Retrospective tax imposed on contractors’ loans
You might also be interested in
Rebecca Cave is now retired from 35 years in the tax world, including eight years as AccountingWEB's consulting tax editor.
Replies (550)
Please login or register to join the discussion.
I think it is also clear ...
I think I have made it abundantly clear that HMRC are...misbehaving...in your name. I am surprised that this does not seem to concern you.
That disguising remuneration as a 'loan' is also misbehaving, but in whose name? I cannot answer that one! I am surprised that this does not seem to concern you.
you appear to have all the answers...
I can only assume you are one of the QC's who gave the original assurances...
Difficulttimes, there obviously are two versions of the OED
Because mine refers to 'loans' as being repayable. Yours obviously does not!
No body cares ...
... about the squirming of these "borrowers" because they have had their pants pulled down, don't you get it yet?
These schemes used by slimy scheme promoters are, as Shirley accurately describes them, fairy tales to magically change lead in to gold.
These schemes have tried to side step section 455, whereby they would have had a charge levied, which would be returned after the loan is repaid!
I am quite amused by the squealing, as the actions of the greedy few has made the tax landscape a minefield for the proper accountants, and long term everyone will lose out as legitimate sensible tax planning is getting tarred with the same brush as those used by (what are to all intents and purposes) fraudsters and sensible honest planning techniques are being vilified, and the wet modern politicians are likely to create even more bureaucracy for us as they knee-jerk react to appease the (misguided) chagrin of the voters, who in their turn are being manipulated by an ignorant press.
"vilified tax avoidance" today, "sensible honest planning" yest
I am quite amused by the squealing, as the actions of the greedy few has made the tax landscape a minefield for the proper accountants, and long term everyone will lose out as legitimate sensible tax planning is getting tarred with the same brush as those used by (what are to all intents and purposes) fraudsters and sensible honest planning techniques are being vilified
I am "amused" by accountants extolling the virtues of "legitimate tax planning" in the form of the low salary / dividend arrangements when it was those that gave rise to IR35 in the first place.
And why did we do the salary / dividends?
Oh yeah...it was the accountants!
The "vilified tax avoidance" of today is the "sensible honest planning" of yesterday. It's very easy to serve judgement in retrospect. Those of you self-confessed veteran accountants who are all too happy to question other professional's "intelligence" should really know better, and I am surprised, if not amused, at your lack of humility.
nope
I am quite amused by the squealing, as the actions of the greedy few has made the tax landscape a minefield for the proper accountants, and long term everyone will lose out as legitimate sensible tax planning is getting tarred with the same brush as those used by (what are to all intents and purposes) fraudsters and sensible honest planning techniques are being vilified
I am "amused" by accountants extolling the virtues of "legitimate tax planning" in the form of the low salary / dividend arrangements when it was those that gave rise to IR35 in the first place.
And why did we do the salary / dividends?
Oh yeah...it was the accountants!
The "vilified tax avoidance" of today is the "sensible honest planning" of yesterday. It's very easy to serve judgement in retrospect. Those of you self-confessed veteran accountants who are all too happy to question other professional's "intelligence" should really know better, and I am surprised, if not amused, at your lack of humility.
Nope it was people leaving work on a friday going back to work on a monday as a limited company but nothing else had changed.
apart from a lot less NIC
The original big mistake with IR35
Nope it was people leaving work on a friday going back to work on a monday as a limited company but nothing else had changed.
apart from a lot less NIC
And it's a shame they didn't restrict it to the Friday to Mondays as IR35 might then have worked and we wouldn't have had civil servants and TV presenters getting in on the act too and making "personal service company" a dirty phrase.
IR35 came about, ...
I am quite amused by the squealing, as the actions of the greedy few has made the tax landscape a minefield for the proper accountants, and long term everyone will lose out as legitimate sensible tax planning is getting tarred with the same brush as those used by (what are to all intents and purposes) fraudsters and sensible honest planning techniques are being vilified
I am "amused" by accountants extolling the virtues of "legitimate tax planning" in the form of the low salary / dividend arrangements when it was those that gave rise to IR35 in the first place.
And why did we do the salary / dividends?
Oh yeah...it was the accountants!
The "vilified tax avoidance" of today is the "sensible honest planning" of yesterday. It's very easy to serve judgement in retrospect. Those of you self-confessed veteran accountants who are all too happy to question other professional's "intelligence" should really know better, and I am surprised, if not amused, at your lack of humility.
as Black Knight states, because tax scheme pedlars saw legitimate limited companies using a salary/dividend strategy and pesuaded punters to pretend they were a trading company and not an employee.
Tarring with same brush
I am quite amused by the squealing, as the actions of the greedy few has made the tax landscape a minefield for the proper accountants, and long term everyone will lose out as legitimate sensible tax planning is getting tarred with the same brush as those used by (what are to all intents and purposes) fraudsters and sensible honest planning techniques are being vilified,
Well said OGA. Exactly the point I made somewhere on page 2 I think. You can't even say you're a tax advisor now without people visibly flinching.
adviser
I am quite amused by the squealing, as the actions of the greedy few has made the tax landscape a minefield for the proper accountants, and long term everyone will lose out as legitimate sensible tax planning is getting tarred with the same brush as those used by (what are to all intents and purposes) fraudsters and sensible honest planning techniques are being vilified,
Well said OGA. Exactly the point I made somewhere on page 2 I think. You can't even say you're a tax advisor now without people visibly flinching.
Adviser!! lol sorry had to be fair
or is permitted but er is correct according to the Oxford english dictionary
No according to my tax return..
The amount included on E1 of the employment pages for X represents the taxable benefit in relation to interest at the official rate on employer provided loans. These loans are repayable on demand.
Something doesn't match your prejudiced narrative, Shirley?
Yes, the loans are real loans and as such are repayable on demand.
In that case ...
Yes, the loans are real loans and as such are repayable on demand.
... the directors are in breach of their fiduciary duties under the Companies Act in allowing the company to make an unsecured loan without ensuring the borrower would be able to repay it, surely? After all the director is there to safeguard the assets of the company is he/she not?
then
Yes, the loans are real loans and as such are repayable on demand.
Then you were fully aware of the risks that this loan could have to be repaid and there would be an eveb bigger tax charge on this?
Although you may still make a saving of 10% nic on a lot of it.
Couldn't possibly comment ...
No according to my tax return..
The amount included on E1 of the employment pages for X represents the taxable benefit in relation to interest at the official rate on employer provided loans. These loans are repayable on demand.
... as any details of the terms of these loans are like Brigadoon, disappearing in the mists of time only to be glimpsed on rare occassions.
Defies logic
No according to my tax return..
The amount included on E1 of the employment pages for X represents the taxable benefit in relation to interest at the official rate on employer provided loans. These loans are repayable on demand.
Why did you sign up for this if you thought that there was the remotest possibility that the loan would be called in?
Work hard for 16 years on NMW, borrow extra money to pay the bills, and end up owing close to £1m??? Nope, makes no sense to me as a business model.
Defies logic
An all those Directors paying themselves minimum wage and the balance by dividend.
I'll buy their shares and even throw them in a 10% salary increase if they commit to carry on working for me for the next few years.
Oh, that's right................................... won't work for them will it?
to be fair gordo
its not me you need to convince. I merely suggested a more relevant analogy than the salary/dividend argument. That said I do agree with your statement regarding the 'charge', nevertheless all tax is 'retrospective'...as you will find when you go to a good adviser - they will always state when carrying out any planning that it is subject to 'changes in legislation'.
I realise that part is really upsetting, but it s the same for everyone...
I can't imagine what the intelligence of the punters must be
If they were told the loan was repayable, and still went for it. It's mind boggling.
My guess is that someone is fibbing. The law doesn't (or shouldn't) protect dishonest people who lie for personal gain.
I also guess that someone is venting their spleen because they have been painted into a corner ... ie. outmanoeuvred by the government and another tax loophole closed.
Pardon me, please
If I doubt the sincerity of your claim. I have many sound and logical reasons for my doubts, ie. I don't think high earners are that thick.
Stereotypes
Shirley, maybe if you made a honest attempt at understanding the facts by observing them objectively, you would be less puzzled?
So far, all you have done in this thread is project your own prejudices about people and their motives ("IT geeks", "high earners", "greedy", "thick"...etc).
This is not how you are going to gain any understanding.
haha - it gets funnier :)
Shirley, maybe if you made a honest attempt at understanding the facts by observing them objectively, you would be less puzzled?
Who is dishonest? I suspect it is the person who tells the punter that the loan is non-repayable, while telling HMRC that the loan is repayable.
I have observed the facts, and my conclusion is that someone is being dishonest.
Substance over form (an accounting and tax principle)
If it looks like an elephant, smells like an elephant and walks like one, then........no it's legally registered as a girraffe.
If these loans are repayable then just repay them what's the problem? This can work in the same way as repaying a repayable loan with no tax charge. Or you could write them off with a tax and NIC charge.
The proposed changes seem to address APN 's and potential to double taxation so this matter will be settled in 2019 to give finality.
APN's I think were challenged in the courts (judicial review) and upheld. I agree they are not fair but that is the law as it currently stands at the moment is it not?
The problem?
If these loans are repayable then just repay them what's the problem?
The problem is that repaying the loans doesn't make APNs corresponding to those loans magically disappear.
As for the JR of the APN legislation, it has failed in the High Court, but appeal has been accepted. So that's not the end of it.
I am a bit shocked at the lack of awareness of such facts from supposed professionals.
IF
If these loans are repayable then just repay them what's the problem?
The problem is that repaying the loans doesn't make APNs corresponding to those loans magically disappear.
As for the JR of the APN legislation, it has failed in the High Court, but appeal has been accepted. So that's not the end of it.
I am a bit shocked at the lack of awareness of such facts from supposed professionals.
If you click at the link on the base article of this thread then HMRC I think explains how this new legislation helps you with that.
they way round IR35
The way round IR 35 was change the way you worked so it wasn't deemed employment.
NOT have blind faith in an accountants pen retrospectively changing a matter of fact.
You could compare entertaining being dissallowable being redescribed as stationary so that it is.
Thanks for the tip
The way round IR 35 was change the way you worked so it wasn't deemed employment.
NOT have blind faith in an accountants pen retrospectively changing a matter of fact.
Thanks for the tip.
Do you think HMRC will let me borrow their time machine so that I can deliver this memo to my young self back in 2005 (when accountants were en-masse advising contractors to close Ltd Co's and switch to "contractor structures")?
we all make mistakes
The way round IR 35 was change the way you worked so it wasn't deemed employment.
NOT have blind faith in an accountants pen retrospectively changing a matter of fact.
Thanks for the tip.
Do you think HMRC will let me borrow their time machine so that I can deliver this memo to my young self back in 2005 (when accountants were en-masse advising contractors to close Ltd Co's and switch to "contractor structures")?
We all make mistakes don't beat yourself up about it.
We certainly were not giving that advice at the time.
Are you still with the same accountancy firm and do you still believe they were the cheapest?
I could be wrong but I'm sure that a court is yet to hear an APN JR for a EBT case yet. From what I know it's just been PPNs so far. Most JRs for APNs are stayed until the Supreme Court hears the Ingenious case so sometime in 2017 by which stage we will probably have this legislation with us which makes the whole situation even more uncertain and incredibly complex.
ingenious case
I could be wrong but I'm sure that a court is yet to hear an APN JR for a EBT case yet. From what I know it's just been PPNs so far. Most JRs for APNs are stayed until the Supreme Court hears the Ingenious case so sometime in 2017 by which stage we will probably have this legislation with us which makes the whole situation even more uncertain and incredibly complex.
That's a new one on me I assume that has already done first and second tier tribunal then? Do you have a link handy or the case reference.
Ingenious
[/quote]
That's a new one on me I assume that has already done first and second tier tribunal then? Do you have a link handy or the case reference.
[/quote]
http://www.taxation.co.uk/taxation/Articles/2015/08/04/333469/not-so-ing...
I should also add that you know the difference between litigation and JRs? JRs don't go through a first and second tier tax tribunal, they go through the High Court and then the Supreme Court if the Court of Appeals allow them to appeal. In this case Ingenious (film scheme) was granted the appeal so will be heard in the Supreme Court where the Rangers case will also be held. I'm not a legal person at all but the way things are going I don't think I will need to be anyway as we can do without it soon :)
I have so far been challenged
Justsotax
I have so far been challenged as being a Contractor, a Promoter and now the horrid QC who gave the blasted advice.
Though I'm flattered that you should think me sufficiently knowledgeable to be a QC.
Interesting that people should try and pin me as a person they can direct their anger at because they are not getting their own way. That's classic School Yard bullying.
None are correct I'm afraid.
I'm just a concerned Accountant who happens to understand manipulation and how Behavioural Psychology can be used or abused and I don't like what I see. I qualified with ACCA in 1994 and with CIOT in 2004 and then the psychology qualifications all came afterwards as I tried to better understand my clients and maybe figure out why they did not want advice on growing their business, but simply wanted to know how to reduce the tax so that they could keep more of their hard earned dough.
Actually my most recent was a Diploma in Mindfullness, so goodness only knows what I'm doing spending time on this thread. I think it is that I would be happy to wait for the Courts, who are much more knowledgable than me, but I fear HMRC are trying to manoeuvre the situation so that people are deprived of that basic entitlement.
[***], I've been outed as an Accountbat who is prepared to question HMRC. Damn, the games up. Better go and get me one of those proper accountants or good advisers (almost wrote advisors there).
Anyone want to go round again?
psychopaths
Justsotax I have so far been challenged as being a Contractor, a Promoter and now the horrid QC who gave the blasted advice. Though I'm flattered that you should think me sufficiently knowledgeable to be a QC. Interesting that people should try and pin me as a person they can direct their anger at because they are not getting their own way. That's classic School Yard bullying. None are correct I'm afraid. I'm just a concerned Accountant who happens to understand manipulation and how Behavioural Psychology can be used or abused and I don't like what I see. I qualified with ACCA in 1994 and with CIOT in 2004 and then the psychology qualifications all came afterwards as I tried to better understand my clients and maybe figure out why they did not want advice on growing their business, but simply wanted to know how to reduce the tax so that they could keep more of their hard earned dough. Actually my most recent was a Diploma in Mindfullness, so goodness only knows what I'm doing spending time on this thread. I think it is that I would be happy to wait for the Courts, who are much more knowledgable than me, but I fear HMRC are trying to manoeuvre the situation so that people are deprived of that basic entitlement. [***], I've been outed as an Accountbat who is prepared to question HMRC. Damn, the games up. Better go and get me one of those proper accountants or good advisers (almost wrote advisors there). Anyone want to go round again?
bless ya would support you in above
But do feel we are fighting a losing battle when it come to the Law and how the government treats it's subjects/citizens cash cows or what we are now to them.
We can only deal with the laws as they write them.
This is happening in all areas of law. Europe or not I have no idea
Our police force used to be unarmed and didn't accidentally shoot the innocent either, progress I suppose. has it reduced the number of criminals carrying guns?
They just got grenades
My objection to these schemes (not just loan schemes right from the start) was not a moral one but I had concerns re: substance over form, Ramsay principle, commerciality tests etc etc I had no idea they would fail on the basics before the tribunal even got to these grand principles.
APN's are a pain Yes Fair no not really are they here to stay? I expect so until HMRC lose interest or the psychopaths at the top do as is in their nature.
angry me...
nope...I just find this whole thing amusing...as for a bully....not that either...but you do give the impression you know what you are talking about (albeit in my opinion it is misguided hence my jump from sympathiser to introducer etc).
I doubt I know half as much as you about the subject, what I do know however is that if the loan is repayable (well repaid) then the scheme doesn't work...and as we found out during the late 2000s...when loans aren't repaid then [***] happens...but you already know that.
spellind
Can someone please tell me how I get my spell check back on accounting web?
Used to have it then got a new computer
Not comparable
Avoid IR35 - make an arrangement so a piece of legislation does not apply = that's tax avoidance - disgusting, and how dare a reputable man of the profession suggest such a thing!
Going by the many threads on here regarding IR35, most accountants inform their clients that the contract must reflect reality, ie. saying that you can supply a substitute won't be a defence against IR35 if you cannot, in reality, supply a substitute. As everyone keeps telling you, it's substance over form!
How does this compare with a repayable loan (for HMRC purposes) actually being non-repayable (for the punters purposes)?
No no no
It is, you have just decided to draw a line in the sand somewhere that seperates acceptable from unacceptable.
One solution reflects reality (no dishonesty), the other doesn't (based on dishonesty).
Loans: you are ignoring the fact that they are repayable where HMRC are concerned, but not repayable where the punters are concerned.
No wonder you are having a problem distinguishing between what is acceptable and not acceptable.
Yes yes yes
My line in the sand is drawn where the legislation draws it, yours, presumably based on which side of the bed you get out of
BTW
Whilst I had my OED open, I looked up 'opinion'.
"This is a belief or judgment that rests on grounds insufficient to produce complete certainty".
No Title
Justsotax
I am happy to accept your first paragraph and shake hands on that matter.
As regards your second paragraph I'm afraid that we've been through this and the Courts have ruled. Vaughan found it for us earlier; that loans were deemed by the Courts to be repayable on demand. The Courts tell me that's a fact. The Courts have ruled.
ShirleyM
I'm sorry I can't help you any more. I'm not sure if you re-read what you write, but I certainly can't get you to listen (to me).
I have been outed. Turns out I have some knowledge of the subject matters. You don't want to get me started on IR35, which was the most examinable and studied topic when I did my CTA exams. If we did then we would have to discuss the declaration being signed on both the P35 and the Tax Return, having fully considered the PSC tick-box each time. If HMRC could demonstrate that this was incorrect and knowingly incorrect then they could accuse fraud and the taxpayer would be personally liable. Who would the clients sue for the advice. Don't worry though I'm sure HMRC would never win in Court.....oh, wait a minute.
If you can't see that once HMRC get to make themselves judge and jury in regard to the tax strategies, their next target could well be IR35. Wouldn't be difficult to manipulate public opinion against those rogue people operating through Limited Companies.
If these schemes or any avoidance rely on a falsehoods such as:
A partner declaring working 10 hours a week but doesn't
A loan that is repayable that is not.
A substitution clause that in reality no substitution would occur
A dividend that is not lawful or backdated to cover up Wages or a loan
The Losses being dependent on some rather dubious accounting that was clearly not in accordance with accounting standards and then wait for it AUDITED lol
Then this is probably evasion not avoidance
Certainly that is the way HMRC viewed the Tenon incident and why they raided Blackstar as reported. Presumably there is media blackout on that one at the moment.
PA holdings looked at dividends that were not dividends - looks like an elephant? That took 13 years to get through the courts - solution APN's
How can a loan be repayable if there is no intention ever to repay it? The demand bit I get? But only a plonker would agree to work for a loan. Of course the exit route may well have been whoops I've spent it I'm going bankrupt so stuff your loan and your tax. In which case it was cheap living or was that fraud as well.
I do hope this goes to court so we get the answer.
I am interested to see if all avoidance firms were of the same ilk or whether there were some schemes that actually worked.
Loans......... sigh
If these schemes or any avoidance rely on a falsehoods such as:
A loan that is repayable that is not.
How can a loan be repayable if there is no intention ever to repay it?
Because................... wait for it, because it has not been said before (at least not more than 50 times in this thread)
............................. the court has ruled they are loans. OMG
FFS
If these schemes or any avoidance rely on a falsehoods such as:
A loan that is repayable that is not.
How can a loan be repayable if there is no intention ever to repay it?
Because................... wait for it, because it has not been said before (at least not more than 50 times in this thread)
............................. the court has ruled they are loans. OMG
If you are going to quote at least keep the context not just cut and paste the bits that suit your argument. I expect that is what has gone worng with your schemes
If the courts have already decided that your loan is a loan then what are you making this almighty fuss about.
Fuss
Because the contributors on this thread keep keep saying it's income not a loan.
Sorry for the poor cut and paste. (Didn't want to quote the whole text as I was only commenting on a bit of it)
Agree
I do hope this goes to court so we get the answer.
I am interested to see if all avoidance firms were of the same ilk or whether there were some schemes that actually worked.
That makes two of us...
Why doesn't HMRC let the courts decide?
I am interested to see if all avoidance firms were of the same ilk or whether there were some schemes that actually worked.
So are we and thousands of others. If only to know whether we have indeed been scammed by the promoters. The question is: why doesn't HMRC want the courts to decide? Both APNs and the "Osborne ultimatum" are de facto instruments to discourage litigation. The former, by depriving the taxpayer of the funds necessary to pursue his day in court, the latter, by rendering the outcome of any litigation largely irrelevant.
Why are HMRC so insistant on subverting normal legal processes?
You reflect on that.
(hint: gordo dropped a few pointers in his early posts)
Hooray
Now we should work together to ensure that HMRC brings this to Court with all possible haste so that the judiciary can rule over the disagreement.
That may mean that we have to work together to lobby the government and possibly our respective Institutes to ensure that HMRC are not allowed to side-step this important matter.
Thing is ...
... IR35 is a matter of fact, if you lie about those facts you are evading tax, in the same way lying about the fact a loan is actually remuneration because there is no intention to repay (other than on a piece of paper only HMRC ever see) it is also evasion.
No comment yet on my point on the Companies Act 2006;
171 Duty to act within powers
A director of a company must—
(a) act in accordance with the company's constitution, and
(b) only exercise powers for the purposes for which they are conferred.
172 Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be
most likely to promote the success of the company for the benefit of its members as a
whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers,
customers and others,
(d) the impact of the company's operations on the community and the
environment,
(e) the desirability of the company maintaining a reputation for high standards of
business conduct, and
(f) the need to act fairly as between members of the company.
(2) Where or to the extent that the purposes of the company consist of or include purposes
other than the benefit of its members, subsection (1) has effect as if the reference to
promoting the success of the company for the benefit of its members were to achieving
those purposes.
(3) The duty imposed by this section has effect subject to any enactment or rule of law
requiring directors, in certain circumstances, to consider or act in the interests of
creditors of the company.
174 Duty to exercise reasonable care, skill and diligence
(1) A director of a company must exercise reasonable care, skill and diligence.
(2) This means the care, skill and diligence that would be exercised by a reasonably
diligent person with—
(a) the general knowledge, skill and experience that may reasonably be expected
of a person carrying out the functions carried out by the director in relation
to the company, and
(b) the general knowledge, skill and experience that the director has.
175 Duty to avoid conflicts of interest
(1) A director of a company must avoid a situation in which he has, or can have, a direct
or indirect interest that conflicts, or possibly may conflict, with the interests of the
company.
(2) This applies in particular to the exploitation of any property, information or
opportunity (and it is immaterial whether the company could take advantage of the
property, information or opportunity).
(3) This duty does not apply to a conflict of interest arising in relation to a transaction or
arrangement with the company.
(4) This duty is not infringed—
(a) if the situation cannot reasonably be regarded as likely to give rise to a conflict
of interest; or
(b) if the matter has been authorised by the directors.
(5) Authorisation may be given by the directors—
(a) where the company is a private company and nothing in the company's
constitution invalidates such authorisation, by the matter being proposed to
and authorised by the directors; or
(b) where the company is a public company and its constitution includes provision
enabling the directors to authorise the matter, by the matter being proposed to
and authorised by them in accordance with the constitution.
(6) The authorisation is effective only if—
(a) any requirement as to the quorum at the meeting at which the matter is
considered is met without counting the director in question or any other
interested director, and
(b) the matter was agreed to without their voting or would have been agreed to
if their votes had not been counted.
(7) Any reference in this section to a conflict of interest includes a conflict of interest and
duty and a conflict of duties.
In precie, they can be summed up as follow:
The principal fiduciary duties of a director
Company directors are expected to act legally, honestly and in good faith at all times. Any business decisions they make should be for the benefit of the firm alone. They should not make decisions for personal gain, nor should they engage in illegal activity or unethical behaviour.
I fail to see how granting an unsecured loan that is unable to be repaid is for the benefit of the company