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Tax avoidance scheme

Tax avoidance scheme

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I have just been reading that Chris Moyles is the latest one to be involved in a tax avoidance scheme.  It stated that in 2007 he was a self employed car dealer with sales of £3800 and losses of 1million.  How would the excessive losses occur?  Do the other 450 members all have similar sales and losses.  Where do the schemes come from.

Sorry  I am just confused, I understand that the media do not give the full story but it just doesn't add up to me.

Thanks

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By tebthereb
22nd Feb 2014 09:37

The "full story" I suppose is

The "full story" I suppose is here:

http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j7618/TC03314.pdf

As for how the schemes come up there is always someone coming up with something that works around the legislation and gives a "great" result.

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By Jekyll and Hyde
22nd Feb 2014 09:51

deception, dishonesty and fraud
Sorry may seem a little strong but for me there is no legal avoidance here and only strengthens some peoples views that avoidance is the same as evasion.

I don't like the amount I pay in tax so I am going to set up a new avoidance scheme, lets call it overseas dreaming income. Every night when I sleep I will be deaming of working in switzland and paying £1m in charges from my dog. I will then put those charges against my income and put that against my income. As my dream is about work I am doing to claim it is wholly and exclusively and never pay tax again. My dog is not uk domiciled as he is 3rd generatoon german sheppard and hence as he receives this income overseas not taxed ro uk tax.

As long as I write and appropriately inform hmrc of this legal avoidance scheme it is not tax evasion.

But the moment a small business fails to register for vat in time and refuse to pay the necessary output vat that they never received from their customer to hmrc this is considered a reportable event for money laundering purposes.

I can understand why people cannot understand the difference between avoidance and evasion.

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By Duhamel
22nd Feb 2014 09:58

Scheme provider
Someone says to Moyles that he can reduce the tax bill for a percentage in the saving. Moyles doesn't understand or ignores how dodgy the scheme is.
The £1million is the deduction Moyles wanted from his income. The £3,800 sales was a pathetic attempt to make the scheme look legitimate.
Each partner would have different losses depending on the amount they wanted as a deduction.
From what I have read Moyles loaned the money to the partnership which then would be returned as untaxable income of some sort. Perhaps someone else can confirm.

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By ShirleyM
22nd Feb 2014 10:37

It's time these sheme promoters were made to pay the cost ...

...of bringing these cases to court.

When a DOTAS scheme number is obtained, the promoters should also undertake to pay the legal & court costs, and the costs of the tax specialists employed by HMRC, if/when the scheme fails.

It bugs me to death that not only does the country not get the tax when it is due, but we must pay high costs to prove the scheme defective before we get any tax at all!

Their greed costs the country far more than the loss of tax.

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RLI
By lionofludesch
22nd Feb 2014 11:37

An Alternative Plan

He could easily save tax by cutting his ridiculously excessive fees.

 

 

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The triggle is a distant cousin of the squonk (pictured)
By Triggle
22nd Feb 2014 11:55

Triggle doesn't do investment advice but if I did I would suggest selling your Greggs shares now.

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By Tosie
22nd Feb 2014 13:09

Fraud

It should be called what it is,Fraud. When Chris Moyles signed his 2009 tax return he knew jolly well that he was not selling used cars.They should be made to pay the cost of the prosecution including all the fees of HMRC in researching the facts.

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By DavidGilligan
22nd Feb 2014 20:42

@triggle

Fantastic post - gave me the best laugh I have had for ages.

Keep em coming

 

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By DMGbus
22nd Feb 2014 22:00

Working Wheels

When a HNW (High Net Worth) person is offered a convincing tax avoidance scheme they will naturally trust the advisors concerned and go for it.

This particular scheme  ("Working Wheels") is said to have been marketed (along with other schemes) by a firm named as NT Advisors.   I don't know what "NT" stands for, maybe "No Tax"!

 

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Replying to legerman:
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By Anne Fairpo
27th Feb 2014 13:15

Yep

DMGbus wrote:

This particular scheme  ("Working Wheels") is said to have been marketed (along with other schemes) by a firm named as NT Advisors.   I don't know what "NT" stands for, maybe "No Tax"!

That's what the Guardian seem to think it stands for too (http://www.theguardian.com/media/2014/feb/21/chris-moyles-used-car-deale...)

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By cbp99
23rd Feb 2014 10:26

This particular scheme

aimed to exploit the wording of S58 ITTOIA 2005 which allows fees incurred in obtaining finance as a trading expense.

Through convoluted arrangements, the scheme purported that a) the taxpayers were undertaking the trade of buying and selling used cars, and b) gigantic arrangement fees for modest loans in connection with that trade were deductible, thereby creating a loss that could be set against the taxpayers' other income.

In Mr Moyles' case, finance charges of £1m were "incurred" in order to arrange a loan whose interest charge was £63. Another taxpayer claimed a finance charge of £14.5m (interest £141).

The judge decided that the taxpayers were not actually trading so the "loss" was not allowable.

There's a lot more to it to than that (much of which I don't pretend to understand) but I think that is the essence of it.

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By taxhound
23rd Feb 2014 10:55

Advice

If clients come to me asking if they should buy a new whatever to save tax, I advise them to buy it if they need it (and can afford it), but not just to save tax, as you have to spend £1 to save 20p/29p40p/45p depending on your tax rate.

 

So what I would like to know is how you get tax relief without actually spending the money, because I assume he did not actually spend £1m.

As Tosie says - it is simply fraud.

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By Duhamel
23rd Feb 2014 11:01

Must have been spent
I imagine the money did leave Moyles account but came back in sometime later.

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By Steve Kesby
23rd Feb 2014 11:50

This...

... is how it worked:

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Replying to SteLacca:
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By WhichTyler
23rd Feb 2014 12:43

Or...

Steve Kesby wrote:

... is how it worked:

 

Or rather (given the outcome) how it didn't work...

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Replying to Kernowlive:
By Red Leader
24th Feb 2014 10:24

car dealers

Steve's diagram is of course typical of how most second hand car dealerships are structured. Well known fact.

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By BKD
23rd Feb 2014 12:43

Or rather, Steve ...

...that is how they thought it would work

Of course, I would have some sympathy with CM had the purpose been to save tax which saving he would donate in its entirety to Comic Relief (provided he did not claim Gift Aid relief :) )

I really am staggered at the naivety of those that thought this scheme could possibly work - quite apart from the convoluted artificiality, have they never heard of the Badges of Trade? NT? NB, more like (No Brains)

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By justsotax
24th Feb 2014 11:23

I believe

that is the same structure and process that your query goes through when you speak to the call centre and they advise that someone from 'technical' will give you a call....

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By andrewdiver
24th Feb 2014 11:38

Violence and world peace

It is this type of scheme which the general public get particularly angered by.  Circular transfers of money, no element of commercial risk and use of overseas entities, even a Jersey charity.  some of the nuances were interesting and it was helpful for the Tribunal to cover each aspect of the case regardless that it failed on question 1. being a genuine trade.  It actually failed on a number of counts and would have been caught by Ramsay even if the other aspects had been accepted. 

I particularly like the quote "it does not seem to me however much permissible violence one does to the language that it is possible to say that £5m is representative of £61.64.  

Prayer Condition clause in this case raised a small smile.  For the assignment of rights payment of £100 and attendence by the assignee before a solictor practicing in London in order to recite the name of the trader "pray to God of the Christian church for World Peace".   

 

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RLI
By lionofludesch
25th Feb 2014 13:22

All's not lost

At least Chris Moyles has got his second hand car business to fall back on.

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By tinyme77
26th Feb 2014 12:39

Is CM now suing NT for selling him a dodgy scheme?

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Replying to Paul Scholes:
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By DMGbus
26th Feb 2014 13:37

NT liability
" Is CM now suing NT fortinyme77 PM | Wed, 26/02/2014 - 12:39 | Permalink

Is CM now suing NT for selling him a dodgy scheme? "  "

I expect that the following apply:

1.  NT thought that the scheme would work and promoted it accordingly - it was tax avoidance (as opposed to evasion); tax avoidance is lawful

2.  NT, like all professional advisors, will have had an engagement letter in place to lay down the rules of their advice (contract terms)

3.  Engagement letters often tend to be weighted in favour of professional advisors (that's maybe why professional bodies are so keen on them)

Conclusion no come back on NT unless the client can prove mis-selling or beach of contract (engagement letter) terms or was not advised about the risks of the scheme.

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By pauljohnston
26th Feb 2014 12:50

I dont think this is fraud because

as I understand it under the DOTAS scheme you have to disclose how it works. 

Some may feel it is very close to nonsense and many would agree.

I feel that low level avoidance ie pay the non-working wife a salary would be classed the same.

I think that the final say is in statement was made to me by a client with less than £30k taxble earnings.  "If the Govt dont like it they have the powers to change it.  It (the Govt) cant complain if they dont change it or they make a sloppy job of drafting". 

HMRC have a big hangup with anti-avoidance legislation and this may be where the promoters of  these schemes find the loophole.  So perhaps the way forward is to make the legistlation less complicated and accept that there will be some tax leakage, is the way forward.

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By justsotax
26th Feb 2014 13:44

I think also

these schemes tend to be insurance back if they fail such that any loss of 'tax' is covered - but any interest/penalties are not....

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By tonyh
27th Feb 2014 11:33

justsotax

I thought the reverse was true you still have to pay the tax but professional fees,interest,and penalties are covered by the insurance.

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By justsotax
27th Feb 2014 11:54

you maybe right...

that said....its a bit like taking out insurance to cover any penalties/interest/fees you may incur for not disclosing your income....and being covered if you get caught.....all points towards being just a scam in the end..... 

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By tukans
27th Feb 2014 12:00

This is not a loop hole but a lie

So someone comes to you and says if you "pretend" to be a second-hand car salesman I can save you £1m in tax. Surely when you have to say you are doing something you are not it is obvious you are, either; avoiding, evading or defrauding or in simple things doing something wrong!!. Greed is the only driving force of that decision, not naivety or mistrust.

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By DMGbus
27th Feb 2014 13:45

Big money - for the advisors

The Guardian article (thanks afairpro for the link) mentions some figures:

Fee to participate in the scheme = £ 95,000

Number of participants (at least) = 450

=====================================  

This works out at a staggering £ 42.75 million of fees for the promotors!

(assuming 450 people each paid £ 95,000)

=====================================

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By DMGbus
27th Feb 2014 14:11

Other clients - big names?

A Linkedin page (link from Wikipedia - therefore could be wrong!)

http://www.linkedin.com/company/nt-advisors

refers to NT adisor's other clients:

 "  An Advisory business based in three main axes: Project Management, Process (including the Content & Document Management practice) and Sustainability. We have many success stories for public organizations and private clients such as Coca-Cola, AmcorPet, Xerox, IBM, YPF, Avon, Banco Hipotecario, Bank, HP, Kodak, Casa de Moneda and others.

Specialties

Management Consulting, Project Management, Process Reengineering, Sustainability, Business Development, Business Process Outsourcing, Costs Reduction, Content & Document Management.  "

 

Important: No suggestion of any tax improriety here as the "Specialities" do NOT include tax schemes / avoidance.

NB. Could be mistaken ID and actually be a different (but similar name) advisors.

 

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RLI
By lionofludesch
28th Feb 2014 11:13

Good and Bad

I'm sure they've had successes as well as failures.

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By AndrewV12
28th Feb 2014 13:59

Its the same old story if something appears to be to good to be true, it probably is.   Now I can see why my mate hated Chris Moyles so much.

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By thegable
03rd Mar 2014 10:03

Chris Moyles

Surely the shocking thing learned from all this is how thick the participants must have been to think it would work; and even more shocking to think this clown earns £600,000 from our licence fees to play some crappy music and act the oaf.

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Replying to free-rider:
RLI
By lionofludesch
04th Mar 2014 18:49

Shocking

thegable wrote:

Surely the shocking thing learned from all this is how thick the participants must have been to think it would work; and even more shocking to think this clown earns £600,000 from our licence fees to play some crappy music and act the oaf.

Is he acting, though ?

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By Marion Hayes
03rd Mar 2014 10:39

@Shirley

When I used to have clients who invested in a variety of legal investments a significant part of the subscription costs were put aside to cover the costs of fighting on behalf of the investors. As Tax Advisor you played no part in the defences whichg were all handled by the 'schemes' advisors. Granted that was pre-DOTAS but the ability was there for costs to be awarded and I assume they still are.

 

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By ShirleyM
03rd Mar 2014 10:47

Thanks for the info, Marion

Do you know whether they have to pay anything towards HMRC costs & Court costs if the scheme fails?

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By Marion Hayes
03rd Mar 2014 10:56

It depended on the 'Judge' and the reason for failure

I have seen cases where costs had to be shared because promoters had not taken sufficient care in their explanations even though the investment was found to be right, and cases where HMRC bore both sides costts where it was thought they were frivolous in their attack.

These cases had often dragged on for years

 

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By adamsidat
03rd Mar 2014 16:36

a dodgy tax "vehicle"

which was not even second hand lol

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