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Rob79
6th November 2014, 14:27
You would have thought not.

However I hear the faintest whisper of a rumour that we may soon see some form of press release from our friends at HMRC suggesting that as part of their policing of the DOTAS regime, certain agency arrangements that create a tax advantage "should be" DOTAS registered.

Obvious advantage is that it opens the door to APN.

Watch this space.

jbryce
6th November 2014, 16:24
You would have thought not.

However I hear the faintest whisper of a rumour that we may soon see some form of press release from our friends at HMRC suggesting that as part of their policing of the DOTAS regime, certain agency arrangements that create a tax advantage "should be" DOTAS registered.

Obvious advantage is that it opens the door to APN.

Watch this space.

"should be" is not quite the same as "must be".
Still a tad scary.

Rob79
6th November 2014, 16:28
"should be" is not quite the same as "must be".
Still a tad scary.

Remember that the APN rules apply to "disclosable" schemes rather than "disclosed".

If HMRC consider that an agency arrangement is "disclosable = should be", then they have the ability to issue an SRN and then probably an APN.

centurian
6th November 2014, 18:33
"certain agency arrangements"

What could those possibly be :confused:

The nuclear option would be - getting paid via a PSC and not operating IR35.

Can't imagine it's that, but if it is - expect a sudden surge of interest in this thread.

Rob79
7th November 2014, 09:01
This is something that I've used in a reply to a message.

This is the simple version. I suggest that some clever people out there can make improvements to this, especially if you are a non UK domiciled individual just working here for a short period.

Let's say you join an agency and that agency offers to deal with your time sheets and expenses claims etc - a bit like an umbrella company.

The agency secures you a position at the London office of a multinational company.

That company has its headquarters in say the US and runs its European operations out of Jersey/Lux/Netherlands.

The agency agrees that the London office will pay the expenses on your contract but the Jersey office will contract with them (as your agent) for the salary element.

The agent and Jersey Co agree that rather than pay a salary, they will make a loan from one to the other and the agency makes a loan to you.

The salary is the paid only at the end of the contract.

You have a tax advantage because you have delayed paying tax for a period.

HMRC consider that to be within DOTAS.

centurian
7th November 2014, 09:11
Ok, so the agency is actively involved way more than simply LtdCo/divs/IR35

I could see people being suckered into such arrangements more than the other schemes - because it involves the active participation of the agency and end client, which somehow feels a bit safer.

I wonder what's in it for Agency/ClientCo - maybe there is a tax advantage to them as well - also it makes the day rates on offer to the contractor more competitive.

Rob79
7th November 2014, 09:41
Ok, so the agency is actively involved way more than simply LtdCo/divs/IR35

I could see people being suckered into such arrangements more than the other schemes - because it involves the active participation of the agency and end client, which somehow feels a bit safer.

I wonder what's in it for Agency/ClientCo - maybe there is a tax advantage to them as well - also it makes the day rates on offer to the contractor more competitive.

Like I said, the few lines of explanation are not meant to be a comprehensive picture of where your imagination can go with this.

HMRC's concern is that there is nobody in the line of fire for making a DOTAS declaration and as such these sort of schemes are going under the radar.

I can see at least 5 potential tax problems in the sketch I put up but also at least one strong reason why s 739 would not operate.

centurian
7th November 2014, 10:13
HMRC's concern is that there is nobody in the line of fire for making a DOTAS declaration and as such these sort of schemes are going under the radar.

And given that the aim of APNs is to seemingly shoot down every single blip on the radar - it's only natural that most schemes will now try and fly under it.

jbryce
7th November 2014, 10:22
Remember that the APN rules apply to "disclosable" schemes rather than "disclosed".

If HMRC consider that an agency arrangement is "disclosable = should be", then they have the ability to issue an SRN and then probably an APN.

But this means they can apply it to anything that realises a tax advantage as they can decide what is disclosable without recourse to the tax courts.

I see they are about to strip schemes of the ability to avoid DOTAS using grand-fathering which probably means that all schemes - including those trying to fly under the radar - are about to fall within HMRCs interpretation of 'disclosable'. Will they apply all of this retrospectively as well?

Rob79
7th November 2014, 12:57
But this means they can apply it to anything that realises a tax advantage as they can decide what is disclosable without recourse to the tax courts.

I see they are about to strip schemes of the ability to avoid DOTAS using grand-fathering which probably means that all schemes - including those trying to fly under the radar - are about to fall within HMRCs interpretation of 'disclosable'. Will they apply all of this retrospectively as well?

I think by using "disclosable", meaning should have been disclosed even if in fact it wasn't, allows HMRC to look at schemes from the past and decide that an SRN is due.

Is that retrospection?

It may feel like that but I suggest is legally not.

Just assume that nothing is safe.

regron
7th November 2014, 13:21
This is just gets more ridiculous by the day. Regardless how we got into these schemes, whether or not we should have used them blah,blah,blah.... how are you supposed to make an informed decision on what to do when a DOTAS APN arrives on the door based on your financial situation, when you don't know if you will receive a further APN in the future from a non-DOTAS scheme !!!

Rob79
7th November 2014, 13:34
This is just gets more ridiculous by the day. Regardless how we got into these schemes, whether or not we should have used them blah,blah,blah.... how are you supposed to make an informed decision on what to do when a DOTAS APN arrives on the door based on your financial situation, when you don't know if you will receive a further APN in the future from a non-DOTAS scheme !!!

You simply assume that if you are paying tax on income (loan, salary, fees, etc) that is less than the rate that an employee would pay, chances are that you will get a demand at some point for not just the difference, but perhaps a bit more besides.

If you have had such income for a particular (tax) year and laid aside the difference, then once the time limit for assessment passes (12 months beyond the return filing date) the money is yours to spend.

lastManStanding
7th November 2014, 13:53
unless a discovery assessment is issued, in which case 4 years?

regron
7th November 2014, 14:06
Or they try GAAR ! ?

malvolio
7th November 2014, 14:23
Or they suspect malpractice in some other, earlier or later tax year? :wink

Rob79
7th November 2014, 14:36
Or they suspect malpractice in some other, earlier or later tax year? :wink

All true but dependent upon circumstances.

centurian
7th November 2014, 14:57
But this means they can apply it to anything that realises a tax advantage as they can decide what is disclosable without recourse to the tax courts.

That is precisely how the law has been phrased though - it gives HMRC a very wide margin to decide for themselves what constitutes as disclosable - and then issue an APN for which there is no right of appeal.

You do have recourse - you take them to court to prove your underlying arrangements are valid - and get the APN money back, plus interest. But you can't appeal the decision of the APN itself, so you have to stump up the cash first.

Although the law is not intended to go after LtdCo contractors operating outside IR35 - and it would be a real stretch for them to try that - I am not aware of anything which will actually prevent them from giving it a punt - because there is no mechanism to appeal whatever they decide - you would need pay the APN and then take HMRC to court to prove you are outside IR35.

jbryce
7th November 2014, 14:57
Or they try GAAR ! ?

GAAR makes more sense - and, in theory, is a lightweight way of getting clarity on a scheme.
If the GAAR rules on a scheme then one would know what is coming, however, again in theory, the GAAR would not apply retrospectively.

So why aren't they using the GAAR to challenge the current crop of schemes? It seems a clearer way than stating an arrangement is 'advisable'.

StrengthInNumbers
7th November 2014, 23:08
That is precisely how the law has been phrased though - it gives HMRC a very wide margin to decide for themselves what constitutes as disclosable - and then issue an APN for which there is no right of appeal.

You do have recourse - you take them to court to prove your underlying arrangements are valid - and get the APN money back, plus interest. But you can't appeal the decision of the APN itself, so you have to stump up the cash first.

Although the law is not intended to go after LtdCo contractors operating outside IR35 - and it would be a real stretch for them to try that - I am not aware of anything which will actually prevent them from giving it a punt - because there is no mechanism to appeal whatever they decide - you would need pay the APN and then take HMRC to court to prove you are outside IR35.

Saying this is not popular here but no reason HMRC will stop here. Ltd company and everything else - HMRC will decide what is due, not law. They send an APN and you have to pay. To prove its not due, come up with a big sum of money for a proper QC. If you go unprepared without a good QC HMRC wins easy and sets precedence - FTT or UTT does not matter. It has been set in such a way that HMRC will get what they want.

As I was reading somewhere the other day, people paid in blood to get the freedoms which we enjoy but this government has undone a bit of that and trying to do even more. At some point it will start to roll back but how much damage would have been done by then who knows.

I hope all those think this will never apply to Ltd Co. are correct but even with running a Ltd Co. I feel it will not be the case.

Rob79
10th November 2014, 09:06
Although the law is not intended to go after LtdCo contractors operating outside IR35 - and it would be a real stretch for them to try that - .

I would not be confident of that position.

Anti avoidance rules have force against taxpaying entities. That could be individuals, companies, trusts, partnerships etc. I know of no limitation on DOTAS or any other AA law that limits them.

Rob79
10th November 2014, 09:07
GAAR makes more sense - and, in theory, is a lightweight way of getting clarity on a scheme.
If the GAAR rules on a scheme then one would know what is coming, however, again in theory, the GAAR would not apply retrospectively.

So why aren't they using the GAAR to challenge the current crop of schemes? It seems a clearer way than stating an arrangement is 'advisable'.

Because GAAR is retroactive. Until a scheme has been actually executed, a GAAR cannot apply.

jbryce
10th November 2014, 12:19
Because GAAR is retroactive. Until a scheme has been actually executed, a GAAR cannot apply.

Not sure I get you (but having been in a scheme does illustrate that I'm not the sharpest).

For the sake of argument, say a scheme has been whirring away for several years unchallenged by HMRC. At some point it is submitted to the GAAR and is deemed an avoidant scheme.

Now the GAAR accepts that arrangements are put in place to gain an advantage and it will rule on arrangements that are abusive. The GAAR is not retrospective. It only applies to tax arrangements entered into on or after 17 July 2013.

So what happens when the GAAR views one of the current schemes as abusive?

Rob79
10th November 2014, 12:50
Not sure I get you (but having been in a scheme does illustrate that I'm not the sharpest).

For the sake of argument, say a scheme has been whirring away for several years unchallenged by HMRC. At some point it is submitted to the GAAR and is deemed an avoidant scheme.

Now the GAAR accepts that arrangements are put in place to gain an advantage and it will rule on arrangements that are abusive. The GAAR is not retrospective. It only applies to tax arrangements entered into on or after 17 July 2013.

So what happens when the GAAR views one of the current schemes as abusive?

You are correct in that the GAAR is not retrospective. It applies to "arrangements" after 17 July 2013. Note that it's not "tax" arrangements, just arrangements.

A key question therefore will be "Did the arrangements exist before the key date and payments etc made after that date are as a result of those arrangements, or is EACH occasion of payment a separate arrangement allowing GAAR to kick in from the due date?"

I don't know the answer to that question. Common sense tells me that if you arranged to be paid in a particular way several years ago and have not changed them, then it should be safe from GAAR.

Legal analysis tells me that if something happens to change the previous arrangements, no matter how minor, then arguably they are new, possibly post July 13, arrangements. So would a minor change be for instance, changing a bank account or could that be ignored as not being part of the arrangement? Would asking your intermediary to bill a new contractor be a minor change but enough to trigger the rules? Where is the line?

It will be a minimum of 5 years before we see GAAR deployed in anger. Even then I would expect it to apply to post July 13 schemes to begin with in order to avoid losing the above point and perhaps a dozen others that might invalidate the issue. HMRC will want a big bang and a "safe as houses" application as no doubt the taxpayer on the other end will want to throw the proverbial at it if they have the means.

I fear that a lot of "non DOTAS'able" schemes presently in the market are going to be prime targets.

jbryce
10th November 2014, 13:14
You are correct in that the GAAR is not retrospective. It applies to "arrangements" after 17 July 2013. Note that it's not "tax" arrangements, just arrangements.

A key question therefore will be "Did the arrangements exist before the key date and payments etc made after that date are as a result of those arrangements, or is EACH occasion of payment a separate arrangement allowing GAAR to kick in from the due date?"

I don't know the answer to that question. Common sense tells me that if you arranged to be paid in a particular way several years ago and have not changed them, then it should be safe from GAAR.

Legal analysis tells me that if something happens to change the previous arrangements, no matter how minor, then arguably they are new, possibly post July 13, arrangements. So would a minor change be for instance, changing a bank account or could that be ignored as not being part of the arrangement? Would asking your intermediary to bill a new contractor be a minor change but enough to trigger the rules? Where is the line?

It will be a minimum of 5 years before we see GAAR deployed in anger. Even then I would expect it to apply to post July 13 schemes to begin with in order to avoid losing the above point and perhaps a dozen others that might invalidate the issue. HMRC will want a big bang and a "safe as houses" application as no doubt the taxpayer on the other end will want to throw the proverbial at it if they have the means.

I fear that a lot of "non DOTAS'able" schemes presently in the market are going to be prime targets.

But five years??? That means that the current raft of schemes will continue to attract the gullible for a while longer and that their pain will be even greater when HMRC bites.

Rob79
10th November 2014, 13:30
But five years??? That means that the current raft of schemes will continue to attract the gullible for a while longer and that their pain will be even greater when HMRC bites.

YES

jbryce
10th November 2014, 14:51
YES

So HMRC wait 5 years to get their act together and the scheme suppliers ride the train for another five years? That's truly cr@p.

eek
10th November 2014, 17:43
So HMRC wait 5 years to get their act together and the scheme suppliers ride the train for another five years? That's truly cr@p.

It's called life but is why some of us on here are happy to point people in the direction of this forum when the need arises...

And make things as hard as possible for Garraway and other scam merchants...