IT contractor loses employee loan tribunal

An IT contractor should pay tax on loans from employers because the money was “in substance and reality” income from employment, a first-tier tax tribunal has ruled.

In Philip Boyle versus the commissioners for HMRC, TC03103, Boyle argued that his contractor loan scheme worked and the money he received was not taxable.

Boyle also argued that...

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments
ShirleyM's picture

I wonder ,,,

ShirleyM | | Permalink

.. if HMRC will challenge more of the schemes that utilise non-repayable loans?

johnjenkins's picture

Well perhaps

johnjenkins | | Permalink

someone is listening to me.

Providing advice without knowing or understanding the facts?    1 thanks

Wayne Pulman | | Permalink

 

Whoever wrote this article and says "another sign that offshore employee loan schemes dont work" are either running their own agenda or dont understand what this case was about. Clearly a lack of knowledge of this type of arrangment.

Even more surprising therefore for BKL Tax to recommend that people using these schemes (without knowing the nature of the particular arrangment) to settle is - I would suggest - irresponsible to say the least. If I were their PI insurer I would be putting their premiums up!

Or is BKL Tax a subsidiary of HMRC???????

 

ShirleyM's picture

Promoter?    1 thanks

ShirleyM | | Permalink

Wayne Pulman wrote:

Or is BKL Tax a subsidiary of HMRC???????

You seem quite supportive of these artificial schemes. Are you a promoter?

Promoter?    1 thanks

Wayne Pulman | | Permalink

No I am not a promoter.

But I am fed up of accountants who do not look after the best interstes of their clients. I am also fed up of the media and political spin and hypocrisy. Finally I am fed up of the general public (and accountants) who adopt the moral high ground when 95% of the people complaining woul;d do exactly the same if they were in a position to do so.

Finally I am fed up of having to pay huge amounts of tax which is wasted by those who govern us. Strangley enough when I asked my clients about their attitude towards thier tax liabilities 90% supported my view.

Have you asked your clients?

 

ShirleyM's picture

Clients?    3 thanks

ShirleyM | | Permalink

Yes, actually, I have told them about these schemes. They prefer to pay tax and have a clear conscience.

EVERYONE would like to pay less tax, but when the millionaires avoid tax then everyone else (who doesn't use an avoidance scheme) has to pay more ... don't they? We would all benefit from lower taxes if less people avoided, or evaded, tax.

If they want to live in the UK and benefit from the taxes paid (which they will do), and they make a damn good living from the UK, then they should be willing to share part of the costs, too. I may be more forgiving if they just reduced their tax to 20%, or more, as people not so well off have to pay, but they don't do they? They want their cake, but they want the less well-off to pay for it!

Indirect Taxes

Wayne Pulman | | Permalink

I notice that there has been no response to my comments regarding indirect taxes.

Presumably these dont count as "taxes" if it doesn't suit ones argument.

 

ShirleyM's picture

@Wayne    1 thanks

ShirleyM | | Permalink

You seem very defensive of 'high net worth' individuals who want to enjoy keeping more of their 'after-tax income' (I got that phrase from a website). Do you think they are the only ones who pay VAT, etc? 

Maybe if everyone paid 1% income tax, or thereabouts, then everyone could buy a few more necessities, or unnecessary luxuries, and then everyone would pay a little more VAT, too. :)

Tax pays for hospitals, schools, police, etc. I hope the people using these aggressive avoidance schemes do not have children, because it is their future, and their country, that they are jeopardising. Maybe they will go live somewhere else, like Greece, where tax is optional for everyone.

johnjenkins's picture

I'm all for    3 thanks

johnjenkins | | Permalink

us having more money in our pockets and I firmly believe that we would spend it wiser than the politicians. It sickens me when I read about how we can't get rid of people because of human rights and the cost of appealing etc. Yes it's our money. So any legal scheme, in my book, to allow us to have more money is OK. Now we have to look at the artificial side of things. To me it is not legal for a scheme to be set up, where all its components are legal, yet some artificial. Also Accountants and tax advisers should not be setting up schemes that have artificial components in them because that is not in their clients best interests. That's not being high and mighty or forgetting about the painter who does a private for cash.

The long and the short of it is, we have technology that people want, the government need more money, benefits have to be paid for, the NHS need unlimited funds to catch up with the research that will heal people, etc. etc. and there is not enough to go round. There is enough food produced in the world to feed all, yet people starve. We are going around in a whirlpool and sinking faster and faster.

If the pressure isn't taken off soon we gonna be in the smelly stuff (well what do expect in the middle of January)

mrme89's picture

.    2 thanks

mrme89 | | Permalink

Wayne Pulman wrote:

But I am fed up of accountants who do not look after the best interstes of their clients. I am also fed up of the media and political spin and hypocrisy. Finally I am fed up of the general public (and accountants) who adopt the moral high ground when 95% of the people complaining woul;d do exactly the same if they were in a position to do so.

Finally I am fed up of having to pay huge amounts of tax which is wasted by those who govern us.

 

 

 

Perhaps accountants explain the schemes but also explain the pitfalls such as possible investigations etc, then the client decides against the scheme? Clients have to take some responsibility for their tax affairs.

 

Whether the tax is wasted or not doesn't mean that the tax isn't owed. If you don't agree with how your money is being spent, then you have the right to vote for alternative party to govern us.

Right to Vote???    1 thanks

Wayne Pulman | | Permalink

All clients I advise are fully aware of the risks associated with tax planning arrangments. I tell them whats available, what the risks are, what the effects are and they decide.

With regard to the "right to vote", thats far funnier than anything I have ever heard Jimmy Carr say. The final answer to anyone who complains about how the country is run.

So who exactly do I vote for?  Conservatives, Labour, Liberals, UKIP, Plaid Cymru in my case. They are essentially the same in terms of tax. The tax rates in the UK has to be so high to support the voters who put them there,

Finally, the amount of tax that is "owed" is set out in legislation. If your arrangments do not fall under that legislation then nothing is "owed".

In the event that a flat taxation system was introduced to the UK i.e. everyone pays the same rate of tax, then the tax avoidance debate would go away. Whilst the vast majority of the population are happy for the politicians to impose higher taxes on those who are succesful (so they dont have to pay more for the services they use), then you cannot blame the succesful for looking to other solutions.

 

 

 

ShirleyM's picture

Utter rubbish!    1 thanks

ShirleyM | | Permalink

Wayne Pulman wrote:

In the event that a flat taxation system was introduced to the UK i.e. everyone pays the same rate of tax, then the tax avoidance debate would go away. Whilst the vast majority of the population are happy for the politicians to impose higher taxes on those who are succesful (so they dont have to pay more for the services they use), then you cannot blame the succesful for looking to other solutions.

If that were true, then they would be happy to pay 20%, the same as those on low incomes, but they don't, do they? They don't want to pay any tax, and if forced, to pay as little as the schemes can possibly manage.

Jimmy Carr has paid £500K on profits of £2.5M, which is 20% if the figures are correct. What would he have paid if he had stayed in K2? Anything?

It appears you are selling these schemes, so your opinions may be based on personal gain. I hear the % commission paid are excellent so you should be doing quite well out of it, but the rest of the country pays the price.

mrme89's picture

I’m glad I humor you. Perhaps    1 thanks

mrme89 | | Permalink

I’m glad I humor you. Perhaps I could make a career being a comedian? You could then sell me one of your avoidance schemes.

 

I’ve never bought “the rich use less services so should pay no tax” drivel. If you want to become rich by selling products or services in the UK, you should pay you fair share of taxes without using artificial arrangements.  

Utter Rubbish ???    1 thanks

Wayne Pulman | | Permalink

Firstly, would you be kind enough to address my piont on indirect taxes. Perhaps its not convenient from the point of view of your argument?

Secondly, if you know anything about these arrangements (which I suspect you dont) the fees payable probably average 15% (including VAT which goes to HM Gov) If the tax rate were a flat 20% then no one would take the risk for a 5% saving.

I have a clear concience in as much as my clients are given an informed choice and additionally, every one of my larger clients who have utilised these arrangments have ploughed back the savings into expanding their businesses, which have led to circa 200 jobs being created (in the private sector - making things to export) to my certain knowledge during the last two years.

Or would it be better to have them pay their taxes, give it to the goverment and create perhaps 100 "diversity co-ordinators" or another 120 "public" servants who would really get the economy going!

Finally with regard to my socialist commedian freind, who decides what is "fair" in terms of tax rates? Lets assume the same level of public services are used by all (which is not true) then a flat rate system must logically be fair. I repeat if 95% of the population can use the law to force wealthy people to pay higher rates of tax then it seems reasonable to me that the 5% (who have no democratic say in the matter) can use the same law to their advantage.

I am getting bored now by this hypocritical conversation now so back to work.

johnjenkins's picture

@Wayne    3 thanks

johnjenkins | | Permalink

So following your logic how many jobs would Mr Carr have created?

mrme89's picture

You have said from the outset    1 thanks

mrme89 | | Permalink

You have said from the outset that you are NOT a promoter. However, you go on to say “every one of my larger clients who have utilised these arrangements”. Perhaps you would like to elaborate?

 

. . .

 

And you thought I was the comedian?

ShirleyM's picture

How many nurses and doctors ...    1 thanks

ShirleyM | | Permalink

... would £500K tax pay for?

It is widely publicised that K2 yields 1% tax. People using these schemes are hardly the considerate compassionate types. If they create jobs, it is probably so the additional workers can make them even more tax free profits (ok, the last bit is conjecture, but people who want to pay 1% tax while people on low incomes pay 20% can hardly be described as philanthropic).

ShirleyM's picture

You missed it, or didn't bother to read it    1 thanks

ShirleyM | | Permalink

Wayne Pulman wrote:

Firstly, would you be kind enough to address my piont on indirect taxes. Perhaps its not convenient from the point of view of your argument?

I responded in my post dated:  Wed, 15/01/2014 - 11:12

... or perhaps it wasn't convenient from the point of view of your argument?

@ShirleyM

carlh | | Permalink

and here's me thinking that its the millionaires/wealth creators that keep this country running by employing the workers.

Taken from HMRC 2012:

The value of 1 employed worker of the lifetime employment (20-65) = £1.83mil

Now lets take 1 company (Arcadia Group Ltd) Total employed = 47,000

Now the value to HMRC = GAZILLIONS (My calculator does not have enough digits) 

I am surprised that HMRC did not offer him that he can be exempt from Tax FOREVER. In fact I think they should even give him a knighthood OH! they did in 2006.

It should be HMRC's job to keep these wealth creators happy. (dont chop off the hand that feeds) 

Any money that they keep, will in turn be used to employ more workers (Theres only so many Yachts, houses, & cars that you can buy) so keeps the circle of life turning :)

 

HOWEVER, there is a footnote to the above I understand that all the taxes from all the employed in the UK only amounts to 12% of the total tax generated so really only a drop in the ocean, so does it really matter if a few are allowed to use the law to pay only the amount that is owed. REALLY!! 

 

 

 

 

 

 

 

 

 

johnjenkins's picture

We do have the    1 thanks

johnjenkins | | Permalink

other side of the coin though.

If an assessment is not appealed in a specific time scale, the liability on those assessments become legally collectable, which is the amount that is owed. (Assessments are artificial)

So HMRC use the "law" when it suits them, but don't like it when it's used against them.

If we gonna sort out this mess let's do it properly and not one-sided eh.

ShirleyM's picture

@carlh

ShirleyM | | Permalink

Are you teasing me? On the assumption that you are not, your arguments, and statistics, don't stack up. Your statistics put average wages at £44K. I thought average wages were much, much lower.

If ALL employers paid 1% tax (not just the uber rich), they would also be in a position to employ more people, wouldn't they? Whenever there is inequality, there is an unlevel playing field, and if one employer pays 1% tax, and another pays 20%, or more, then they are at a distinct disadvantage. This leads the currently compliant into joining the 'tax avoidance' game just to stay competitive, and before you know it, everyone is paying 1% tax. Then it would be bye bye to everything that makes this country a good place to do business.

Edit: it is also contradictory to make out that the extra employees swells the government coffers, and then say that employees tax only contributes 12% of the total.

ShirleyM's picture

I have a question ....

ShirleyM | | Permalink

As some tax avoidance schemes pay minimum wages through payroll, and in theory these 'employees' have no other taxable income, could they, and do they, claim benefits, ie. working tax credits, child benefit, etc?

mrme89's picture

Average wages. The last

mrme89 | | Permalink

Average wages. The last publication I read determined this to be approx £28k.

Statistics ... Statistically 9/10 statistics are fiddled.

@ShirleyM

carlh | | Permalink

Shirley 

Those figures are not mine but ONS and HMRC, These figures can be found in the public domain.