Ponzi Scheme - Tax Relief for Subscription?

Ponzi Scheme - Tax Relief for Subscription?

Didn't find your answer?

I have never come across this one before.

One of my Self Assessment clients got sucked into the now defunct Banners Internet Marketing ponzi scheme.

Paid a fee but did not see a return as the scheme shut down.

Is it possible to claim tax relief on this?

Replies (10)

Please login or register to join the discussion.

avatar
By Duhamel
09th Jan 2015 13:42

What kind of relief?
I'm not familiar with that scheme, what kind of relief could you claim?

A subscription to what? Is the client a sole trader of some kind?

Thanks (0)
Portia profile image
By Portia Nina Levin
09th Jan 2015 13:48

If it is an unincorporated business

Then expenditure is deductible according to its purpose (as present in the mind of the taxpayer when incurring the expense), rather than any effect.

Thanks (0)
By stratty
09th Jan 2015 13:57

Sole Trader

The client is a sole trader.  Intention of the fee paid was to make some quick money on internet advertising.  He found out when the scheme went pop that it was effectively a ponzi arrangement.  

If the investment had been successful then he would have declared the income.

What I am seeking to confirm is whether the loss incurred is allowable in this instance.

Thanks (0)
avatar
By Duhamel
09th Jan 2015 14:26

Description
Your description of it as an investment leads me to think it might qualify as a capital loss only. Is there any paperwork?

Stretching the boundaries, could it qualify as an advertising expense? It doesn't sound like he paid for his business to be advertised so probably not. How much are we talking about?

Thanks (0)
By stratty
09th Jan 2015 14:35

Not a huge amount

£860 or so.  My initial thought was leading towards a capital loss.

Unfortunately I have not found anything on the HMRC website.

I'll probably tell the client he has to take the hit on that which in fairness is his current expectation.

Thanks (0)
avatar
By Duhamel
09th Jan 2015 14:44

Paperwork
If he has something to back it up, describing the investment then I'd claim a capital loss. Otherwise it looks like a tax nothing.

Tell him not to be so daft next time.

Thanks (0)
Portia profile image
By Portia Nina Levin
09th Jan 2015 14:48

I had assumed that

The client had entered into the scheme as a means of advertising his business. It sounds like that is wrong.

There cannot be a capital loss unless there was an asset acquired. It sounds as though that is not the case.

Thanks (0)
By stratty
09th Jan 2015 14:55

General Advertising Space

It was a purchase of general advertising space which would be resold for profit.

http://blogs.mirror.co.uk/investigations/2013/01/banners-broker-accused-...

 

Thanks (0)
PAH Accounting Devizes Wiltshire
By Phil Hendy
09th Jan 2015 15:42

Banners Broker

This was big organisation for which I also fell into the trap!

I was under the impression I was buying advertising space and effectively reselling at a profit. It was not an 'investment' as such (a totally different debate). 

My intention when getting into it was to put it through a limited company; however I soon realised it was a scam. As I made no earnings from and merely paid in around £750 I did not declare this in my accounts and wrote the payment off to directors loan. 

Thanks (0)
Replying to JDBENJAMIN:
Red Leader
By Red Leader
09th Jan 2015 16:47

trading?

Isn't this in the nature of trading? Sounds like buying wholesale and selling retail.

Thanks (0)