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Another case of a big tax liability from thin air

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Stepurhan
By stepurhan
21st Jun 2017 15:28

If it's a failed scheme, it hasn't come from thin air. If there hadn't been a tax liability that they wished to try to avoid, they would not have entered into a scheme in the first place. They may be disappointed that the scheme has failed to achieve its aim, but the liability arising from that failure should not be a surprise.

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By Justin Bryant
21st Jun 2017 16:22

You clearly have either not read the judgment or not understood its consequences. They were looking to create a tax deduction without any taxable income pick up on roughly the same amount, but got hammered with no tax relief on the expenditure and taxable income. Thus, they would have been a lot better off doing nothing (hence the thin air point).

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Replying to Justin Bryant:
Stepurhan
By stepurhan
21st Jun 2017 16:24

Justin Bryant wrote:

You clearly have either not read the judgment or not understood its consequences. They were looking to create a tax deduction without any taxable income pick up, but got hammered with no tax relief on the expenditure and taxable income. Thus, they would have been a lot better off doing nothing (hence the thin air point).

You're right, I didn't feel like reading a 150 page judgement this afternoon.

But, assuming your summary is accurate, I still have no sympathy for them. They have been hoist by their own petard. The tax deduction they tried to "create" has failed to materialise. The taxable income they tried to avoid "picking up" has. Those sound like two parts of the same scheme failing to me. Perhaps you could explain which part of this would not have happened without the scheme.

The next time I have a client come to me with a wholly artificial scheme to avoid tax, I will point them to this decision as a reason why we don't promote them.

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Replying to Justin Bryant:
Stepurhan
By stepurhan
26th Jun 2017 11:12

No further response? I'm disappointed.

It would appear your assertion is that one of two things has happened.

1) A taxable income stream has been created that would not have existed without the scheme.

2) Expenditure that would have been tax-deductible normally has been rendered non-deductible by the scheme.

Which is it? Can you also explain why they would not have been aware of the risk of these things happening?

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By Justin Bryant
26th Jun 2017 12:01

If you read the case & understand anything about tax, the answer will reveal itself to you.

I am surprised there is no reporting of this case anywhere in the press or in HMRC's smug press releases etc.

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By justsotax
26th Jun 2017 12:14

i thought with there type of arrangements was the intention was to ensure that anybody who had an understanding of tax couldn't possibly follow it.

I would like to think I know something about tax, but it is quite clear from the arrangement that it is to make things anything but clear. Why would the Revenue wish to try and explain how this business tried to get a tax advantage, which only its highly paid tax barristers could explain, albeit I doubt in layman's terms (that would probably expose the arrangement for what it is).

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Replying to Justin Bryant:
Stepurhan
By stepurhan
26th Jun 2017 13:05

Justin Bryant wrote:

If you read the case & understand anything about tax, the answer will reveal itself to you.

I could read the 150 page judgement, true. But I would be willing to bet that you would simply claim I knew nothing about tax if I subsequently said that the tax liability didn't come out of thin air.

If you want to have a civilised debate, put forward your reasoning. If it is really that obvious, that should not be a challenge. Your failure to do so just makes me think you don't actually have a real argument. I'm not going to waste my time reading 150 page judgement until you give some proof otherwise.

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Portia profile image
By Portia Nina Levin
21st Jun 2017 15:50

One of my friends got sent to jail for giving her child botox injections. The kid didn't even look surprised.

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