Loan charge - do these people want sympathy?

[dowie]

If the legislation hadn't been passed in the Finance Act, no one would think anything of this other than a cool way to pay less tax, which is exactly what it was. A loophole, that has legislatively now been closed.

That just isn't true, people have been using this sort of tax dodge way before then and HMRC has been taking people to court for offshore employee trusts or family benefit trusts for over a decade now.

If you're say a senior trader and your firm says "hey we can reduce your tax bill by making loans to your missus from an offshore trust" then you'd be silly not to go and get independent advice from an actual chartered tax advisor... if they'd not heard of the sorts of cases that have hit national newspapers then I'd be surprised. They'd generally know there was a risk there (of HMRC disputing the scheme - I'm not saying they would have been able to get a crystal ball out and predict some future means of enforcement like a loan charge but that isn't relevant, important point is the risk that you'd have to pay the tax you are deemed to owe and therfore budget accordingly if you still go ahead with it.) I don't doubt that some schemes had an "accountant" (whether chartered or not) involved, I don't doubt that there might be some shady financial advisors out there with an interest in flogging dubious schemes. This is why seeking independent advice from an actual tax professional not just any random "accountant" or "advisor" is a good idea!

The tribunal on EBTs found that disguising income as loans as far back as about 2001 weren't legitimate, it was the entire basis of HMRC v RFC, RFC had stopped using them by 2009 when they realised they were on shaky ground (as did other football clubs - many of them deciding to pay up when they realised their "mistake" and HMRC came calling).

I know the company my friend was at used them through the 00s, I also remember him telling me about some old scheme, before his time, involving platinum sponge. These firms know that they're taking the mickey a bit, the beneficiaries know they're taking the mickey, they know HMRC will take action at some point, they're basically just betting that HMRC will stop it going forwards and that they'll be able to fight to keep previous gains.... the risk is there though that they will have to pay up, they know that and they're openly taking that risk.

 

[DireEmblem]

Its difficult to judge as we don't know all of John's circumstances, but surely he was aware, that he wasn't fully declaring his income to the tax man? With his income being 'loaned back', then the company offering the loan should have been taxed instead as it was receiving the income.

It also probably requires tax rules to be simplified going forward, to make it crystal clear to people going forward the right course of action to follow.

In my view, tax should be paid in the jurisdiction any income has been earned. That is simple to follow for sales of goods, but then how do you charge for services?

It could be if someone lives in India, and writes some software for a company in the UK, they pay UK tax. I think that would then cause problems in the fact you can earn say 10k in the UK per year, without paying any tax. Could the solution to that be, that you pay tax on your total income in your base country of operations?

 

[fezster]

I agree with the sentiment of "you take your chances..."

I also agree some/many (though definitely not all) of these people were taking the michael.

What I don't agree with is that hmrc's years of silence, lack of action, some say tacit approval justifies a retrospective tax which allows them to bypass taxpayer safeguards and take a second shot where they missed their opportunity to collect tax (regardless of how much I wish the original tax avoider had paid the right tax). Once you go down that road of riding roughshod over rules put in place to protect us, it's a slippery slope.

And I also do not think the accountants, promoters, and others who made money from these schemes should be let off scot free. For those still around, at least, hmrc should be taking some action (and not just the lip service, which I've seen plenty of). Fine them or make them pay a proportion of the tax. I don't care if they're tory party donors or not.

 

[LeeUK]

No sympathy for tax dodgers even if it was legal.

 

[Psycho Sonny]

Its difficult to judge as we don't know all of John's circumstances, but surely he was aware, that he wasn't fully declaring his income to the tax man? With his income being 'loaned back', then the company offering the loan should have been taxed instead as it was receiving the income.

It also probably requires tax rules to be simplified going forward, to make it crystal clear to people going forward the right course of action to follow.

In my view, tax should be paid in the jurisdiction any income has been earned. That is simple to follow for sales of goods, but then how do you charge for services?

It could be if someone lives in India, and writes some software for a company in the UK, they pay UK tax. I think that would then cause problems in the fact you can earn say 10k in the UK per year, without paying any tax. Could the solution to that be, that you pay tax on your total income in your base country of operations?

There is already clear rules in place in regards to services and how you are taxed on them.

As for making tax simpler that's an impossible task. I dare you to go read a single taxes full legislation. Never mind the fact there are as many taxes for many different types of situation and transaction.

The people using these knew what was going on was dodgy.

UK law is very complex too. Like prostitution is legal but brothels and pimps arent.

If you think it can be fixed by making it simpler then I'd argue you would be undoing hundreds of years of work to get to the point we are currently at.

Unless you are planning on getting rid of a lot of taxes and increasing a single tax like a sales tax (VAT). However that single tax is still very complicated and people will design schemes based on that.

If you work in India and do work in the UK there are double taxation rules in place to stop you from being taxed twice.

Again it depends on what you did for who and how it was invoiced or paid.

Also Indians don't get the £12k allowance.

Personal Allowance
You’ll get a Personal Allowance of tax-free UK income each year if any of the following apply:

you hold a British passport
you’re a citizen of a European Economic Area (EEA) country
you’ve worked for the UK government at any time during that tax year
You might also get it if it’s included in the double-taxation agreement between the UK and the country you live in.

Claim the Personal Allowance
If you’re not a UK resident, you have to claim the Personal Allowance at the end of each tax year in which you have UK income. Send form R43 to HM Revenue and Customs HMRC.

https://www.gov.uk/tax-uk-income-live-abroad/personal-allowance

There is clear guidance available for any situation

 

[HangTime]

I know some people that took part schemes like this, one or two put money aside in case they were caught up with, others did not.

I have no sympathy for them, back then contractors were absolutely minting it already due to the increased dividends etc, it's just greed. Not saying I wouldn't have been greedy myself given the opportunity and encouragement / reassurance from my peers, but at the end of the day if someone owes HMRC a six-figure sum it's because they've been rinsing it and will have taken home an absolute fortune compared to those on PAYE anyway. The whole thing just sounded dodgy, they had some offshore entity lend them money and then that debt got written off.