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View Full Version : Recent use of offshore loan schemes - anyone approached HMRC?



Mug27
18th August 2014, 14:24
Hands up - before I get hit with a shower of abuse I started using a scheme in 2013. Pretty dumb - yes. Ignorance - yes. First contractor position - yes. Not enough research - yes. Introduced by a (former) friend (who was only too keen to trouser his introduction fee) - yes. Please feel free to have a chuckle - when I'm not kicking myself I do as well - my user name was chosen based on how I feel !!!

Ok now to the questions. All of the posts appear to be about previous years use of schemes and HMRC seem to be focused on 2008 -2011. Why the particular focus on these years? Is it that's how behind they are? Is the cut off at 2011 to coincide with the Disguised Remuneration rules?

Has anyone approached HMRC off their own back to declare use of these schemes after these dates?

In HMRC's own releases they are using the date of Jan 2015 for people to be able to approach and settle without penalties. Anyone know if this would apply if you contacted them re. 2013/2014? I am assuming that anyone using a scheme after 2011 is going to get hit hard and am wondering as well as trying to get this millstone from around my neck whether it makes much more financial sense to try and sort it out now.

Additionally has anyone ever had a "loan" recalled from any of the companies providing this sort of scheme. My paranoia is working overtime now and I wonder if out of spite any companies would do this if you settled with HMRC. And then where do you stand.....

DonkeyRhubarb
19th August 2014, 08:25
The recent letter many people have received from HMRC refers to arrangements used up to 5 April 2011, which does coincide with the introduction of the disguised remuneration legislation.

HMRC may regard any schemes used after this date as flouting the law, and one option open to them would be to deal with them under the GAAR.

I think you are right to be concerned that they may take a harder line.

turbowoowoo
19th August 2014, 09:29
The recent letter many people have received from HMRC refers to arrangements used up to 5 April 2011, which does coincide with the introduction of the disguised remuneration legislation.

HMRC may regard any schemes used after this date as flouting the law, and one option open to them would be to deal with them under the GAAR.

I think you are right to be concerned that they may take a harder line.

GAAR only came into law 2013 iirc so what about years 2011-2012?

regards

DonkeyRhubarb
19th August 2014, 12:59
GAAR only came into law 2013 iirc so what about years 2011-2012?

regards

Good point.

I guess they'll have to find some other way of attacking 2011/12 and 2012/13.

malvolio
19th August 2014, 13:56
Good point.

I guess they'll have to find some other way of attacking 2011/12 and 2012/13.
Perhaps they'll use the December 2010 provision that allows them to examine all schemes in use from that date forward?

Mug27
19th August 2014, 14:52
For 2013/2014 tax year is it all a moot point after all as there's still plenty of time to declare earnings anyway and pay up?

BTW I am no longer a user of any of these schemes.

BlasterBates
19th August 2014, 15:34
Consider yourself lucky you can sort everything out.

I suggest you go and see an accountant, and get this taxed and accepted.

Don't sit tight because HMRC won't leave you alone for years and years, hounding you through the courts and making your life a complete misery, just pay the tax that, lets face it, would have been paid anyway.


...and remember, you're one of the lucky ones. Some contractors spent years on "water tight schemes" and are now paying a very heavy price indeed.

jbryce
19th August 2014, 16:05
Consider yourself lucky you can sort everything out.

I suggest you go and see an accountant, and get this taxed and accepted.

Don't sit tight because HMRC won't leave you alone for years and years, hounding you through the courts and making your life a complete misery, just pay the tax that, lets face it, would have been paid anyway.

...and don't touch anything like this ever again.

...and remember, you're one of the lucky ones. Some contractors spent years on "water tight schemes" and are now paying a very heavy price indeed.

The scheme will have to go via the GAAR - and found to be wanting - at which point FNs and APNs will be issued.
If the scheme is non DOTAS, due to grandfathering rules, then that will be changing with upcoming legislation. Again FNs and APNs will follow.

In neither case will you be hounded through the courts, but you will be required to pay tax+interest+penalties.

HMRC have set out to kill boutique schemes by ensuring that only the certifiable would join one now.

Some of the existing schemes may be effective - genuinely they may even work, who knows. That's irrelevant - HMRC and HMG are no longer afraid to introduce legislation to retrospectively target avoidance and whatever the legal state of play is right now that may change, retrospectively, in the future.

Get out. it's really not worth the hassle.

jbryce
19th August 2014, 16:06
For 2013/2014 tax year is it all a moot point after all as there's still plenty of time to declare earnings anyway and pay up?

Yes.

Mug27
20th August 2014, 09:49
Consider yourself lucky you can sort everything out.

I suggest you go and see an accountant, and get this taxed and accepted


...and remember, you're one of the lucky ones. Some contractors spent years on "water tight schemes" and are now paying a very heavy price indeed.

Blaster, I do feel lucky now that I've come to my senses and I have a bit of time to sort things out. First step is getting an accountant and progressing from there. Let's see how that goes. The lovely cut that the scheme providers have taken will have to be written off to my "that's what you get for being a t**t fund" or my savings as I believe that's what less certifiable people call it!

Wombat14
22nd August 2014, 20:02
I would appreciate any thoughts on my own situation, which is similar (albeit slightly worse) to that of Mug27.

In my case I got my first contract in 2012, and signed up to one of these schemes for the same silly reasons. The contract finished in the latter half of 2013 (and I have used my own limited company since then) so I have already filed one tax return for 2012-13, declaring use of the scheme, and will soon be filing a second for 2013-14.

I was a bit uneasy about the whole thing (though not uneasy enough to avoid getting myself into this situation) and have saved the money that I think HRMC will want. I'm tempted to just pay up for both years, which I assume would involve filing a revised return for 2012-13. But part of me thinks I'm handing over a bunch of cash unnecessarily, since I can just wait for an APN and perhaps one day get the money back. Is there any plausible likelihood of getting hit with some sort of legal fee or a penalty (aside from the interest) if I hang on to the cash and wait years for a final conclusion? Am I doubly a fool for not already having settled the matter, or is there nothing to lose by waiting?

DonkeyRhubarb
23rd August 2014, 11:47
But part of me thinks I'm handing over a bunch of cash unnecessarily, since I can just wait for an APN and perhaps one day get the money back. Is there any plausible likelihood of getting hit with some sort of legal fee or a penalty (aside from the interest) if I hang on to the cash and wait years for a final conclusion?

Was the scheme DOTAS registered and did you put the scheme reference number (SRN) on your tax return?

HMRC can only issue an APN if the scheme was registered and they've opened an enquiry or raised an assessment.

I don't think anyone can answer your question about the likelihood of penalties, although I think there is more of a risk with the post-2011 schemes.

Wombat14
23rd August 2014, 19:08
Yes, the scheme has a DOTAS number, the SRN was included in my 2012-13 tax return (along with the loan amount) and HMRC have opened an enquiry for that year.

I'm inclined towards paying up for 2012-13 but I'm a bit concerned about penalties, and I can't find any guidance on the HMRC web site. If it's a modest percentage I could live with it, but if they turn round and say "Great, thanks, that will be £x for the unpaid tax/NI and an extra 500% fine on top" it would be problematic.

DonkeyRhubarb
24th August 2014, 08:02
Yes, the scheme has a DOTAS number, the SRN was included in my 2012-13 tax return (along with the loan amount) and HMRC have opened an enquiry for that year.

I'm inclined towards paying up for 2012-13 but I'm a bit concerned about penalties, and I can't find any guidance on the HMRC web site. If it's a modest percentage I could live with it, but if they turn round and say "Great, thanks, that will be £x for the unpaid tax/NI and an extra 500% fine on top" it would be problematic.

There is a list of SRNs which (supposedly) may receive APNs here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/326655/Reviewed_Tax_Avoidance_Scheme_Ref__Numbers_July_20 14.pdf

You could approach the office which issued the enquiry saying that you are considering settling and asking for a settlement figure. By coming forward voluntarily, they may settle for tax+interest.

With most of the assessments I've seen, HMRC has treated the loans as "other" or "foreign" income, rather than employment income, and has just charged tax not NI. Some of the post-2011 schemes got around the disguised remuneration legislation by having the users as self-employed (sole traders) rather than employees. In this case HMRC may be more likely to charge additional NI (class 4).

MrO666
26th August 2014, 09:40
There is a list of SRNs which (supposedly) may receive APNs here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/326655/Reviewed_Tax_Avoidance_Scheme_Ref__Numbers_July_20 14.pdf

You could approach the office which issued the enquiry saying that you are considering settling and asking for a settlement figure. By coming forward voluntarily, they may settle for tax+interest.

With most of the assessments I've seen, HMRC has treated the loans as "other" or "foreign" income, rather than employment income, and has just charged tax not NI. Some of the post-2011 schemes got around the disguised remuneration legislation by having the users as self-employed (sole traders) rather than employees. In this case HMRC may be more likely to charge additional NI (class 4).


I wonder how HMRC intend to target people who were users of the 'self-employed schemes'. One would assume that there's no mention of anything on the users self-assessment (other than being self employed), so I for one don't really see how HMRC are going to reliably get the information. A random SA enquiry would pick up the income, but once that 12 month general SA enquiry window closes, then I don't see how HMRC would be able to identify those particular users, as there's probably nothing on their self-assessments (DOTAS, employer etc) which would allow them to be identified.

Not saying it's impossible at all, just that I don't see an easy way for HMRC to do this.

jbryce
26th August 2014, 16:02
I wonder how HMRC intend to target people who were users of the 'self-employed schemes'. One would assume that there's no mention of anything on the users self-assessment (other than being self employed), so I for one don't really see how HMRC are going to reliably get the information. A random SA enquiry would pick up the income, but once that 12 month general SA enquiry window closes, then I don't see how HMRC would be able to identify those particular users, as there's probably nothing on their self-assessments (DOTAS, employer etc) which would allow them to be identified.

Not saying it's impossible at all, just that I don't see an easy way for HMRC to do this.

Do they care? Those schemes died pretty quickly. HMRC have killed of contractor schemes, dead, and got a pretty large boost to HMG coffers.

It might have been painful - but this will have ensured that new schemes will be unavailable for contractors and remain the preserve of the rich.

ASB
26th August 2014, 16:08
HM Revenue & Customs: Understanding penalties - agents and advisers (http://www.hmrc.gov.uk/agents/compliance/penalties.htm) this might help a little on potential penalties.

Wombat14
26th August 2014, 19:05
Thank you all for your thoughts; much appreciated! I shall do some more research and have a ponder on what to do next.

jbryce
26th August 2014, 20:44
Yes, the scheme has a DOTAS number, the SRN was included in my 2012-13 tax return (along with the loan amount) and HMRC have opened an enquiry for that year.

I'm inclined towards paying up for 2012-13 but I'm a bit concerned about penalties, and I can't find any guidance on the HMRC web site. If it's a modest percentage I could live with it, but if they turn round and say "Great, thanks, that will be £x for the unpaid tax/NI and an extra 500% fine on top" it would be problematic.

...they may follow the spirit of the EBT settlement offer where they do state that penalties would only be applied in extreme cases and that NI will not form part of the calculation.
HMRC have waged a war against EBTs as a means of altering people's attitudes to avoidance. FNs, APNs etc. are pretty scary weapons.....

DonkeyRhubarb
31st August 2014, 10:56
HM Revenue & Customs: Settlement opportunity: tax on contractor loans (http://www.hmrc.gov.uk/avoidance/contractorloans.htm)

"Enquiries for different arrangements

If you receive an enquiry notice relating to a different arrangement you've used after the tax year ending 5 April 2011 then you can ask HMRC to discuss paying the tax to resolve these years too. HMRC may not be able to settle on the same basis as the earlier years but this will depend on how you used the arrangements and the law in place at the time."

EBTContractor
8th January 2015, 23:47
With most of the assessments I've seen, HMRC has treated the loans as "other" or "foreign" income, rather than employment income, and has just charged tax not NI. Some of the post-2011 schemes got around the disguised remuneration legislation by having the users as self-employed (sole traders) rather than employees. In this case HMRC may be more likely to charge additional NI (class 4).

This I imagine makes it more appealing for people to settle these ludicrous HMRC claims as it makes it slightly more palatable, even when any new "income" pushes a person up into the next tax bracket and rapes him/her.

Regarding self-employed (sole traders), I imagine loans have come from overseas in which case they also fall under the "other" or "foreign" income category and will be NI exempt?

Post-2011 products do you mean under GAAR which came into effect in July 2013? So HMRC has to prove that a person entered into an abusive arrangement?

How can they tackle pre-2013 products?