HMRC defeats fifth NT Advisors scheme

HMRC has defeated another avoidance scheme designed by NT Advisors.

HMRC said the victory was its fifth against schemes promoted by Matthew Jenner and his firm, bringing the total tax protected to more than £750m.

Recent defeats for the promoters include ‘Working Wheels’, where participants including DJ Chris Moyles claimed to be second-hand car dealers.

The Bluebox scheme involved in the latest tribunal involved a purported £500,000 gift to a charity, HMRC said...

Continued...

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Comments
stepurhan's picture

Still no prison sentences?    13 thanks

stepurhan | | Permalink

A donation to charity that is not a donation to charity, and still no prison sentences over these schemes. Am I missing something here, because that sounds a lot like fraud.

ShirleyM's picture

I agree, Stepurhan    8 thanks

ShirleyM | | Permalink

I had the same thought about the 'Working Wheels' scam. They lied about the 'business'. What else can anyone call it, but fraud?

Agree    6 thanks

secondhand_22 | | Permalink

Agree.  In these setups there are more elements than the is it avoidance or evasion argument.

Another element is whether fraud/misrepresentation offences have been committed.

Getting a few scalps for criminal charges would serve the current government agenda on tax very well I'd have thought - so why don't they have a shot?

ShirleyM's picture

I wondered about that, too, @secondhand    7 thanks

ShirleyM | | Permalink

As far as I can see, my little bit of research indicated it is because they took advice from 'professionals'. If they had tried the 'second hand car sales' scam themselves it would have been fraudulent.

I do wonder, though, why the 'professional advisers' haven't been prosecuted.

Still    7 thanks

secondhand_22 | | Permalink

You'd think that if you asked the man on the clapham omnibus to sign up to a scheme that showed (in diagram form) that he had to claim to be a car dealer he'd know that to be a misrepresentation of what he truely does (which has been to sit on a bus for 80 years answering questions from judges!)

Then when presented with his return to sign, he would see the self employment page, read the statement re making a true declaration and realise that it patently wasn't true.

If it was a technicality then, sure, he wouldn't be expected to know it was wrong. But it isn't - anyone could spot that it was an untruth.

We need lord denning to decide. He'd sort out the right from the wrong!

ShirleyM's picture

I agree with you    5 thanks

ShirleyM | | Permalink

I think it should be considered to be fraud by all the involved parties. You don't have to be the Brain of Britain to know whether or not you are running a second hand car business, and they should not be allowed to wriggle out of it by blaming an adviser who was equally as guilty.

The whole lot of them should be prosecuted.

I dont agree with You

Trethi Teg | | Permalink

So, what we are saying here is one can take legal advice from a QC, which provides an opinion that something is legal and then when is is found not to be legal one can be guilty of fraud and presumably be banged up. That is the whole problem with debate around the tax avoidance debate - the laws of the land are abandoned because it relates to taxes.

Hopefully Shirley M and the others wont find themselves taking advice in future from a QC in matters related to - say - land, probate, health care, driving offences etc  - and then having found that the QC was wrong being found guilty of fraud or perverting the course of justice.

Its about time everyone got off their soap boxes and got back to a sensible view of the law. Perhaps they could also spend some time bringing the establishment to account for the scandalous waste of moneys, without which taxes could be kept at a sensible level and not trying to impose a system Stalin or Hitler would have been proud of.

 

 

stepurhan's picture

Advice needed?    8 thanks

stepurhan | | Permalink

A £500,000 gift is declared made to a charity. The charity actually receives virtually nothing. Is legal advice really needed to tell that is wrong?

I will not deny that, where schemes rely on an interpretation of the wording of law, then prosecutions for fraud would be inappropriate. I still cannot see how claiming a deduction for something that has not actually happened can be anything but fraud. I cannot see how anyone could undertake such a transaction and not be aware that it was fraud. If a legal advisor said that killing someone who cut you up on the motorway was perfectly legal, would anyone then doing so be immune from prosecution for murder?

If you can give an explanation of how someone could claim a deduction for this non-donation and not realise something was up, please enlighten us.

ShirleyM's picture

You're entitled to your opinion, @Trethi Teg    6 thanks

ShirleyM | | Permalink

My opinion is that it was a blatant lie. I don't care who sanctioned it. I would be saying the same no matter who thought it was a 'good idea' to lie about a trade/charity in order to generate a big tax refund. Being a QC does not make anyone immune from dishonesty, especially if a large amount of cash is pushed their way, as there is always someone willing to overlook the law .... if you search hard enough. There must be quite a few QC's around who are willing to stretch the law, and possibly actually break it, as all the tax schemes (failures included) seem to have been approved by QC's. Anyway, who is to say the QC(s) knew that the second hand car scheme and/or charity was a sham? 

The NT adviser schemes are rather different to the ones that interpret the law for specific tax purposes. These latest 2 schemes (Working wheels and Bluebox) were based on falsehoods, and not based on interpretation of the law.

mrme89's picture

Until the promoters of these    7 thanks

mrme89 | | Permalink

Until the promoters of these schemes are held accountable, they will continue to promote them.

 

All well and good that HMRC have 'protected' the tax owed in these schemes, but at what cost? How many HMRC hours have been spent trying to close these scheme down?

ShirleyM is correct    1 thanks

Justin Bryant | | Permalink

Having relied on a professional adviser makes all the difference (especially if supported by a positive counsel opinion, per HMRC’s own published guidance). Why wouldn't it? That's why the Vantis tax scheme clients weren't done for fraud either.

As to negligence penalties, this case is relevant (for Icebreaker too):

http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j7570/TC03229.pdf 

I wonder    4 thanks

justsotax | | Permalink

if the 'blinkered' client asked how much of his hard earned cash would end up with the charity...at a guess this was one question not asked....because the agenda wasn't about getting money to a charity. 

Is counsels

The Black Knight | | Permalink

Is Counsels opinion worth anything then.

This is what is used to convince the accountants that it's ok.

HMRC approved is what is told to the client.

Just marketing spin or deception?

Not read it yet as you can waste a lot of time reading about an idiotic scheme but may learn nothing new from it,  but did it fail on substance over form? or if it had worked would it have?

Is HMRC going for the easy ones first. Will any of these get to second tier to establish precedent or is that needed at all anyway.

Penalties

The Black Knight | | Permalink

No mention of penalties just tax and interest.

Presumably HMRC feel the taxpayer took reasonable care in their tax affairs.

So are these salesmen considered competent advisers.

And if there is no penalty only the tax that would have been due otherwise then no one has been negligent either?

 

.    5 thanks

ireallyshouldkn... | | Permalink

Re Council's opinon, its all bluster.  They just go shopping until they find a QC who thinks it might just be OK under a limited set of circumstances. Having got this "approval" along with an official looking HMRC "scheme number" (which just means thy have put their hand up to the fact this is a 'scheme' and rather iffy)  the scheme is then sold widely to people for whom the criteria doesn't fit at all. 

Its a bit like if you go to a litigation lawyer and ask "do I have a case?"  Of course you do sir, can I have £5k upfront to present it?

 

Counsel's opinion    1 thanks

secondhand_22 | | Permalink

I always run a mile from anything if the blurb says it is supported by Counsel's opinion.  Because we all know what that means - it's a dodgy scheme!

Besides, if one were actually allowed to read the opinion, I expect there are more caveats, assumptions and warnings in it than you'd know what to do with.  No barrister would actually provide a 'sign off' of any sort.

Seems that the value of the opinion is marketing and to keep folks out of jail.

KH's picture

Funny, always thought Chris Moyles was a second-hand car dealer    2 thanks

KH | | Permalink

Funny, I always thought Chris Moyles was a second-hand car dealer ... ..............

 

Locutus's picture

Counsel's Opinion versus gut feeling    1 thanks

Locutus | | Permalink

There's a lot to be said for taking good, professional advice, but bear in mind that Counsels' Opinions are probably riddled with words such as "could", "should", "might" and disclaimers that are so wide they are likely to make the opinion meaningless.

For me, if the scheme looks artificial or contrived to the average man in the street, then all of the Counsel Opinions in the world wouldn't make me recommend it.

I'm sure HMRC will be quick to examine NT Advisors' sixth, seventh and eighth schemes when they come to their attention.

I agree but then what did MP    1 thanks

jalwebster | | Permalink

I agree but then what did MP's do with regard to their expenses and why aren't most of those who claimed incorrectly also being prosecuted for fraud!!!!!

We got to Godwin's Law quickly    2 thanks

trevv69 | | Permalink

Look it up, if you don't know what that is.

Counsel's opinion as a defence against fraud is an odd concept. On that basis, would any criminal trial with a QC defending be automatically lost by the prosecution? As has been said, it's likely that such an opinion is couched in terms that really make it watertight, whatever the actual outcome. It looks like a guarantee or an insurance policy, but it won't be valid if you need it.

I would agree with others upthread. It's one thing to have a debate in court about whether section a of law b in interaction with section c means that transaction d could arguably be free of tax, it's another thing when transaction d itself is a farce. An overpaid radio DJ is not a secondhand car dealer. A gift to charity in which the charity gets nothing is not a gift to charity. How this is different from someone deliberately misstating their income on a tax return is a mystery.

One Way Traffic.....    2 thanks

AndyC555 | | Permalink

It seems to me that the 'morality' and 'they should have known better' arguments only work one way where tax is concerned.

Are there any tax advisors or accountants reading this who have never been faced with a client who has said "I can't believe that that ISN'T allowable" to which our reply has been "that's just the way the law is written"?

There is never an offer from HMRC to look at the moral position or the spirit of the law if clients fall foul of it. 

It seems to me that what has really happened is a change in the way the courts are looking at such schemes.  It used to be that if a scheme complied with the letter of the law, however tenuous the scheme was then the courts were finding in favour of it, now they are not.

I certainly can't see how there is a 'moral' argument that some pop star who earns money from fans all over the world should organise his or her tax affairs so that they pay the absolute maximum amount of tax in the UK that they possibly can.

Although I don't much like wholly artificial schemes,  I would have no problem with someone being advised that if they want to minimise their UK tax they should go and live in Jersey - always assuming that they actually do that and aren't just pretending to live there!

It's naïve to assume that the ending of artificial schemes will mean taxes will roll into the exchequer. Bill Gates, for example, is a very rich man who pays no UK tax not because of some outrageous scam but because he doesn't live here. That option is open to everyone.    

bookmarklee's picture

Back in the day    1 thanks

bookmarklee | | Permalink

trevv69 wrote:
Counsel's opinion as a defence against fraud is an odd concept.

Back in the day when I was still in practice I was routinely being asked to give my view on fancy tax schemes. I'll save you the sordid details - save to say that few clients went ahead.

As already noted, all tax schemes come with a supporting Counsel's opinion that the scheme does not involve fraud or evasion. They rarely guarantee that the scheme works, simply that it operates within the letter of the law. This remains the case even if the scheme is ultimately found to be ineffective.

Where the taxpayer has evidently seen and taken notice of Counsel's opinion on the scheme - or, better yet, gone to Counsel themselves, the authorities do not waste time alleging fraud. Such an accusation would be reserved for the promoters of the scheme if it does not operate in the way promoted to the taxpayers who 'invested' in it.

Mark

 

Omnibus editon    2 thanks

ken of chesterl... | | Permalink

[quote=secondhand_22]You'd think that if you asked the man on the clapham omnibus to sign up to a scheme that showed (in diagram form) that he had to claim to be a car dealer he'd know that to be a misrepresentation of what he truely does (which has been to sit on a bus for 80 years answering questions from judges!) 

 

I love it!

 

 

Not sure about that    3 thanks

trevv69 | | Permalink

Not sure that the courts are dismantling the "letter of the law" compliance in these high profile cases. Rather it is the nature of the transactions themselves - as I said, if the transaction is a charitable donation, and the charity concerned is not a penny better off at the end of it, then logically there is no charitable donation *in fact*. Likewise, if you're not really a secondhand car salesman.
And in the Icebreaker case, I believe this again fell down on the facts (not really in business with the intent to make a profit) rather than on any novel approach to tax avoidance per se.

stepurhan's picture

Not moral arguments    1 thanks

stepurhan | | Permalink

AndyC555 wrote:
It seems to me that the 'morality' and 'they should have known better' arguments only work one way where tax is concerned.

Are there any tax advisors or accountants reading this who have never been faced with a client who has said "I can't believe that that ISN'T allowable" to which our reply has been "that's just the way the law is written"?

I've never been faced with a client who said "I'm going to pretend that I made a donation to charity, but I won't really. Can I claim a deduction?" If I did, I think my response would go way beyond "that's just the way the law is written". This is not a case of morality, unless you think relying on an outright lie is simply a moral question.

I will make a genuine effort to come up with legitimate arguments for making deductions wherever possible. I shall even advise clients on what they can do to back up those legitimate arguments, by means of record-keeping, or avoiding actions that will create duality of purpose issues. Only if there really is no legitimate argument will I resort to telling clients that it cannot be done.

Quote:
I certainly can't see how there is a 'moral' argument that some pop star who earns money from fans all over the world should organise his or her tax affairs so that they pay the absolute maximum amount of tax in the UK that they possibly can.
This is, and always has been, a ridiculous statement to make in these circumstances. It is just blatant straw-manning. No-one is saying that they shouldn't be able to legitimately reduce their tax bill. We are just crying foul when they do that in illegitimate ways.

bookmarklee wrote:
As already noted, all tax schemes come with a supporting Counsel's opinion that the scheme does not involve fraud or evasion. They rarely guarantee that the scheme works, simply that it operates within the letter of the law. This remains the case even if the scheme is ultimately found to be ineffective,
Are you able to shed any more light on this "donation that is not a donation" issue? If you say Counsel's opinion must mean it complies with the letter of the law then presumably this cannot be fraudulent. I still don't understand how.

FAO Steppurhan

AndyC555 | | Permalink

You misunderstand my first point about talking to clients.

I am saying that clients accept the word of trusted advisors even when it makes no sense it the client.

What you then go on to say is that you advise your clients what to do and tell them that this will reduce their tax bill.  Your clients presumably believe you and follow your advice? Even if they don't understand why what you've told them is important or necessary or logical?

And raising the 'moral' issue is blatant straw-manning? I can only assume you haven't been following the debate. 

Margaret Hodge and other politicians  have repeatedly used the 'moral' argument against the likes of Starbucks and Amazon whilst admitting they are doing nothing illegal (or even aggressive) as far as their tax planning is concerned.  Or maybe you didn't read about The Archbishop of Canterbury calling tax avoidance a 'moral issue' at the G8 conference last year and calling tax avoidance 'sinful'? Or Cardinal Brady, head of Ireland's Catholic Church saying the same thing at the same conference? And tax campaigner Richard Murphy publishing an article entitled "Why tax avoidance and morality are inextricably linked"?

You then go on to say that tax planning done "legitimately" is OK? Who decides what's legitimate? It's the courts, of course, who have found many artificial schemes over the years to be legitimate.

And you advise clients to "come up with" legitimate arguments but suppose those arguments fail before a Tribunal?  Are you saying you would then start flagellating yourself on the basis that if a court found against you, you must have been behaving illegitimately?

So what would your opinion of the "working wheels" scheme have been if the courts decided that legally it worked?  That it was OK?  Or that despite being legally OK it was.....er....morally wrong?

ShirleyM's picture

Here's a thought ....    2 thanks

ShirleyM | | Permalink

A professional adviser gets QC approval for tax avoidance, based on a real business. Apply the same rules to an imaginary business and you can be as fraudulent as you like because you have a 'get out of jail' card in place!

I cannot understand why QC approval, and professional advice, which may be based on different facts & circumstances, excludes someone from being prosecuted for tax evasion 

re Here's a thought.    1 thanks

ken of chesterl... | | Permalink

Quite right, Shirley

Peddlers of avoidance are very cagey about avoidance schemes. You then have the analogy  of a fat midget buying a ready-made suit on line.

 I had a client who used to draw out all his turnover, thus giving himself massive S 419 problems and an overspent CT provison.   The peddlers gave me very little information, but what I did get involved partnerships and the Isle of man. On the information I had, an eminent tax consultant friend told me it wouldn't work anyway, before you even got as far as morality.. Client went ahead, I resigned. From being close freinds I found myself taken off his Christmas card list!

As his company disappeared from Companies House website a year afterwards, clearly the scheme didn't work.  Pity, he deserved better!

flurrymc's picture

Trouble is, Ken, that what    1 thanks

flurrymc | | Permalink

Trouble is, Ken, that what you probably told him to do would sound equally ludicrous and artificial to a lay person.

“Before you pay money from the company bank account to your bank account you must hold a meeting  with yourself and declare a dividend, don’t forget to ask yourself if there are enough reserves in the company to pay the dividend, then record the fact that the meeting has taken place.”

 

Trouble is, Ken, that what..    1 thanks

ken of chesterl... | | Permalink

Far be it from me to use a precedent for the meeting and resolution and have the client sign it!

The trouble is that small company users of ready-made companies  are used to minutes of meetings that only took place in fairyland, and resolutions pre-printed by incoming banks, who insists on them.

 

A 14-year old actress famously signed legal documents without having read them. HP agreements, leasing T & C's, software contracts, and contracts with power suppliers, all have small print that few people read and fewer understand. 

I've only ever had one client read his Engagement Letter  through line by line, and discuss or dispute them all, over several hours.. 

I've retired , by the way!

flurrymc's picture

That is my point    1 thanks

flurrymc | | Permalink

That is my point, Ken, how is a lay person supposed to know that, for instance, calling himself a second hand car dealer for tax purposes is a “no no” when they have been trained by us to perform all sorts of nonsensical, and indeed fake,  manoeuvres  to comply with unfathomable tax requirements.

stepurhan's picture

Several misunderstandings    4 thanks

stepurhan | | Permalink

AndyC555 wrote:
You misunderstand my first point about talking to clients.

I am saying that clients accept the word of trusted advisors even when it makes no sense it the client.

Hmmm

Advisor : "We set it up so that you claim a donation to charity but you end up getting all the money"

Client : "I don't understand how I could make a donation and still keep all the money, but if you say it's fine that that's OK"

Really? What I do is explain how they can legitimately reduce their tax bill, and why. I don't tell them to do things that, and I'm going to continue calling it this until someone can explain how it isn't, are fraud.

Quote:
And raising the 'moral' issue is blatant straw-manning? I can only assume you haven't been following the debate.

I'm sorry, I thought the bit I was accusing of being blatant straw-manning was obvious. Let me clarify that for you.

Quote:
....should organise his or her tax affairs so that they pay the absolute maximum amount of tax in the UK that they possibly can.
"Pay as much as possible" is a long way from "Don't lie to avoid tax". Objecting to people lying (false donations, fake businesses, etc) to avoid paying tax does not mean we think they should be taxed on their income without any deductions whatsoever. Yes, various people have misused the "moral" argument for political gain, but that doesn't invalidate it, especially when actions go way beyond personal views of right or wrong.

Quote:
You then go on to say that tax planning done "legitimately" is OK? Who decides what's legitimate?
See all my previous comments about lying

Quote:
So what would your opinion of the "working wheels" scheme have been if the courts decided that legally it worked?
This is a meaningless question because it didn't. It's like asking what would be my opinion of water being found to be dry. The people in question were not motor traders, so presenting them as motor traders was a lie. Call that a moral question if you like, but I can't help thinking the law deciding that people cannot save tax by lying about what they do is a good thing.