they state in their letter that if you settle you avoid penalties, and they have stated this in writing so would be unlikely to refute as much in a tribunal. Unless they have somehow weasel-worded it which is not beyond realms of possibility. I'm at work so can't check the exact wording of the letter, but I will later. Maybe the additional £4.5k is penalties, I just don't know yet.

As an aside, I also think that the girl claiming her gym membership and understating her income by £30k was taking the p1ss, so I can understand the penalties here. I think the principle here is that ignorance of the law constitutes no excuse.

But yeah, we need to see the computations and also see what happens next. Unless we have another example of settlement calcs, which I haven't seen as yet.

I agree that a penalty is unlikely and would be very unusual.

Seeing the calculation is key here.

With regard to the case, I think the lady in question was told that the £30k that did not form part of her self employment income had instead gone to her company as income. As far as she was concerned she/her company had declared the income and the games played by the accountant teeming and lading personal/corporate accounts were beyond here comprehension and she was just not aware that such action was illegal until the Revenue told her.

Contrast this with various cases on "discovery" where a decision from an officer employed by HMRC can be overturned and a "discovery" made if that officer is subsequently thought to be below the standard required.

What's sauce for the goose is evidently not sauce for the gander.

creativity
26th September 2014, 19:12
Guys I don't necessarily see why anyone should seek professional help as the process to calculate the tax is quite simple (to me as a contractor?):

I have gone through all my online bank statements and tabulated salary and loans for all years affected. Added both summed salary and loan payments together to obtain my total 'income' for that year. Then I used the tax rates for that year and calculated how much tax I need to pay for each rate (inc my personal allowance). Then I simply negated the tax I did pay. Voila, the total left is the value HMRC are after. Goes without saying P60's are very very handy for this. Luckily I had all of mine. I cant see HMRC arguing with this especially as they have my P60's - Im just awaiting to see how much interest they add. Im not looking to 'settle' as there are no advantages but at least when this APN arrives it will have the right numbers.

Also, in order to pay this forthcoming APN, HMRC have forced me to act shrewdly with my future tax position. Which means I am planning to MVL my existing LTD company and work abroad for at least 12 months (you can also take a full time job or a long break) - this will enable me to extract the profits from my LTD company at ET rate (10%), enough to pay my APN bill and retain some cash for myself. The reason I am going to work abroad is so that I can retain a good contractor rate and pay the countries tax (in my instance the Netherlands) using a standard Umbrella company run by the agent.
After a year or so I could decide to return at which point I could start another LTD company.

So in the end my tax position would be offset by liquidating my LTD company and taking advantage of the discounted CG tax (ET). More hassle for me, but only a little.

HMRC don't like you closing/opening LTD companies in succession but liquidating one for good reasons (working abroad, full time job etc) is OK as long as you have no intentions of starting another shortly after just to obtain a tax advantage. Of course I have no intention of that...

DonkeyRhubarb
27th September 2014, 12:01
Not sure I agree or maybe I don’t understand. Using HMRC’s tool http://www.hmrc.gov.uk/campaigns/19years-calc.pdf, enter an example: Select year 06/07 and enter £10,000 as income due. It gives you a total of £14,573 and it breaks it down with 3 interest charges:

1. £2,380.15 in interest for the balancing payment of £10.000.
2. £1190.10 in interest on the first PoA of £5,000
3. £1,003.62 in interest on second PoA of £5,000

This gives a total interest charge of £4,573.

The first amount (£2,380.15) would be the correct amount of accrued interest for £10,000 from 06 to present day. So how can being charged interest on the two missed PoA payments not be seen as paying interest twice on the same amount?

Can't follow that calculator but your conclusion is wrong.

I've seen HMRC written calcs for interest and it's only charged once.

centurian
27th September 2014, 12:14
Disagree with both of you. If they treat 63K as a net income for 2006-2007 tax year then the total gross income will be circa 98k with tax only 31k. If you add couple of years interest and IHT on this then it will be well above 36K which lower than 28.5k from HMRC. I think we need to wait and see the breakdown calcs and how they calculated. Even with the figure i have given here I have calculated the 63K as total income (including salary part) so in reality the tax well over 31K as you are exceeding 100K and losing half of your tax allowance for every £2 over 100K.

And I also now disagree with myself. I got APN and settlement mixed up (one is just the tax demand - the other includes interest). The value demanded is close to the net-paid-grossed-up value for the tax alone, but not the interest as well.

Agreed - lets wait and see what the breakdown request comes back with

AlCapone
27th September 2014, 13:45
Can't follow that calculator but your conclusion is wrong.

I've seen HMRC written calcs for interest and it's only charged once.

But it's not MY conclusion is it. The figures are there in black and white in HRMC's own tool http://www.hmrc.gov.uk/campaigns/19years-calc.pdf.

DonkeyRhubarb
28th September 2014, 08:21
But it's not MY conclusion is it. The figures are there in black and white in HRMC's own tool http://www.hmrc.gov.uk/campaigns/19years-calc.pdf.

I can't fathom that calculator out but the conclusion that interest is charged twice is not correct.

In addition to seeing HMRC figures on paper, I know people who've settled.

There was only one lot of interest. But it was calculated from PoA dates, not the normal due date, so slightly more than they were expecting.

If you are still in doubt contact HMRC and ask for a figure.

AlCapone
28th September 2014, 08:30
I can't fathom that calculator out but the conclusion that interest is charged twice is not correct.

In addition to seeing HMRC figures on paper, I know people who've settled.

There was only one lot of interest. But it was calculated from PoA dates, not the normal due date, so slightly more than they were expecting.

If you are still in doubt contact HMRC and ask for a figure.
That's exactly what I said. They are charging interest once on a settlement figure (please re-read my post). The article states that HMRC may pursue overall interest PLUS interest due on the missed payments (that's where the calculator comes in) if you lose at tribunal. (The link to the article in the original post didn't work: http://www.contractorumbrella.com/news/827-contractor_pay_schemes_-_enquiries_and_appeals.html)

DonkeyRhubarb
28th September 2014, 09:20
That's exactly what I said. They are charging interest once on a settlement figure (please re-read my post). The article states that HMRC may pursue overall interest PLUS interest due on the missed payments (that's where the calculator comes in) if you lose at tribunal. (The link to the article in the original post didn't work: Contractor Pay Schemes - Enquiries and Appeals | Contractor Umbrella (http://www.contractorumbrella.com/news/827-contractor_pay_schemes_-_enquiries_and_appeals.html))

The wording in that article is a bit ambiguous, so I'm not surprised you jumped to the wrong conclusion.

Interest can be calculated in one of two ways:

(1) from the original due date
OR
(2) from when payments on account would have been due, which is 6 and 12 months earlier

Note it is OR not both.

In all the cases I've come across HMRC are using (2) which leads to a slightly higher figure.

AlCapone
28th September 2014, 13:14
The wording in that article is a bit ambiguous, so I'm not surprised you jumped to the wrong conclusion.

Interest can be calculated in one of two ways:

(1) from the original due date
OR
(2) from when payments on account would have been due, which is 6 and 12 months earlier

Note it is OR not both.

In all the cases I've come across HMRC are using (2) which leads to a slightly higher figure.

Well of course I hope you're right. Still doesn't explain why HMRC's calculator adds both types of interest payments to the total though.

AlCapone
29th September 2014, 14:57
The wording in that article is a bit ambiguous, so I'm not surprised you jumped to the wrong conclusion.

Interest can be calculated in one of two ways:

(1) from the original due date
OR
(2) from when payments on account would have been due, which is 6 and 12 months earlier

Note it is OR not both.

In all the cases I've come across HMRC are using (2) which leads to a slightly higher figure.

By the way, when using the HMRC tool, option 2 is a slightly lower figure. Even more confusing.

DonkeyRhubarb
29th September 2014, 18:46
By the way, when using the HMRC tool, option 2 is a slightly lower figure. Even more confusing.

That makes no sense at all. PoA dates are 6 and 12 months before the normal due date, so accrued interest must be a few % higher.

AlCapone
29th September 2014, 19:30
That makes no sense at all. PoA dates are 6 and 12 months before the normal due date, so accrued interest must be a few % higher.

I'm lost - if you pay a debt before its due date would't you expect to pay less interest as you're paying it early?

DonkeyRhubarb
30th September 2014, 07:44
I'm lost - if you pay a debt before its due date would't you expect to pay less interest as you're paying it early?

Example

HMRC assess you for £10,000 tax for ebt scheme you used back in 2005/6

Normally the due date for the paying the tax would have been January 2007.

However, HMRC are saying you should have made earlier payments on account of £5,000 in January 2006 and £5,000 in July 2006.

Hence there are several more months interest accrued.

AlCapone
30th September 2014, 08:34
Example

HMRC assess you for £10,000 tax for ebt scheme you used back in 2005/6

Normally the due date for the paying the tax would have been January 2007.

However, HMRC are saying you should have made earlier payments on account of £5,000 in January 2006 and £5,000 in July 2006.

Hence there are several more months interest accrued.
Ok thanks, I get it. So if what you say is correct HMRC's calculator makes no sense at all.

DonkeyRhubarb
30th September 2014, 09:07
Ok thanks, I get it. So if what you say is correct HMRC's calculator makes no sense at all.

It's not intuitive that's for sure!

The way I got it to work is as follows.

Example 2005/6

(1) Select previous tax year 2004/5

(2) Enter £10000 in the 2005 tax box

Interest for 2006 is £3,705, reflecting the payments on account.

(If you repeat selecting 2005/6 in (1), and enter £10000 in the 2006 box, then it shows interest of £3,176)

£3,176 is the interest if it was calculated using the normal due date; £3,705 is the interest taking into account that tax should have been paid earlier on account

Hence, £529 more interest.

Who said tax doesn't have to be taxing !!!

AlCapone
30th September 2014, 09:52
It's not intuitive that's for sure!

The way I got it to work is as follows.

Example 2005/6

(1) Select previous tax year 2004/5

(2) Enter £10000 in the 2005 tax box

Interest for 2006 is £3,705, reflecting the payments on account.

(If you repeat selecting 2005/6 in (1), and enter £10000 in the 2006 box, then it shows interest of £3,176)

£3,176 is the interest if it was calculated using the normal due date; £3,705 is the interest taking into account that tax should have been paid earlier on account

Hence, £529 more interest.

Who said tax doesn't have to be taxing !!!
Wow. It's almost like they're trying to confuse us :happy. Thanks for deciphering it!

jbryce
30th September 2014, 10:40
Hi,
anyone understand the IHT implications (if any) with EBT schemes?

creativity
30th September 2014, 12:44
There was some talk of this but no firm conclusion in that can we claim for expenses in the settlement offers?
So after summing up the salary and loans received can we negate our expenses (most significantly mileage) before calculating our 'tax' owed?
I can't see why not, this will help reduce the numbers considerably for some.
Any views?

Rob79
30th September 2014, 14:52
Hi,
anyone understand the IHT implications (if any) with EBT schemes?

An EBT is a trust.

Placing money into a trust is an occasion of potential charge to IHT.

Assuming that the trust meets certain rules, that charge may be exempt or deferred 10 years.

Extracting cash from a trust may also be an occasion of charge.

It's possible that HMRC see the "loans" as being a permanent withdrawal of funds from the trust and therefore a trigger for an IHT charge.

Until HMRC explain their reasoning, this is speculation. Looking at other threads it's clear that even a direct question to HMRC fails to get a straight answer so we must wait and see.

Rob79
1st October 2014, 15:42
http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j8005/TC04030.pdf

see para 69 et seq.

jbryce
1st October 2014, 16:34
An EBT is a trust.

Placing money into a trust is an occasion of potential charge to IHT.

Assuming that the trust meets certain rules, that charge may be exempt or deferred 10 years.

Extracting cash from a trust may also be an occasion of charge.

It's possible that HMRC see the "loans" as being a permanent withdrawal of funds from the trust and therefore a trigger for an IHT charge.

Until HMRC explain their reasoning, this is speculation. Looking at other threads it's clear that even a direct question to HMRC fails to get a straight answer so we must wait and see.

Indeed, HMRC are not supplying a straight answer and, as a result, my accountant is advising against settling as a settlement will not guard against imposition of IHT in the future. He thinks the lack of straight answer is because HMRC have not decided if IHT would damage their case.

They really are taking the p1ss.

LadyPenelope
1st October 2014, 16:52
Indeed, HMRC are not supplying a straight answer and, as a result, my accountant is advising against settling as a settlement will not guard against imposition of IHT in the future. He thinks the lack of straight answer is because HMRC have not decided if IHT would damage their case.

They really are taking the p1ss.

I received my settlement calculation today and confirm that there is IHT.

Loans (06/07) = £60,390 (not sure why as I told them £63k - maybe a timing diff.)
Income Tax = £19,383
IHT = £4,548
Interest = £4661
Total = £28592

The interest charges start from 29th Sept 2009, although I'm not sure why this is.

The initial letter arrived late July. Settlement calculation letter arrived 1st Oct, from a letter dated 25th September. Seems as though they like to work your last nerve on the matter.

I hope this provides a little clarity.

Boobetty
1st October 2014, 18:05
Loans (06/07) = £60,390 (not sure why as I told them £63k - maybe timing diff

This may be the benefit in kind declared on the loans originally. On my discovery assessments they had adjusted my loans amounts in this way.

This leads me to another question: if they are indeed giving us back the benefit we originally declared on our SA returns, then surely they are acknowledging that the loans no longer accrue any benefit to us. If so, why then add IHT?

Does anyone in HMRC have a f**king clue what they are doing?

Rob79
2nd October 2014, 08:12
I received my settlement calculation today and confirm that there is IHT.

Loans (06/07) = £60,390 (not sure why as I told them £63k - maybe a timing diff.)
Income Tax = £19,383
IHT = £4,548
Interest = £4661
Total = £28592

The interest charges start from 29th Sept 2009, although I'm not sure why this is.

The initial letter arrived late July. Settlement calculation letter arrived 1st Oct, from a letter dated 25th September. Seems as though they like to work your last nerve on the matter.

I hope this provides a little clarity.

Were there any calculations backing the numbers?

For example, the IHT charge implies a chargeable transfer of £11,730. Even allowing for a c0uple of years of annual exemptions etc, I'm struggling to correlate the loan with the charge.

I don't want to pry and please feel free to ignore this request but would you mind PM'ing me and let me have a look at the calculation please?

AlCapone
2nd October 2014, 09:31
Were there any calculations backing the numbers?

For example, the IHT charge implies a chargeable transfer of £11,730. Even allowing for a c0uple of years of annual exemptions etc, I'm struggling to correlate the loan with the charge.

I don't want to pry and please feel free to ignore this request but would you mind PM'ing me and let me have a look at the calculation please?
Rob could you explain what you mean my chargeable transfer?

LadyPenelope
2nd October 2014, 09:33
Were there any calculations backing the numbers?

For example, the IHT charge implies a chargeable transfer of £11,730. Even allowing for a c0uple of years of annual exemptions etc, I'm struggling to correlate the loan with the charge.

I don't want to pry and please feel free to ignore this request but would you mind PM'ing me and let me have a look at the calculation please?

There was a full set of calculations. Sorry, but I'm not prepared to share them, I posted this simply to give people an idea what they're dealing with so that they can prepare their own estimates. Also, they were on A4 but should have been on A3 or two A4 pages, making them very difficult to read, i.e. the font was extremely small.

In summary though, they add the loans to your salary for the year, deduct your personal allowance and then apply the income tax bandings in force at the time to the balance. No grossing up of the loans takes place. It was roughly in line with my estimates except for the IHT.

Rob79
2nd October 2014, 09:46
There was a full set of calculations. Sorry, but I'm not prepared to share them, I posted this simply to give people an idea what they're dealing with so that they can prepare their own estimates. Also, they were on A4 but should have been on A3 or two A4 pages, making them very difficult to read, i.e. the font was extremely small.

In summary though, they add the loans to your salary for the year, deduct your personal allowance and then apply the income tax bandings in force at the time to the balance. No grossing up of the loans takes place. It was roughly in line with my estimates except for the IHT.

Understood and thanks anyway.

It's the IHT I'm interested in. I have a theory that the HMRC basis of the IHT charge may not allow them to run the income tax charge argument. If so, HMRC may be forced to choose which one to go for.

As I said, a theory based on not much information and which may be completely wrong, but I'd like to test it.

I'm in touch with a number of other people and I'm sure the calculation will be available soon.

The interest accrual dates are interesting as well (if you're a tax nerd).

Rob79
2nd October 2014, 10:09
Rob could you explain what you mean my chargeable transfer?

IHT is a tax based on a transfer of assets/wealth between individuals.

In very broad terms if you measure your wealth pre event and again post event, the reduction or increase in your wealth is a transfer.

Where that transfer is not exempt (annual exemptions, nil rate bands, lifetime gifts, business assets, etc etc) it becomes a chargeable (to IHT) transfer.

A trust is a separate personality for IHT purposes. A such a transfer of assets from individual to a trust is potentially chargeable.

Trusts normally will not pay IHT on receiving assets but may be subject to a charge on transfers made out of trust and/or a 10 year anniversary charge.

Some trusts (commonly a Baker Trust or one that has a fixed purpose so that the trustee has little or no discretion on distributions) are often seen as extensions of the individual who makes a transfer of assets to the trust (called the settlor). In that instance the liability for IHT may fall on the settlor.

I have not enough data to analyse HMRC's position yet but it appears that they assume a Baker trust is in point and have raised a charge. I'm interested in understanding more about that charge.

AlCapone
2nd October 2014, 10:17
IHT is a tax based on a transfer of assets/wealth between individuals.

In very broad terms if you measure your wealth pre event and again post event, the reduction or increase in your wealth is a transfer.

Where that transfer is not exempt (annual exemptions, nil rate bands, lifetime gifts, business assets, etc etc) it becomes a chargeable (to IHT) transfer.

A trust is a separate personality for IHT purposes. A such a transfer of assets from individual to a trust is potentially chargeable.

Trusts normally will not pay IHT on receiving assets but may be subject to a charge on transfers made out of trust and/or a 10 year anniversary charge.

Some trusts (commonly a Baker Trust or one that has a fixed purpose so that the trustee has little or no discretion on distributions) are often seen as extensions of the individual who makes a transfer of assets to the trust (called the settlor). In that instance the liability for IHT may fall on the settlor.

I have not enough data to analyse HMRC's position yet but it appears that they assume a Baker trust is in point and have raised a charge. I'm interested in understanding more about that charge.

Thank you. In order for me to understand it more clearly would you mind showing how you arrived at the chargeable transfer of £11,730?

Rob79
2nd October 2014, 10:20
Thank you. In order for me to understand it more clearly would you mind showing how you arrived at the chargeable transfer of £11,730?

IHT is charged at 40%.

The calculation is IHT of £4,548.

If that is 40% of the chargeable transfer, then the total must be £11,370

(£11,370 @ 40% = £4,548).

May have committed a typo earlier?

AlCapone
2nd October 2014, 11:22
IHT is charged at 40%.

The calculation is IHT of £4,548.

If that is 40% of the chargeable transfer, then the total must be £11,370

(£11,370 @ 40% = £4,548).

May have committed a typo earlier?

So in ladypenolpe's case would you have expected much more IHT (£16,402.80)? My calculations:

£60,390 (loans) - £19,383 (income tax) = £41,007 (chargeable transfer)

£41,007 @ 40% = £16,402.80

Rob79
2nd October 2014, 11:37
So in ladypenolpe's case would you have expected much more IHT (£16,402.80)? My calculations:

£60,390 (loans) - £19,383 (income tax) = £41,007 (chargeable transfer)

£41,007 @ 40% = £16,402.80

No. The income tax number is not part of the calculation.

Given Lady P's expressed wish, I'd rather not comment further for the moment.

jbryce
2nd October 2014, 11:53
On a more general note.




If one settles then one pays the amount + interest.

If one receives an APN one pays the amount.

Assuming one's scheme loses (at some point) then the interest that accrued before the APN was settled, becomes payable.


What is the position regarding fines etc. I'm unclear and HMRC are just humming and aahhhhing on that point.

Rob79
2nd October 2014, 12:25
On a more general note.




If one settles then one pays the amount + interest.

If one receives an APN one pays the amount.

Assuming one's scheme loses (at some point) then the interest that accrued before the APN was settled, becomes payable.


What is the position regarding fines etc. I'm unclear and HMRC are just humming and aahhhhing on that point.

Slight correction. If you receive and pay an APN and your scheme loses, you pay interest on the tax due from the due date to settlement. The APN is regarded as a payment on account. Therefore the interest on the amount of tax liability covered by the APN arises only to the date of the APN.

Example. You receive an APN and pay £100 on 31/12/14. Some time later your case loses and your final liability is determined as being £150 and had a due date of 31/1/10.

You pay interest on £100 from 31/1/10 to 31/12/14. You pay interest on £50 from 31/1/10 to date of settlement.

Penalties. Until very recently HMRC has been relatively relaxed about such. However we're seeing evidence now of penalty questionnaires being issued.

A brief guide.

For claims made before 1/4/09, penalties start at 100% and can then be mitigated by UP TO:

20% for "helpful" disclosure
10% for voluntary disclosure
40% for co-operation
40% dependent upon seriousness of case.

(I know that's 110% but apparently HMRC apply some form of weighting - go figure)

For claims after 1/4/09 HMRC will take into account whether the "offence" arises from

innocent error (rare)
carelessness
Deliberate offences
Deliberate offences concealed.

In other words entirely subjective.

Boobetty
2nd October 2014, 14:30
Rob, are you sure about IHT charged at 40%? My understanding is that the 40% rate only applies on death. In your lifetime you are taxed @ 20% on gifts into trusts but only where lifetime gifts are above your £325k nil rate band.

The IHT charge referred to above is (I believe) based on funds exiting the trust. Under current rules I believe these are taxed at 1% or 0.6% for every year the fund were in trust. So £63,000 x 1% x 7 years or so.

Do please correct me if I am wrong, but the above is my current understanding (and the numbers stack up).

On a related note, your comment about the apparent conflict between HMRC pursuing IHT AND income tax on the same funds intrigues me as I had reached a similar conclusion.

Would you be prepared to elaborate?

Rob79
2nd October 2014, 14:58
Rob, are you sure about IHT charged at 40%? My understanding is that the 40% rate only applies on death. In your lifetime you are taxed @ 20% on gifts into trusts but only where lifetime gifts are above your £325k nil rate band.

The IHT charge referred to above is (I believe) based on funds exiting the trust. Under current rules I believe these are taxed at 1% or 0.6% for every year the fund were in trust. So £63,000 x 1% x 7 years or so.

Do please correct me if I am wrong, but the above is my current understanding (and the numbers stack up).

On a related note, your comment about the apparent conflict between HMRC pursuing IHT AND income tax on the same funds intrigues me as I had reached a similar conclusion.

Would you be prepared to elaborate?

Mr B, you may very well be correct on the rates. It must be 15 years since I last looked at IHT. I'll go and check.

On the apparent conflict, again I'm reluctant to elaborate until I've established the basis of the charge but I am at present unclear as to the position.

LadyPenelope
2nd October 2014, 16:51
Mr B, you may very well be correct on the rates. It must be 15 years since I last looked at IHT. I'll go and check.

On the apparent conflict, again I'm reluctant to elaborate until I've established the basis of the charge but I am at present unclear as to the position.

OK, so I went back and looked at the dreaded calcs. It's the income tax and interest where they provide a full breakdown.

There is basically no information on how they arrived at the IHT figure. The letter says:

"The arrangements which were set up for you involved the use of a relevant property trust which was situated outside the United Kingdom. Three of the main Inheritance Tax charges which arise on this type of trust are:

- The trust reaches a 10-year anniversary of when it was set up
- Assets are transferred out of the trust
- The trust comes to an end an loans are written off at that point

Based on the loans which you received, the Inheritance Tax due is £4,548.77"

That's it. No breakdown of calcs, no percentages - nothing. You might conclude from that that they believe they are on shakier grounds with the IHT. Boobetty's suggestion looks pretty close, though.

meanttobeworking
2nd October 2014, 16:59
I received a settlement calculation today too. Round figures for 2010/11, EBT scheme, loans of £35k, tax of £11.5k, interest £1k.

Payment options (from point of acceptance):

1) settle within 30 days
2) settle within 90 days
3) request more than 90 days, in which case a) initial payment of x, followed by b) monthly payments of y where x and y are figures entered by me, and subject to approval

And a statement saying "based on supplied information, no Inheritance Tax due *at this time*.

Interesting to understand why they add "at this time" if this is a settlement opportunity...

Boobetty
2nd October 2014, 19:00
LadyP....without wanting to suggest your next move, I think you are entitled to an explanation for ALL the numbers given.

HMRC providing a full breakdown against the obvious (and more justifiable) numbers together with the conspicuous absence of the same for the IHT number makes this a little comical...as if they just slip it in and hope you don't notice and/or ask questions.

LadyPenelope
2nd October 2014, 19:05
LadyP....without wanting to suggest your next move, I think you are entitled to an explanation for ALL the numbers given.

HMRC providing a full breakdown against the obvious (and more justifiable) numbers together with the conspicuous absence of the same for the IHT number makes this a little comical...as if they just slip it in and hope you don't notice and/or ask questions.

I know, it's quite telling, isn't it? :grin
The loans are on the Income Tax comp as "Other income". I guess they think this classification allows them to apply both taxes to the same income. Doesn't seem right to be able to do this though.

Rob79
3rd October 2014, 08:09
With thanks to a poster on this thread, I now have a better view of the IHT charge basis.

To paraphrase that information, HMRC want to charge IHT on loans made from a trust which may be written off or out of that trust. At the same time they want to charge the "loans" as income.

Seems to me to be a conflict here.

Either HMRC says these are loans and charges IHT or it is income and charged to IT.

Before we jump to any conclusions (or lifeboats) on this, I'd like to think on it further over the weekend and see if this is a non compatible position for HMRC in law, or whether such situations are common and allowed.

Rob79
3rd October 2014, 11:24
I joined this forum a few months back with a view to bringing a view from the tax professional side of the fence, aided by my regular meetings with HMRC and their motives. I hope I have brought some objectivity to the debate, supplied some useful information and most of all, taken away some of the mystery of the position you and HMRC are in. Knowledge is power and if you have better knowledge you achieve better results.

My day job is dealing with complex "investment" schemes that HMRC consider are pretty much all tax avoidance schemes. Some of these you will have read about in the papers who report them with varying degrees of accuracy or sympathy depending on who their favourite celebrity is at the time. Backed by 35+ years of working in tax, the last 8 or so in tax "planning", I think I have the right tools.

That day job is demanding more of my time with the result that I will (with considerable regret) be cutting back on the time I spend here.

My firm's main activities are bringing claims for mis-selling the above tax products and finding solutions with HMRC for our clients. To a degree, dependent upon circumstances, that may be of assistance to some of you. If you wish, please PM me for more details.

I'm not leaving completely and will continue to post and provide links to useful information, but I have to be fair to those who pay me.

Thanks for your time.

vern19
3rd October 2014, 12:11
I joined this forum a few months back with a view to bringing a view from the tax professional side of the fence, aided by my regular meetings with HMRC and their motives. I hope I have brought some objectivity to the debate, supplied some useful information and most of all, taken away some of the mystery of the position you and HMRC are in. Knowledge is power and if you have better knowledge you achieve better results.

My day job is dealing with complex "investment" schemes that HMRC consider are pretty much all tax avoidance schemes. Some of these you will have read about in the papers who report them with varying degrees of accuracy or sympathy depending on who their favourite celebrity is at the time. Backed by 35+ years of working in tax, the last 8 or so in tax "planning", I think I have the right tools.

That day job is demanding more of my time with the result that I will (with considerable regret) be cutting back on the time I spend here.

My firm's main activities are bringing claims for mis-selling the above tax products and finding solutions with HMRC for our clients. To a degree, dependent upon circumstances, that may be of assistance to some of you. If you wish, please PM me for more details.

I'm not leaving completely and will continue to post and provide links to useful information, but I have to be fair to those who pay me.

Thanks for your time.
Thank you for sharing your professional knowledge.

fielder
3rd October 2014, 12:21
I joined this forum a few months back with a view to bringing a view from the tax professional side of the fence, aided by my regular meetings with HMRC and their motives. I hope I have brought some objectivity to the debate, supplied some useful information and most of all, taken away some of the mystery of the position you and HMRC are in. Knowledge is power and if you have better knowledge you achieve better results.

My day job is dealing with complex "investment" schemes that HMRC consider are pretty much all tax avoidance schemes. Some of these you will have read about in the papers who report them with varying degrees of accuracy or sympathy depending on who their favourite celebrity is at the time. Backed by 35+ years of working in tax, the last 8 or so in tax "planning", I think I have the right tools.

That day job is demanding more of my time with the result that I will (with considerable regret) be cutting back on the time I spend here.

My firm's main activities are bringing claims for mis-selling the above tax products and finding solutions with HMRC for our clients. To a degree, dependent upon circumstances, that may be of assistance to some of you. If you wish, please PM me for more details.

I'm not leaving completely and will continue to post and provide links to useful information, but I have to be fair to those who pay me.

Thanks for your time.

Thank you also for your input to date.

FTTM
3rd October 2014, 13:52
I joined this forum a few months back with a view to bringing a view from the tax professional side of the fence, aided by my regular meetings with HMRC and their motives. I hope I have brought some objectivity to the debate, supplied some useful information and most of all, taken away some of the mystery of the position you and HMRC are in. Knowledge is power and if you have better knowledge you achieve better results.

My day job is dealing with complex "investment" schemes that HMRC consider are pretty much all tax avoidance schemes. Some of these you will have read about in the papers who report them with varying degrees of accuracy or sympathy depending on who their favourite celebrity is at the time. Backed by 35+ years of working in tax, the last 8 or so in tax "planning", I think I have the right tools.

That day job is demanding more of my time with the result that I will (with considerable regret) be cutting back on the time I spend here.

My firm's main activities are bringing claims for mis-selling the above tax products and finding solutions with HMRC for our clients. To a degree, dependent upon circumstances, that may be of assistance to some of you. If you wish, please PM me for more details.

I'm not leaving completely and will continue to post and provide links to useful information, but I have to be fair to those who pay me.

Thanks for your time.

Rob79 - thank you very much for your input , i have found your knowledge and guidance very helpful.

DarnEBTs
3rd October 2014, 14:19
I joined this forum a few months back with a view to bringing a view from the tax professional side of the fence, aided by my regular meetings with HMRC and their motives. I hope I have brought some objectivity to the debate, supplied some useful information and most of all, taken away some of the mystery of the position you and HMRC are in. Knowledge is power and if you have better knowledge you achieve better results.

My day job is dealing with complex "investment" schemes that HMRC consider are pretty much all tax avoidance schemes. Some of these you will have read about in the papers who report them with varying degrees of accuracy or sympathy depending on who their favourite celebrity is at the time. Backed by 35+ years of working in tax, the last 8 or so in tax "planning", I think I have the right tools.

That day job is demanding more of my time with the result that I will (with considerable regret) be cutting back on the time I spend here.

My firm's main activities are bringing claims for mis-selling the above tax products and finding solutions with HMRC for our clients. To a degree, dependent upon circumstances, that may be of assistance to some of you. If you wish, please PM me for more details.

I'm not leaving completely and will continue to post and provide links to useful information, but I have to be fair to those who pay me.

Thanks for your time.

Indeed been useful and who knows whether some may need your settlement expertise or not. Hope it doesn't come to that. :wink Thanks

pimpernell
3rd October 2014, 15:04
I joined this forum a few months back with a view to bringing a view from the tax professional side of the fence, aided by my regular meetings with HMRC and their motives. I hope I have brought some objectivity to the debate, supplied some useful information and most of all, taken away some of the mystery of the position you and HMRC are in. Knowledge is power and if you have better knowledge you achieve better results.

My day job is dealing with complex "investment" schemes that HMRC consider are pretty much all tax avoidance schemes. Some of these you will have read about in the papers who report them with varying degrees of accuracy or sympathy depending on who their favourite celebrity is at the time. Backed by 35+ years of working in tax, the last 8 or so in tax "planning", I think I have the right tools.

That day job is demanding more of my time with the result that I will (with considerable regret) be cutting back on the time I spend here.

My firm's main activities are bringing claims for mis-selling the above tax products and finding solutions with HMRC for our clients. To a degree, dependent upon circumstances, that may be of assistance to some of you. If you wish, please PM me for more details.

I'm not leaving completely and will continue to post and provide links to useful information, but I have to be fair to those who pay me.

Thanks for your time.

Thanks Rob. Much appreciated

dangerouswhensober
4th October 2014, 09:42
Indeed been useful and who knows whether some may need your settlement expertise or not. Hope it doesn't come to that. :wink Thanks

Absolutely agree - your experience & expertise are invaluable here Rob - many thanks for all of your advice thus far - and I think it's more than likely that your company will benefit in some way in the future, even though you do not represent individual contractors.

Best wishes.

gettingangry
4th October 2014, 16:55
Finally got a reply after 10 weeks of waiting.
They have given me figures for 2005-6, 2008-9, 2009-10 and 2010-11.
2006-7 and 2007-8 they say that they failed to protect their position. They also say that there are no "current" Inheritance tax charges.

I never received any notice regarding 2005-2006 and that they must be joking about adding this and the interest for which they kindly provided a breakdown. Going back a staggering 2825 days the interest rate charged varied between 2.5% to 8.5%.

On the final page they breakdown the amount of tax due for each year 2005-6 and 2010-11 are listed as type ENQUIRY, 2008-9 and 2009-10 are listed as type ASSESSMENT. Any one any idea what this means?

Also regarding not taking the settlement opportunity ... they say "
... we assume you are not interested in taking the settlement opportunity. We will then continue to gather evidence on your case as we proceed towards the Tribunal" - I'm confused about this - APNs or Tribunal???

slatt
4th October 2014, 17:50
APNs or Tribunal???

most likely an APN whilst you wait for the tribunal....

Rob79
6th October 2014, 08:09
Finally got a reply after 10 weeks of waiting.
They have given me figures for 2005-6, 2008-9, 2009-10 and 2010-11.
2006-7 and 2007-8 they say that they failed to protect their position. They also say that there are no "current" Inheritance tax charges.

I never received any notice regarding 2005-2006 and that they must be joking about adding this and the interest for which they kindly provided a breakdown. Going back a staggering 2825 days the interest rate charged varied between 2.5% to 8.5%.

On the final page they breakdown the amount of tax due for each year 2005-6 and 2010-11 are listed as type ENQUIRY, 2008-9 and 2009-10 are listed as type ASSESSMENT. Any one any idea what this means?

Also regarding not taking the settlement opportunity ... they say "
... we assume you are not interested in taking the settlement opportunity. We will then continue to gather evidence on your case as we proceed towards the Tribunal" - I'm confused about this - APNs or Tribunal???

OK.

2006/07 and 2007/08, HMRC has not advised you of an enquiry, has not raised an assessment and is now too late to open those years failing a discovery which it sounds they don't have grounds for.

ACTION - ask HMRC to confirm that those years are closed with no further liability.

Difference between "Enquiry" and "assessment" is largely legal and has little practical effect. The only point might be that an "Enquiry" can perhaps lead to penalty in some circumstances although that is usually rare. (I say usually because I met with HMRC last week on something similar and it seems that attitudes may be hardening).

If you choose not to settle, HMRC assume that your position will be determined by the result of a Tribunal hearing. That may be your case or another person in a similar scheme(s). That Tribunal hearing may be weeks away or perhaps a year or more. I do know that a couple of EBT/loan type schemes are at Tribunal soon and if yours might be one of them.

Regardless of whether your case goes to Tribunal soon or not, an APN for the open years is likely.

If you indicate you want to settle, perhaps no APN (although do allow for some administrative incompetence).

I have said before and say again - an APN can be issued no matter what the position on impending litigation or otherwise.

Rob79
6th October 2014, 08:10
Thank you all for the kind words - much appreciated.

I'm not leaving for ever, just cutting down and being more selective.

pimpernell
6th October 2014, 10:55
Finally got a reply after 10 weeks of waiting.
They have given me figures for 2005-6, 2008-9, 2009-10 and 2010-11.
2006-7 and 2007-8 they say that they failed to protect their position. They also say that there are no "current" Inheritance tax charges.

I never received any notice regarding 2005-2006 and that they must be joking about adding this and the interest for which they kindly provided a breakdown. Going back a staggering 2825 days the interest rate charged varied between 2.5% to 8.5%.

On the final page they breakdown the amount of tax due for each year 2005-6 and 2010-11 are listed as type ENQUIRY, 2008-9 and 2009-10 are listed as type ASSESSMENT. Any one any idea what this means?

Also regarding not taking the settlement opportunity ... they say "
... we assume you are not interested in taking the settlement opportunity. We will then continue to gather evidence on your case as we proceed towards the Tribunal" - I'm confused about this - APNs or Tribunal???

For 2005-2006, if you never received any notice, surely that year is also 'lost' to HMRC because they also didn't protect their position? Can you clarify what you received for that year if anything?

Rob79
6th October 2014, 16:13
Taxman using psychologists to make people feel guilty if they don't pay up - Telegraph (http://www.telegraph.co.uk/finance/personalfinance/tax/11142244/Taxman-using-psychologists-to-make-people-feel-guilty-if-they-dont-pay-up.html)

gettingangry
6th October 2014, 19:24
For 2005-2006, if you never received any notice, surely that year is also 'lost' to HMRC because they also didn't protect their position? Can you clarify what you received for that year if anything?

I didn't receive anything for 2005-2006 - if I did I would have appealed like I did for 2008-9 and 2009-10 and they would have sent letters acknowledging the appeal. Otherwise surely time would have been up on that year and they'd be knocking on my door by now.

pimpernell
6th October 2014, 20:12
I didn't receive anything for 2005-2006 - if I did I would have appealed like I did for 2008-9 and 2009-10 and they would have sent letters acknowledging the appeal. Otherwise surely time would have been up on that year and they'd be knocking on my door by now.

Well yes. So is it a worrying development that they've sent you a settlement offer for a year that they haven't got 'open' - i.e. is this an admin error or are they just chancing it?

jbryce
6th October 2014, 21:44
I didn't receive anything for 2005-2006 - if I did I would have appealed like I did for 2008-9 and 2009-10 and they would have sent letters acknowledging the appeal. Otherwise surely time would have been up on that year and they'd be knocking on my door by now.

2005-2006 is a long time ago, talk to an accountant and ask for evidence, form HMRC, that they did, in fact, have those years open.

AlCapone
7th October 2014, 08:45
2005-2006 is a long time ago, talk to an accountant and ask for evidence, form HMRC, that they did, in fact, have those years open.

I haven't had my offer yet despite calling them at the end of July the day after I got my letter. The first person I spoke to said I only had one enquiry open for 06/07. Didn't hear back for a month so called again and got another guy and he said the same. Spoke to the same guy about 4 or 5 times since. Then on the last conversation he very casually mentioned 05/06. Eh?? Where did this come from? I too never had any notice on that. My accountant is checking this out. He said he has another client who is in the same situation.

TonyTucker
7th October 2014, 11:08
Just called the helpline to see which years I'm being investigated for. I had previously received a COP8 for 2006/7 and DA for 2008/9. I was in a scheme for 2007/8 but nothing was received.

The lady said I was being investigated for all years IE 2006/7, 2007/8 and 2008/9. I said I'd never received a letter for the middle year but she said that was covered by the 2008/9 DA.

Anyway, she wanted details of my loans for the 3 years - won't be sending those yet....

My last comment to her was about the APN's. She said I wasn't affected by them and it's only for people on current schemes. I queried this and she said if I chose not to settle in January then I'd have to wait for tribunal.

So, can they investigate me for 2007/8 under the DA for 2008/9?

Has anyone else heard that the APN's are not relevant to older schemes... This seems opposite to the idea behind the apn!!

DonkeyRhubarb
7th October 2014, 11:56
There seem to be some dubious messages coming from that Helpline.

jbryce
7th October 2014, 12:34
Just called the helpline to see which years I'm being investigated for. I had previously received a COP8 for 2006/7 and DA for 2008/9. I was in a scheme for 2007/8 but nothing was received.

The lady said I was being investigated for all years IE 2006/7, 2007/8 and 2008/9. I said I'd never received a letter for the middle year but she said that was covered by the 2008/9 DA.

Anyway, she wanted details of my loans for the 3 years - won't be sending those yet....

My last comment to her was about the APN's. She said I wasn't affected by them and it's only for people on current schemes. I queried this and she said if I chose not to settle in January then I'd have to wait for tribunal.

So, can they investigate me for 2007/8 under the DA for 2008/9?

Has anyone else heard that the APN's are not relevant to older schemes... This seems opposite to the idea behind the apn!!

so.....why settle? Are fines inevitable if one were to lose at tribunal?

Rob79
7th October 2014, 12:48
Just called the helpline to see which years I'm being investigated for. I had previously received a COP8 for 2006/7 and DA for 2008/9. I was in a scheme for 2007/8 but nothing was received.

The lady said I was being investigated for all years IE 2006/7, 2007/8 and 2008/9. I said I'd never received a letter for the middle year but she said that was covered by the 2008/9 DA.

Anyway, she wanted details of my loans for the 3 years - won't be sending those yet....

My last comment to her was about the APN's. She said I wasn't affected by them and it's only for people on current schemes. I queried this and she said if I chose not to settle in January then I'd have to wait for tribunal.

So, can they investigate me for 2007/8 under the DA for 2008/9?

Has anyone else heard that the APN's are not relevant to older schemes... This seems opposite to the idea behind the apn!!

No HMRC cannot include 07/08 in an 08/09 assessment and to even think that is absurd and illegal.

If you genuinely have no 07/08 open enquiry or COP8 then you are home and clear for that year. Tell HMRC to either prove to you that the year is open or formally drop any claim.

Her advice on APN is also wide of the mark. An APN can be issued for any scheme that meets the conditions. DOTAS started in 2004 but really got going in April 2006. I suggest that almost all schemes should have been notified after that date. If it was not, then arguably an offence has occurred.

That offence is failure to notify. This carries a heavy fine these days (up to £1m!) but previously were much less. There is also a priority as to who is meant to notify which starts with promoter and ends with user.

jbryce
7th October 2014, 13:20
No HMRC cannot include 07/08 in an 08/09 assessment and to even think that is absurd and illegal.

If you genuinely have no 07/08 open enquiry or COP8 then you are home and clear for that year. Tell HMRC to either prove to you that the year is open or formally drop any claim.

Her advice on APN is also wide of the mark. An APN can be issued for any scheme that meets the conditions. DOTAS started in 2004 but really got going in April 2006. I suggest that almost all schemes should have been notified after that date. If it was not, then arguably an offence has occurred.

That offence is failure to notify. This carries a heavy fine these days (up to £1m!) but previously were much less. There is also a priority as to who is meant to notify which starts with promoter and ends with user.

...just out of interest are there any schemes that are not required to be notified under DOTAS? Many of the current (irritating) schemes seem to think that they fall outside DOTAS - surely that's an example of the failure to notify you mention above - which, hopefully, suggests that the current raft of suppliers will get their arse kicked at some point?

TonyTucker
7th October 2014, 13:35
She said the 2007/8 scheme came in to play because one loan payment from the 2007/8 scheme was made in 2008/9 tax year.

They also had me down for a scheme in 2009/10 but I'd gone PAYE by then.


I really don't think their info is great and the settlement opportunity is a guise for collecting missing data.

Rob79
7th October 2014, 13:53
...just out of interest are there any schemes that are not required to be notified under DOTAS? Many of the current (irritating) schemes seem to think that they fall outside DOTAS - surely that's an example of the failure to notify you mention above - which, hopefully, suggests that the current raft of suppliers will get their arse kicked at some point?

DOTAS rules are getting longer and longer but I reckon that a bit of careful planning and a peculiar slant on the law and we could knock up a non DOTAS scheme this afternoon.

Equally, we do share information with HMRC on structures we come across that escape DOTAS (allegedly).

One or two of them have had some "visits" from HMRC compliance. Shame.

If any company claims to be non DOTAS'able ask to the see the questions posed to a QC AND the answers.

Rob79
7th October 2014, 13:54
She said the 2007/8 scheme came in to play because one loan payment from the 2007/8 scheme was made in 2008/9 tax year.

They also had me down for a scheme in 2009/10 but I'd gone PAYE by then.


I really don't think their info is great and the settlement opportunity is a guise for collecting missing data.

That is nonsense.

Income is usually taxed on an arising basis and not a paid basis. If the income arose in 07/08 then it's taxable that year regardless of when paid.

I think you have a legitimate claim to have 07/08 dismissed.

centurian
7th October 2014, 16:15
If any company claims to be non DOTAS'able ask to the see the questions posed to a QC AND the answers.

Therein lies the problem - a scheme promoter may say they are non-DOTAS - without actually doing the slightest bit of background work to establish if they actually are.

Has anyone actually seen a QCs opinion of a scheme in advance of joining - I presume they just fob people off with - it's confidential - you might really be HMRC etc.

jbryce
7th October 2014, 21:06
Therein lies the problem - a scheme promoter may say they are non-DOTAS - without actually doing the slightest bit of background work to establish if they actually are.

Has anyone actually seen a QCs opinion of a scheme in advance of joining - I presume they just fob people off with - it's confidential - you might really be HMRC etc.

....a few of my ex-colleagues banded together a few years back and employed a tax barrister and a tax specialist from a reputable firm. They had sight of QC opinion of a scheme, validated it with their specialists who considered the scheme to be not only non-DOTAS but also a defensible avoidance scheme. They then had that validated by yet another specialist accountancy firm.
They do get paid at twice my rate. Their 'scheme' is expensive and I don't think it's representative of the typical contractor scheme that is still doing the rounds. They paid a lot of money for their DD, and they used the scheme until quite recently.
However, the horror stories of APN/FN has increased the risk to the point that, even with their legal and specialist opinion, two have left the scheme.

Avoidance schemes for contractors are dead. There's the hills - get running!

DonkeyRhubarb
8th October 2014, 07:59
Going forward DOTAS is probably dead.

No-one is going to want to join a scheme where they have to disclose it, pay the tax up front and then embark on costly and protracted litigation to try and get it back.

If AP doesn't kill off the mass marketed schemes altogether then it will drive them underground.

Rob79
8th October 2014, 08:17
Going forward DOTAS is probably dead.

No-one is going to want to join a scheme where they have to disclose it, pay the tax up front and then embark on costly and protracted litigation to try and get it back.

If AP doesn't kill off the mass marketed schemes altogether then it will drive them underground.

There used to be a defence for schemes not disclosed under DOTAS. If you could show that you had consulted with an "expert", normally a tax barrister, and his/her view was that you had grounds for not disclosing, then if a subsequent Court decision said you should have done, no penalty would be due. As you can imagine many promoters flocked to barristers who were well known for always saying "yes".

That defence is no longer available.

Instead many schemes are now said to be not eligible for disclosure on the flimsiest of grounds.

Treat any scheme that says is it non DOTAS with MAXIMUM CAUTION.

Not only is that self granted designation probably incorrect BUT any user of the scheme could be held liable for a penalty if they do not disclose it AND when HMRC find out (which they will), you will get APN's (on the grounds that the scheme was "notifiable") and a hefty tax penalty.

This is an area in which I have been know to rant, but I don't have time at the moment.

Rex Munday
8th October 2014, 14:31
Going forward DOTAS is probably dead.

No-one is going to want to join a scheme where they have to disclose it, pay the tax up front and then embark on costly and protracted litigation to try and get it back.

If AP doesn't kill off the mass marketed schemes altogether then it will drive them underground.

Which is exactly what Gauke wants so his missus and his mates can get back to making a motsa from bespoke schemes for toffs

DownButNotOut
11th October 2014, 16:32
No HMRC cannot include 07/08 in an 08/09 assessment and to even think that is absurd and illegal.

If you genuinely have no 07/08 open enquiry or COP8 then you are home and clear for that year. Tell HMRC to either prove to you that the year is open or formally drop any claim.

Her advice on APN is also wide of the mark. An APN can be issued for any scheme that meets the conditions. DOTAS started in 2004 but really got going in April 2006. I suggest that almost all schemes should have been notified after that date. If it was not, then arguably an offence has occurred.

That offence is failure to notify. This carries a heavy fine these days (up to £1m!) but previously were much less. There is also a priority as to who is meant to notify which starts with promoter and ends with user.

So the letter finally arrived, it only took 6 weeks and to be honest hasn't told anything new :ind

Dear XXXXXX

Thank you for contacting HMRC in respect of the settlement offer.

We have opened Section 9a into the tax years 5 April 2006, 2007 and 2008. We have issued a Discovery Assessment for the tax year ending 5 April 2009.

We sent a calculation for the 2008 - 2009 tax year on 1 March 2013 and I have enclosed a copy of this calculation. We haven't issued any calculations for the 2005-2006, 2006-2007 or 2007-2008 years yet. If you would like calculations for these years can you let us know the amount of loans you received while working for XXXXX. This can be done by completing the form DO3 which is online at.........

OK, so I understand the letter. They haven't sent out discovery assessments for the years with an open enquiry because they don't know what the adjustments are. That's for me to do!
The thing is I thought there's a time frame for opening a Section 9a Enquiry. I've the correspondence for the discovery assessment from 2008 - 2009 but I've never had any correspondence or been made aware of the Section 9a enquires for previous years.

Should I ask for proof from HMRC when they opened the Section 9a enquires or am I wrong about the timeframe. Also has anyone attempted to complete the DO3 form?

Please help...

pimpernell
12th October 2014, 13:26
So the letter finally arrived, it only took 6 weeks and to be honest hasn't told anything new :ind

Dear XXXXXX

Thank you for contacting HMRC in respect of the settlement offer.

We have opened Section 9a into the tax years 5 April 2006, 2007 and 2008. We have issued a Discovery Assessment for the tax year ending 5 April 2009.

We sent a calculation for the 2008 - 2009 tax year on 1 March 2013 and I have enclosed a copy of this calculation. We haven't issued any calculations for the 2005-2006, 2006-2007 or 2007-2008 years yet. If you would like calculations for these years can you let us know the amount of loans you received while working for XXXXX. This can be done by completing the form DO3 which is online at.........

OK, so I understand the letter. They haven't sent out discovery assessments for the years with an open enquiry because they don't know what the adjustments are. That's for me to do!
The thing is I thought there's a time frame for opening a Section 9a Enquiry. I've the correspondence for the discovery assessment from 2008 - 2009 but I've never had any correspondence or been made aware of the Section 9a enquires for previous years.

Should I ask for proof from HMRC when they opened the Section 9a enquires or am I wrong about the timeframe. Also has anyone attempted to complete the DO3 form?

Please help...

As far as I understand, HMRC have 12 months from the date of filing to open a Section 9a, assuming you haven't asked them to amend the returns for that year. So if you haven't previously received enquiries for years 2005 -2008, then these years are effectively closed. But best get Rob79 to confirm this.

SALF404 - Enquiries into Tax Returns: some notes on HMRC enquiries (http://www.hmrc.gov.uk/manuals/salfmanual/salf404.htm)

SACM8010 - Making Enquiries into Claims: Time Limits (http://www.hmrc.gov.uk/manuals/sacmanual/sacm8010.htm)