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Potential client - tax avoidance case

Potential client divulged that they are under investigation concerning a tax avoidance scheme...

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Potential client has asked for some guidance - received a follower notice in connection with one of the dreaded tax avoidance schemes he joined some years ago.  It sounds like loan charge case.

i normally do not get involved, but this is a side issue that was mentioned at the meeting. He is worried to death. 

Apparently, any tax saved was paid out in commission. He is still with the accountants who recommended the scheme but is considering a claim against them. 

Just wondering whether anyone has any experience of this particular scheme: ISH Marketing LLP. 

The guy has no way of paying back the tens of thousands of pounds demanded by HMRC.

It seems such a shame that he followed advice from his trusted accountant and is now landed with a huge debt. He didn't appear to benefit from the scheme even if it had gone unchallenged. 

My question is does anybody know how this particular scheme worked?  It appears to have involved a pension scheme and invoices being raised. 

Apologies for any typos, finding it difficult typing this post on my phone.

 

Replies (14)

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RLI
By lionofludesch
09th Oct 2019 15:52

Just curious - what was in it for him if he paid out his entire tax saving to the scheme promoters, whilst leaving himself open to huge liabilities to HMRC ?

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Replying to lionofludesch:
Lone Wolf
By Lone_Wolf
09th Oct 2019 17:00

I suspect he would have benefited if it had gone unchallenged. As it is though...

We took on a client who entered into loan scheme in about 2013/2014. Paid 18% commission to scheme promoter, lets call them A Murky Lot.

Quelle surprise, the scheme didn't work. Client is now faced with having to pay the PAYE and NIC which was always due, as well as late payment interest, on top of the 18% they've given to the scheme promoters.

So really the scheme promoters are the only ones who benefited - and have the cheek to continue asking for funds to "fight the case", or to sign up to their new scheme that "beats the loan charge".

An expensive lesson for the client.

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Replying to Lone_Wolf:
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By SWAccountant
09th Oct 2019 17:29

In the meantime, your client had a cashflow benefit from not paying that tax. Hopefully he invested it in an asset that has increased in value and can now be liquidated to pay the tax.

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By ImmanuelLieber
09th Oct 2019 15:59

He needs specialist legal advice. Hopefully the accountants who recommended the scheme are insured, and hopefully he has proof that they recommended he participated in it. If he can prove both then he probably has a good chance of claiming from them, but he needs specialist advice.
If he sues his current accountants he will need to move, so you could take him on for ongoing work, but remember that with this ongoing investigation whatever you submit for him is more likely to be subjected to scrutiny by HMRC.

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Hallerud at Easter
By DJKL
09th Oct 2019 16:10

"He didn't appear to benefit from the scheme even if it had gone unchallenged. "

Is that from the prospective client's viewpoint or from following the numbers, because I would find it surprising were it so.

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Replying to DJKL:
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By Manchester_man
09th Oct 2019 23:36

DJKL wrote:

"He didn't appear to benefit from the scheme even if it had gone unchallenged. "

Is that from the prospective client's viewpoint or from following the numbers, because I would find it surprising were it so.

Hi DJKL,
Yes, it is from the prospective client’s viewpoint. He ‘believes’ he paid 20% commission to save 20% tax. I don’t have any figures, but took this at face value. I take your point that the facts may be quite different and most probably are.

The only thing I know is that the company is very small (profits of 30k at the time, now close to 20k before tax & dividends).

I thought that only businesses making hundreds of thousands in profits were targeted By these scheme promoters, not very small companies.

I understand there is no right Of appeal against a follower notice and that the only possible challenge would be as to the validity of the notice.

The guy has been advised to settle (by a tax adviser who he engaged some months ago, in connection with this matter only). Trouble is, even over 5 years, it is £800 per month that he doesn’t have.

I just felt a bit sorry for him. Usually I would have little sympathy with people who join such schemes. Maybe I’m going soft in my old age.

Thanks all.

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Replying to Manchester_man:
Hallerud at Easter
By DJKL
10th Oct 2019 01:39

From your figures re what he now owes either profits were back then much higher or it covers a number of years.

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By ireallyshouldknowthisbut
09th Oct 2019 18:08

I have a client who did a scheme like this, and instead of trying to claim on the ****ty advisors, has been instead hoodwinked into paying significant sums on a class action to fight it.

The words "good money after bad" spring to mind.

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Replying to ireallyshouldknowthisbut:
Hallerud at Easter
By DJKL
09th Oct 2019 18:32

That is human nature, it is like penny shares and bulletin boards, the dog drops 50% and they are all shouting double up, fill yer boots etc.

Human behavior has individuals fearful of losing gains made (cash in too early so do not ride winners) and reluctant to recognise their original mistakes (falling knives), people require to be mature to stick their hand up and admit they were a ****, sadly quite a few are unable to do this, with predictable outcomes.

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By unearned luck
09th Oct 2019 23:51

On which judicial ruling are HMRC relying and how have they worded the asserted similarity?
Your visitor needs urgent expert advice on whether or not to comply with FN (and thus avoid a penalty) or to challenge it on the grounds that Mr Haworth succeeded in doing in the CoA.

If it is a "loan charge" case there should be little or no personal income tax as in Rangers it was held that the payment to the EBT was earnings at that point from which the employer should have deducted PAYE and the employee should be given credit for the PAYE that should have been paid. This get out of jail card is why the loan charge was introduced to give HMRC a second bite of the cherry. Your client also needs urgent advice on this second bite.

It does seem odd that they want the client to abandon his appeals against closure notices and/or DAs. The client is in danger of paying tax twice.

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By Wanderer
10th Oct 2019 07:35

Manchester_man wrote:

.... this particular scheme: ISH Marketing LLP. 

https://beta.companieshouse.gov.uk/company/OC365579/officers
Appreciate it's obvious to the likes of us however any organisation which shows
314 officers / 312 resignations & the last two being BVI / Monaco companies should ring alarm bells.
Take it your client is one of the 312 resigned LLP members?
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By bernard michael
10th Oct 2019 10:00

Why would he want to save 20% tax and pay 20% commission.= NIL benefit unless he was trying to save NIC
What's his explanation for wanting to take part in this apparent nonsense ??

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Replying to bernard michael:
RLI
By lionofludesch
10th Oct 2019 10:13

bernard michael wrote:

Why would he want to save 20% tax and pay 20% commission.= NIL benefit unless he was trying to save NIC
What's his explanation for wanting to take part in this apparent nonsense ??

I like your directness, Bernard.

Was the commission 20% + VAT ?

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By Justin Bryant
10th Oct 2019 15:55

This link says it all really: http://www.snadvisory.com/our-team.html

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