I think this is why more people are sore about it than the fact they pay more tax. Given a legal opportunity to reduce their tax burden if they could Im almost certain most people would take it. Ive seen people moan about others not paying their fair share of tax, then later in time, they have a family member pass away and get to inherit quite a bit of money and then onto the internet to see how they can somehow realise more of that money instead of having to pay the full inheritance tax.
Loan charge - do these people want sympathy?
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I think this is why more people are sore about it than the fact they pay more tax. Given a legal opportunity to reduce their tax burden if they could Im almost certain most people would take it. Ive seen people moan about others not paying their fair share of tax, then later in time, they have a family member pass away and get to inherit quite a bit of money and then onto the internet to see how they can somehow realise more of that money instead of having to pay the full inheritance tax.
No I'd just argue that you're conflating completely different things... you've got to play some mental gymnastics there to call me naive for holding the opinion that people taking this loan arrangement were naive if they couldn't see the obvious risk with it... I mean it's not like we don't know the end result here either!
I've been self employed before and I know plenty of contractors, I also know of people who've not been contractors but have been involved in tax dodges such as this among other schemes... you're completely clueless if you couldn't see the obvious risk here so calling others naive is a bit rich! My friends firm once paid people in platinum sponge and later had a court case involving an offshore trust and dodgy loans... apparently later involved some essex birds who worked as hairdressers or similar (or worse just housewives) having to stand up in court and answer questions about how they could justify taking a 7 figure loan!
But anyway, for all you know I might be a tax barrister right?
Makes things easier for HMRC.
They don't (and they haven't just waited years in some cases as others have already pointed out to you) it's useful though.
OK so if it was all fine then I expect we'll see them winning some court cases right? Hmmm lets see what happens there...
Back in reality, nurses/low paid agency workers aside, the contractors, traders etc.. who took advantage of these schemes knew it was a dodge, knew they were paying way less tax on actual income than they should have been... there is an obvious risk there.
Perhaps they should have consulted a proper tax advisor in future if they're that naive and they'd have been told about the obvious risks of these schemes, it's their choice to not seek advice elsewhere (or in reality to take the obvious risk that, lets face it, they knew about but hoped they'd get away with).
You say they're different. A person paying PAYE would say differently. They'd argue why does a Director with a PSC get to pay less tax than them.
Do we? Are you sure? HMRC went to court for years. Yes they had some successes. But ultimately, RFC 2015 gave them the "big win" - except it wasn't such a big win, because the courts found the employer liable, and HMRC realised they'd get very little return on their investment. Why else did they invent the Loan Charge?
On that we agree.
We wont get the chance now. HMRC have taken a shortcut - and in the process, given themselves a second bite of the cherry for the thousands of cases where they were asleep at the wheel (for years).
Define proper here. All were ICAEW members. It doesnt get more proper than that (!).
My point here was about legal / illegal. "Illegal" is criminality. I agree with you there are many grey areas in tax - but none of them amount to a crime. Your tax avoidance may not work, but you will not go to jail for it (and if you did go to jail, it wouldnt be avoidance, it would be evasion ... )
I wholeheartedly agree with you on this. Make the tax system simpler. Except they wont - too many vested interests.
Yeah, I think people are missing the point here - this wasn't tax avoidance. It was never legal to not declare your income to avoid paying tax on it
I'm not sure they are. This was tax avoidance, and his income was declared by the company managing his finances and taxes. This is (was) a perfectly legitimate, but perhaps morally ambiguous method of avoiding large tax bills. Now, having said that, I still have no sympathy for him, but the company offering said service should be just as accountable.
For anyone interested, it's worth looking up Behavioural Insights. The phrase "fair share" is right from their playbook. It's about nudging people into doing what they decree as the right thing.
I remember a few years ago seeing a quote from the then Chancellor, Philip Hammond, on the Marr show. He described these schemes as "illegal tax avoidance". He was forced to retract his statement because tax avoidance is not illegal, tax evasion is! You'd expect better from a Chancellor of the Exchequer.
I'm not particularly interested in what your made up PAYE person might say or not, it's not very relevant to anything here. Fact is you conflated very different things.
Yes, I'm fairly sure we do know the end result here, I mean sure maybe someone can fight it out in court and demonstrate that this dodgy loan scheme wasn't in fact dodgy... seems doubtful though.
That isn't true, the onus is on people to pay up, that doesn't stop them from going to court.
When you sign a contract for something important do you:
A) Just sign it because it was created by a solicitor and "it doens't get more proper than that" ?
B) Hire your own solicitor and get some advice?
Anyway the profession you're looking for is a Chartered tax adviser... Do you have any examples of actual CIOT tax experts promoting these schemes?
IIRC @Pudney is a tax advisor of sorts... perhaps he can answer - if you were considering a tax avoidance scheme - would you:
A) Just run with it because the guy flogging it says some accountant who may or may not have been chartered and who doesn't work for you but is trying to sell a product/scheme, was involved etc..
B) Consult an actual Chartered tax advisor who specialises in..... tax advice, paid for by you for some independent advice... such as - is avoiding all this tax and taking "loans" I don't expect to pay back actually legit?
IMO There was nothing stopping anyone from consulting with a tax expert and asking for paying for their advice/getting their views before taking the plunge and going along with a scheme like this... at least then if they were really really dense and didn't already see the really obvious risk then someone could spell it out for them!
Err.. ok. It's an example to your insistence that the 2 things are different. As a person on PAYE myself, I resent having to pay more tax than a person beside me operating as a PSC. Pretty much everyone I know thinks the same. Hardly made up - and doesnt require much imagination.
No. Wrong. The Loan Charge is a charge due on all outstanding loan balances as of 5th April 2019. You don't get a chance to go to court.
I'm sorry, but you haven't a clue what you're talking about. These schemes were proliferating left, right and centre. Even seasoned tax advisors and chartered accountants were promoting them (with huge kickbacks for themselves).
They are different... I'm not sure what some made up PAYE person has to do with this?
That someone might resent another person paying less tax doens't negate anything here, that is also different.
Wrong - no one is stopping anyone from going to court.
In that case - do you have any examples of actual CIOT tax experts promoting these schemes to their clients? How widespread was this? Are you conflating independent advice with the people flogging these schemes having an accountant involved?
I suspect if anyone had bothered to do their due diligence or just consulted a tax advisor independently they'd be informed of the risks... You're just defending gullible idiots and people who knew the risk but got caught out.
You made the point that it was "ridiculous" to think someone lowering their tax bill could be seen as legitimate. I then pointed out other ways in which people lower their tax bills which may seem ridiculous to a person on PAYE. That's the context here (in case you forgot).
This is completely wrong. I'd like you to explain to me how one takes the underlying tax liability to court and not pay the Loan Charge? The 2 things are different - the loan charge needs to be paid regardless. Whether the underlying tax liability ever makes it to court or not is irrelevant.
I can give you countless ICAEW chartered accountants, as examples, typically used by self employed people. This is well known - you only need to spend 5 minutes googling to see that professionals were knee deep in this debacle, lining their pockets - yet none have been made culpable. Some have even been taken to court - the problem is, none of this was illegal. So no wrongdoing occurred. And they were careful to caveat their slick sales pitch with enough maybe's to make suing them very difficult (although I believe some are being sued - so let's see what happens).
There's also statute of limitations. Whilst HMRC saw fit to go back 20 years (until reigned in by the independent review into the Loan Charge - thus still allowing them to go back to 2010), the statute of limitations means a lot of accountants can no longer be taken to court.
Should be regulated tbh... the tax advisors that disproportionately cause the most problems for HMRC are the ones that aren't members of professional bodies. If tax advice was a regulated activity and everyone had to be insured etc.. then we'd perhaps have fewer issues. No doubt you'd still get people trying stuff on, hiding things in trusts or companies offshore etc.. but you could reduce a lot of the low hanging fruit that would otherwise be into schemes like this.
This, I agree with you on. There should also be some onus on accountants producing unaudited accounts - their advice typically dictates what goes into a tax return. They should share some of the responsibility if that advice turns out to be incorrect.
Nope I've not claimed that it is ridiculous that simply lowering your tax bill can be legitimate - I suggest you re-read what I've posted and quote me if you're unsure. You're just making up context now... You've completely conflated different things here, that you seem to think they're equivalent might explain the mental block you seem to be having in failing to recognise that this sort of scheme was obviously risky (something literally any half decent tax advisor could have told you if consulted.)
You don't need to pay the loan charge if you settle your tax bill. That doesn't negate your ability to go to court.
I didn't ask you for accountants I asked you for tax advisors... you know, people you'd go to to get advice on..... tax! And again I think you're conflating accountants involved in flogging the scheme rather than independent advisors telling clients this was a good idea!
It's a simple point - getting independent advice could have highlighted the obvious risks with a scheme like this. Pretty dumb of people not to seek it given the sums involved.
If you settle your tax bill, how do you intend to take it to tribunal?
Caporegime
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So much incorrect info.
If you don't agree with a tax assessment you can appeal it.
You can also ask for an independent review
You can go to tribunal.
If you lose you can appeal and go to upper tier tribunal after first tier.
After that you can go to ECJ, etc.
As for promoters and advisers they cannot be taken to court by HMRC because it's you that never paid the correct amount of tax. You should have been paying the tax under self assessment. The key words here are self assessment meaning you assess yourself. Get it wrong and it's your fault nobody elses.
What you could do is take them to court personally after HMRC assess you. However that's a matter for you and your advisers. I'd consult a lawyer in the first instance.
The fact is people never paid income tax that was clearly due. Majority of them knew they were paying far less than what was due. Rightfully so they have to pay it back.
The point that they had advisers telling them it was kosher doesn't make any difference. That's for you and your advisers to deal with seperately.
If you owe money under this. This is money you should have paid a long time ago. Essentially it's an open and shut case. Pay what you owe and move on.
If you don't agree with a tax assessment you can appeal it.
You can also ask for an independent review
You can go to tribunal.
If you lose you can appeal and go to upper tier tribunal after first tier.
After that you can go to ECJ, etc.
As for promoters and advisers they cannot be taken to court by HMRC because it's you that never paid the correct amount of tax. You should have been paying the tax under self assessment. The key words here are self assessment meaning you assess yourself. Get it wrong and it's your fault nobody elses.
What you could do is take them to court personally after HMRC assess you. However that's a matter for you and your advisers. I'd consult a lawyer in the first instance.
The fact is people never paid income tax that was clearly due. Majority of them knew they were paying far less than what was due. Rightfully so they have to pay it back.
The point that they had advisers telling them it was kosher doesn't make any difference. That's for you and your advisers to deal with seperately.
If you owe money under this. This is money you should have paid a long time ago. Essentially it's an open and shut case. Pay what you owe and move on.
Again, complete naivety on how the Loan Charge works. Little point in having this debate, as you're clueless on the legislation. Once you've read it, then we'll discuss.
Caporegime
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Why would you pay if you didn't agree? You would appeal then take to court.
By doing just that, taking it to a tribunal...
https://www.gov.uk/tax-tribunal
HMRC said:
I'm sure a tax advisor and/orlawyer could advise further though.
Seems doubtful.
Ok, Im going to take a few mins to explain it. However, I suggest you read the legislation to get a proper grasp on it.
1. A uses a scheme in 2011 to avoid paying £40,000 in tax on an amount of £100,000.
2. HMRC open an enquiry into A and say he owes £40,000 in tax (no court has decided on this yet).
3. The LC19 legislation says that if A has a loan of £100,000 outstanding on 5th April 2019, he has to pay £40,000 as a "one off charge". If he pays this, they will waive the £40,000 they say he owes.
5. What does A do?
If he doesnt pay the £40,000 for LC19, he will lose by default in tribunal, because the legislation is clear that this "one-off charge" applies.
How does he take the underlying tax liability to tribunal with the barrel of the LC19 gun on him?
It's a masterful piece of legislation. It basically says - pay up now, regardless. Whether you win in court or not, we'll take the money anyway, thank you very much.