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webberg
2nd April 2015, 15:29
The question and answer below I have extracted from the Bedouin thread as I suspect many lurkers here will have moved from a DOTAS to an allegedly non DOTAS scheme at some point.

I would stress that this is a personal view and please read the disclaimer.

Quote Originally Posted by LetsGoSailing View Post
Hi webberg and any other advisors in the know
What action do you recommend for users of a non DOTAS registered scheme like Bedouin.
There has been much talk in the forum of the Settlement Opportunity, which is only for tax years up to 2011. APN's are starting to hit post boxes, but they are only for DOTAS schemes (as far as I know, so far). There are a number of JR groups being formed against APN's, but I assume they are only for those being hit with an APN, so what do those of us that don't fall into any of those categories do?
For an example like this: Tax year 2013, non DOTAS scheme (Bedouin), open Section 9A enquiry into self assessment, estimated liability not totally massive that it fighting is the only option, but big enough that some favourable terms to pay it back would be required over a number of months, and willing to enter some sort of settlement arrangement just to put this all to bed and to cap interest and extra charges, what does one do? It seems like none of the options on the table currently cater for this situation. Does one just wait until HMRC to make the next move?
A few from Bedouin have mentioned on the forum that they have received requests for payment from HMRC - what exactly are these? They are not APN's I don't think, are they just a recalculation of what HMRC think you owe which you can either pay or not pay? What are the consequences?
I will most likely be looking for some form of professional advice at some point, but so far am yet to see any available options being mentioned for this situation.
Cheers
A bit of a hospital pass - thanks!

Disclaimer - I have not studied the Bedouin scheme details, whether reported under DOTAS or not, nor your personal circumstances. As such the following represents my personal opinion based on what I know and have assumed and you CANNOT and MUST NOT rely upon anything below. You should ALWAYS seek appropriate professional advice.

The HMRC position on non DOTAS schemes is that most should probably have been disclosed and that failure to do so is a potential offence. They rely upon the wording of the legislation that discusses a "notifiable" scheme. The words are widely drawn, ill defined and not yet tested in Court. In the event that a Court eventually decides a scheme should have been disclosed, HMRC will seek penalties. These are the primary responsibility of the provider. However if the provider has failed to disclose, then there is a chain of others who become liable. This starts with intermediaries, goes to advisers and eventually to users.

In summary, you could find yourself liable for penalties for failing to disclose. These were originally modest at around £5k plus a daily charge. They have been ramped up most years. Most recently a provider could be fined up to £1m for not disclosing. I'd have to research the history of fines to be accurate and frankly don't have the time at the moment.

APN's can be issued ONLY for DOTAS registered schemes at the moment. A non DOTAS scheme would need to be hit with a Follower Notice (unlikely as no finally decided cases at the moment), a GAAR counteraction notice (no sign publicly of any GAAR notice yet but I understand we will see the first within 6 months, not a contractor scheme), or HMRC get a ruling that a scheme was "notifiable". That would require a Court hearing, so such a beast in 2015 in unlikely.

A JR is looking to challenge APN on jurisdictional or procedural grounds. These are usually accompanied by an injunction that stalls payment. A JR hearing will decide whether HMRC has the right to issue an APN and how. Opinion is divided as to whether a JR will succeed. If it does, my opinion is that the rules will be re-written and we'll see new incontestable rules later this year. If not, the APN is valid and needs to be paid. It's presently unclear whether the latter would mean that the original penalty dates (due payment date - 5%, plus 5 and 11 months later at 5% each) would be valid. There are others here trying to chase that issue down.

I think this is one of those issues where if you put 5 experts in a room, you get 6 replies. You have to weigh the various factors, legal and political and economic to get an answer. For what it's worth, my personal opinion is that a JR will fail.

If you have used a non disclosed scheme, I would suggest the following.

1. Assume that you will get a demand for tax based on the funds you received being fully taxable.
2. That may arise via an APN - see above - or an assessment - which can be appealed
3. Start saving for the liability and if possible buy a Certificate of Tax Deposit which stops interest running
4. Look at what you've told HMRC via your returns. If this is less than full disclosure of all the facts, ask the provider what they have told HMRC. If you are unsure, tell HMRC all the details you know. This will reduce any penalties in due course.
5. Get active in joining or forming a group of people in similar situations.
6. Do not rely upon the provider to stay around to help. A few exceptional firms do, most disappear.
7. Do not rely upon the providers adviser. They will help only for so long as the provider pays them.
8. Get you own adviser.

As I mentioned, the fact that there is no disclosure under DOTAS has temporarily stopped an APN unless and until HMRC get a ruling, but they have other routes. Enquiry notice (9A) plus assessment is the usual (makes you wonder how HMRC know who is in the scheme?) but they have other routes such as discovery.

If you take anything from the long piece above (apologies), it's this.

Assume your scheme should have been disclosed; calculate the possible liability; start making provision to pay it; seek independent personal advice based on your circumstances; get organised in a group.

As I said, this is a general overview and you cannot rely upon it (because you're not my client and have not paid a fee).

I also think that the above might be useful as a separate thread. Do you have any objection to this being posted as such?

pimpernell
2nd April 2015, 22:26
Some clarification please.

My provider told me that DOTAS registration was not required because the scheme (offshore EBT) was set up prior to 2004 and closed its doors to new members after the FA 2004 ruling.

I've no idea what was on my tax return but I'm assuming there was no DoTAs number entered because of the above.

I'm assuming I can't therefore get an APN even though I did received two COP 8s for 2006-2008 - because no DOTAS number. I have never received a settlement opportunity either or any other correspondence since.

I'm also assuming that at some point HMRCs spotlight will fall on the scheme I was in, but they have in fact followed the rules re. Disclosure. That being the case how or why could penalties be applied when the rules have been followed??

Or is it all a case of wait and see what happens?

DonkeyRhubarb
3rd April 2015, 07:07
Or is it all a case of wait and see what happens?

It's a complex area.

The only certainty at the moment is that APNs can't be applied to tax year 2003/4 or earlier.

webberg
3rd April 2015, 09:45
Some clarification please.

My provider told me that DOTAS registration was not required because the scheme (offshore EBT) was set up prior to 2004 and closed its doors to new members after the FA 2004 ruling.

I've no idea what was on my tax return but I'm assuming there was no DoTAs number entered because of the above.

I'm assuming I can't therefore get an APN even though I did received two COP 8s for 2006-2008 - because no DOTAS number. I have never received a settlement opportunity either or any other correspondence since.

I'm also assuming that at some point HMRCs spotlight will fall on the scheme I was in, but they have in fact followed the rules re. Disclosure. That being the case how or why could penalties be applied when the rules have been followed??

Or is it all a case of wait and see what happens?

As DR says - it's complicated.

1. I'm surprised that a pre 2004 scheme is still running. I'd have thought that the raft of rules on disguised remuneration etc would have made it ineffective back in 2007 or 2008. Are you sure it's the same scheme? May have the same name but if the mechanics and cashflows are not today what they were in 2004, it's a different scheme.

2. You will not get an APN. You may in due course get an assessment for the COP 8 years and perhaps discovery assessments for other periods. The risk of the latter is increased if you return is silent on details.

3. Penalties are not based on disclosure under DOTAS. They are based on why did you use the scheme, what did you tell HMRC about it (or not), did you hide information, did you try and defend it. The last is strictly not a factor in assessing penalty but HMRC always try it on. So yes, you may get a penalty if your scheme is proven to be ineffective.

4. You can wait and see (acknowledging that interest is potentially racking up - buy a CTD). You would be better advised to ask the provider the above questions and also whether HMRC has been in touch and if so what have they been told and what was their response. If the provider is reluctant, ask HMRC the same questions. If you would rather not, your accountant or adviser could probably ask HMRC on a no names basis.

Whatever you do, take control.

Do not rely upon a provider of a 10 year old scheme to stick around for ever. Do not do nothing.

pimpernell
3rd April 2015, 18:39
As far as I know the scheme was closed in 2008. Sorry if I didn't make that clear in original post.

The same providers then created a new scheme but I was long gone by then and in permiedom.

I have asked my current accountant to see whether he can find out from HMRC what was on my 2006-2008 tax returns, - the ones I received a cop8 for - and whether a DOTAS number was specified, and also what loan amounts were entered, but I'm fairly certain that there was no DOTAS number specified because the provider didn't take on any new clients after 2004. They were always ken to be as under the radar as possible. Agree it would be good to get that confirmed but the people I used to deal with from the provider - don't know how to contact them now, including the accountant they used.

I've been advised by a tax specialist to let sleeping dogs lie in the meantime as far as asking HMRC direct is concerned, at risk of stirring up the hornets nest.

I gather the scheme was run correctly from an EBT point of view and a lot depends on the Rangers case. I guess worse case is that HMRC will keep on taking an EBT scheme to court until they get their desired outcome and then issue FNs. At that point I may be more at risk, but I gather that could take years.

Other than that I don't really know. I look at these boards and there are many people worse off than me. I haven't had any demand for settlement or any other correspondence since from HMRC but am painfully aware that the COP8 s give them licence to take as long as they like. I think I could work out the potential liability and have thought about purchasing a CTD, but that could tie money up for years that could be more usefully invested elsewhere.

pimpernell
3rd April 2015, 18:51
2. You will not get an APN. You may in due course get an assessment for the COP 8 years and perhaps discovery assessments for other periods. The risk of the latter is increased if you return is silent on details.

Why could I get discovery assessments for other periods? I thought that other tax years are now closed since I didn't get a COP 8 and the only ones I could be assessed against are those which a COP8 has held open?

webberg
4th April 2015, 09:26
2. You will not get an APN. You may in due course get an assessment for the COP 8 years and perhaps discovery assessments for other periods. The risk of the latter is increased if you return is silent on details.

Why could I get discovery assessments for other periods? I thought that other tax years are now closed since I didn't get a COP 8 and the only ones I could be assessed against are those which a COP8 has held open?

The COP 8 years are open.

Discovery is usually available up to 4 years after the year end. So if you finished in 2008, probably OK under normal rules.

if HMRC allege a more serious offence than carelessness, i.e deliberately hiding details then these time limits expand. Exactly how much that is depends on things like when your returns were submitted etc.

pimpernell
4th April 2015, 09:55
Ok. Thanks For your help Weberg. That's what I thought.

As far as I know the accountants associated with the provider filed timely tax returns with details of any EBT loans, so amounts disclosed were accurate, so I think fraud can be defended and the tax advisor I spoke to advised the same( although he didn't look at my tax returns for the cop 8 years).