This is in the news again as some MPs are kicking off and it's drawn comparisons to the Post Office scandal but the connection is rather vague at best in so far as some ordinary people need to pay back large sums of money and this is causing financial ruin for some:
www.independent.co.uk
Fundamentals seem very different; post office scandal involves people being falsely accused of stealing this involves people actually dodging tax and being asked to pay.
I remember in the 00s when my friend started working in commodities and mentioned all the tax dodging shenanigans in his industry, wealthy traders/brokers previously being paid in platinum sponge at one point before he joined (HMRC put a stop to it) were then using offshore trusts making "loans" to traders and their spouses.
The basic gist of it was that the commodities firm and others arranged to set up an offshore trust, the traders get their salaries as normal but their bonuses get paid via "loans" made from this trust... with an unwritten agreement that the loans don't ever need to be repaid. Obvs this means they avoid a load of income tax as they've merely "borrowed" the huge sums they were paid in bonuses.
HMRC was anti this as far back in 2004 and made it quite clear it was dodgy in 2010 too but this sort of scheme ended up not just being something set up for millionaire city types but was later marketed to IT contractors.
IT contractors earn say low six-figure incomes, and in their case it wasn't their employer/client company who was setting up the tax dodge for them but some third-party firm marketing it to them and that involves taking a cut of say 10 or 15%... (lots of money to be made for the dodgy firms selling these schemes) but the contractor gets to dodge income tax in return and they're not wealthy enough to have their own trust so still worth it to them to pay a cut to the third party instead of paying tax.
You can't cheat an honest man comes to mind for these IT contractors, you don't need to be a tax expert to know that taking a loan to dodge income tax and being told off the record that the loan doesn't need to be repaid is inherently dishonest.
The perhaps iffy circumstance in some case where this sort of thing extended to agency nurses and social workers (especially if in their case their agency told them to do it) but ultimately you're still responsible for paying tax and you would have had to agree to a loan you *know* you're not expected to pay back, there's still the personal responsibility aspect.
So to crack down on these schemes the government introduced the loan charge in 2016; basically, if you've got one of these loans then you have three years to pay it back or you face a charge of 45%.
If you're a tax dodging IT contractor who has been earning "borrowing" say £120k a year for the past 5 years then that's suddenly £600k you need to pay back, on paper that's what you "owe" but it wasn't really a loan.. it was income. Obviously, people aren't going to pay back these loans so now they need to pay the 45% loan charge... to account for all the income tax they dodged but 45% of £600K is still £270k and lots of these chumps didn't expect to be rumbled so have spent it.
This has caused financial ruin for some therefore outrage... but surely it's just holding people to account over the tax they knowingly didn't pay, in some cases for multiple years?
Loan charge victims need fair resolution and full investigation, urge MPs
The controversial tax avoidance clampdown was introduced in the 2016 Budget to address tax loss from ‘disguised remuneration’ schemes.
www.independent.co.uk
Fundamentals seem very different; post office scandal involves people being falsely accused of stealing this involves people actually dodging tax and being asked to pay.
I remember in the 00s when my friend started working in commodities and mentioned all the tax dodging shenanigans in his industry, wealthy traders/brokers previously being paid in platinum sponge at one point before he joined (HMRC put a stop to it) were then using offshore trusts making "loans" to traders and their spouses.
The basic gist of it was that the commodities firm and others arranged to set up an offshore trust, the traders get their salaries as normal but their bonuses get paid via "loans" made from this trust... with an unwritten agreement that the loans don't ever need to be repaid. Obvs this means they avoid a load of income tax as they've merely "borrowed" the huge sums they were paid in bonuses.
HMRC was anti this as far back in 2004 and made it quite clear it was dodgy in 2010 too but this sort of scheme ended up not just being something set up for millionaire city types but was later marketed to IT contractors.
IT contractors earn say low six-figure incomes, and in their case it wasn't their employer/client company who was setting up the tax dodge for them but some third-party firm marketing it to them and that involves taking a cut of say 10 or 15%... (lots of money to be made for the dodgy firms selling these schemes) but the contractor gets to dodge income tax in return and they're not wealthy enough to have their own trust so still worth it to them to pay a cut to the third party instead of paying tax.
You can't cheat an honest man comes to mind for these IT contractors, you don't need to be a tax expert to know that taking a loan to dodge income tax and being told off the record that the loan doesn't need to be repaid is inherently dishonest.
The perhaps iffy circumstance in some case where this sort of thing extended to agency nurses and social workers (especially if in their case their agency told them to do it) but ultimately you're still responsible for paying tax and you would have had to agree to a loan you *know* you're not expected to pay back, there's still the personal responsibility aspect.
So to crack down on these schemes the government introduced the loan charge in 2016; basically, if you've got one of these loans then you have three years to pay it back or you face a charge of 45%.
If you're a tax dodging IT contractor who has been
This has caused financial ruin for some therefore outrage... but surely it's just holding people to account over the tax they knowingly didn't pay, in some cases for multiple years?
