Does BN66 matter?

[DonkeyRhubarb]

I'm interested in the opinions of people not affected by BN66. Users of the scheme like myself are probably too close to it to be objective.

Does the case currently going through the courts have any wider importance/significance?

If it gets to the Supreme Court and they rule in favour of HMRC does it have any broader implications/ramifications?

[LisaContractorUmbrella]

I think that the cause for concern is that the ruling, as I understand it, would be based on the premise that the tax payer should know what HMR&C intends, even though any relevant legislation may be flawed. I think to try and avoid tax these days is asking for trouble and I would (and do) advise strongly against it. However, retrospective tax legislation is wrong and IMHO could be massively damaging to the UK economy. An overzealous tax system will deter businesses from investing in UK PLC - you only have to look at Mr Branson's recent move to Switzerland

[eek]

I'm interested in the opinions of people not affected by BN66. Users of the scheme like myself are probably too close to it to be objective.

Does the case currently going through the courts have any wider importance/significance?

If it gets to the Supreme Court and they rule in favour of HMRC does it have any broader implications/ramifications?

As I said No I better say why. My reasoning is that the law has now been changed enough that while you are being impacted retrospectively there is enough law now in place to ensure that all future schemes are suitably forewarned. So that when HMRC decide the scheme is now worthwhile they can legally demand back payments.

[Mister Clark]

I think that the cause for concern is that the ruling, as I understand it, would be based on the premise that the tax payer should know what HMR&C intends, even though any relevant legislation may be flawed. I think to try and avoid tax these days is asking for trouble and I would (and do) advise strongly against it. However, retrospective tax legislation is wrong and IMHO could be massively damaging to the UK economy. An overzealous tax system will deter businesses from investing in UK PLC - you only have to look at Mr Branson's recent move to Switzerland

This summarises most of what I feel.

In addition, I follow your thread closely and the scary part for me is what happens if yours and PwC appeals are rejected.

So far as I can make out it would become a precedent that HMRC *could* refer to when applying retrospective taxation in the future and could be applied to cases that have nothing to do with schemes/EBTs etc.

Scary thought when put into an IR35 context.

I may have over simplified this; DR please correct/elaborate on this point if appropriate.

[NotAllThere]

It sets a precedent. While all the politicians and judges etc. will say - ah, it's only in this particular case where they really were taking the piss, they should have known etc. etc., so you don't have to worry, you only have to look at S660A to know that in a few years, an HMRC inspector might have a bright idea to exploit this precedent further, and widen its applicability..

[Mister Clark]

That’s what I thought.

I'm LTD and would guess I approx retain 82% of my companies income which isn't much less that people using schemes. What happens is HMR&C decides I'm taking the Michael and I now owe unpaid personal tax, plus interest plus fines?

I have a certain amount of sympathy for those hit by BN66; personally I would never have touched such a scheme with a barge poll however I understand why many did (introduction of IR35 being one of the main drivers).

The problem is at the time what they we're doing *appeared* to work (not going to go into it in this thread but there are internal HMR&C documents to support this position), just as LTD 1 man bands appear to work as an efficient tax vehicle for contractors right now.

What happens if HRM&C turn round and say we were using an artificial mechanism (no risk, only one income stream etc) to avoid tax and retrospectively tax us using MP and PwC as their precedent?

I think it highly unlikely, but that doesn’t mean it wont or cant happen and to think it doesn’t effect every person or company working in this country regardless of their trade or company setup is naive on many levels IMHO.

[DonkeyRhubarb]

Personally I agree with those who say it's scaremongering to suggest that IR35 could be amended retrospectively.

Too many people would be affected and there would be uproar. Also, unlike the DTA scheme, it would involve hundreds of thousands of individual re-assessments which would be totally impractical.

Maybe BN66 was just a one-off and we'll never see the likes of it again.

On the other hand, if Labour ever got in again, the temptation to introduce more retro taxes may be too hard to resist.

[OnYourBikeGB]

I think it has quite a significant meaning. I don't think the judgements handed down can be purely regarded as applying to retrospective legislation. Based on Parker they are a green light for HMRC to take extreme measures to tackle legal tax avoidance where a taxpayer has sought to lower their liability below that normally expected. But what does that mean? It's open to their interpretation. I know many think that the BN66ers (I'm one) were taking the proverbial, but this has wider implications. What is more worrying is that the judiciary are to some extent washing their hands, and there is no legal defense.

On the subject of IR35, while they may not be able to apply it retrospectively (for political reasons), there is nothing to stop them, for example, increasing penalties to a ruinous level. It just needs to be signed off by Parliament, and they have shown they are prepared to use any means possible to do that. I suspect with Labour, they wouldn't even have to try to hard. Remember that IR35 is the exact opposite of what Parker claimed, that the BN66 scheme gave an unfair competitive advantage to it's users. Under IR35 an unfair disadvantage was imposed on contractors who then found it harder to compete with large consultancy firms. HMRC has shown that they want to define fairness as that what brings them in the most revenue, with the least political consequences, and the rights to challenge this are being stripped away.

The most worrying thing about BN66 for the business community is not so much retrospection, it's the lack of clarity, lack of limitation and the removal of a check to the power of HMRC. And that's why it's significant, imo.

[centurian]

Personally I agree with those who say it's scaremongering to suggest that IR35 could be amended retrospectively.

Again the voice of reason.

We hear it less often now, but the claim that general taxation rates could be retrospectively changed is just pure 100% tulip. Retrospection will never affect the masses for one simple reason - there's no need to. If the government wants to take more money from the masses, it just puts up tax rates (which is exactly what the government have done with VAT etc.)

Retrospection for IR35 probably isn't quite so far fetched, but the problem is implementation. Each case has to be argued on it's merits. The problem with BN66 is that you have herded yourselves into collective groups that make a juicy target for HMRC.

[centurian]

On the subject of IR35, while they may not be able to apply it retrospectively (for political reasons), there is nothing to stop them, for example, increasing penalties to a ruinous level.

At 100% + interest + 2%, it's already pretty ruinous, although the government are increasing that to 200% for certain cases, so that measure already exists.

Whatever size of people's BN66 CN's, I understand that the total amount paid to the scheme and HMRC works out at roughly the same as if you had gone umbrella in the first place. A 100% penalty on IR35 will leave you considerably worse off.