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Accelerated payment notices hit footballers

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27th Jan 2015
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One group of professionals in the firing line for accelerated payment notices (APNs) demanding tax bill repayments within 90 days are footballers.

Reports have been coming through of APNs being received by a number of professions and high net worth individuals who participated in disputed avoidance schemes.

According to The Guardian more than 140 football players are affected by the Revenue’s challenge to film schemes such as those promoted by Ingenious Media, now being heard at the first tier tribunal.

Some current and former footballers are facing bankruptcy because they cannot meet the demands, the paper reported. Around 100 have sought help from the Professional Footballer’s Association and a further 40 from Xpro, a welfare organisation for former players.

Xpro said these players are ‘seriously affected’ by HMRC demands for the repayment of tax reliefs granted on some investments schemes and 20 face bankruptcy. Many are divorced, facing house reposessions and individual voluntary arrangements. 

One anonymous player was quoted admitting that he had been greedy, but was encouraged to use such schemes because so many other footballers were doing so too. The financial advisers who targeted them failed to explain the full implications should avoidance schemes go wrong. 

The player started using the schemes when he was on a Premiership salary, but now he’s retired, he are is unable to meet the 90-day demand.

Several famous players have been linked to Ingenious Media schemes including Wayne Rooney and David Beckham. But those big names are better able to pay their tax bill on time, which may not be the same for the 60-plus others who are not earning as much now.

Since the publication of the DOTAS scheme numbers, HMRC has been drip feeding APNs out to different groups.

On AccountingWEB in late December, Taxworks reported a client who had used a stamp duty avoidance scheme had received such a notice.

According to the Financial Times, HMRC also sent a batch of APNs to those involved in the Liberty scheme, which allegedly generated artificial losses to reduce tax liabilities. It was closed down in 2009 and brought to tribunal in 2014. 

Dawn Register, tax dispute resolution partner at BDO, said many schemes being targeted, such as Liberty, haven't been formally heard at a tribunal yet and this may be seen as “unfair” by some. 

But she added, “The accelerated payment legislation allows that to happen. People feel it is unjust but the accelerated payment is just an accelerated payment, it’s not a settlement of the case. The Revenue doesn't need a final decision to issue one.”

There is a repayment mechanism if the tribunal does not rule in HMRC’s favour, she added. However this is unlikely to happen “for some time” in cases such as Ingenious that are only just being heard by the first tier tribunal. If the Revenue is unsuccessful and appeals the case could drag on through the upper tier tribunal and even higher courts.

As with the struggling footballers, Register said cashflow is the main issue for a lot of people receiving these notices.

“A lot may not have the money and the notice only allows 90 days to pay. There is a concern about personal bankruptcy and corporate insolvency too. If you come forward before the deadline it is possible a Time to Pay agreement could be reached, but you've got to be able to show genuine hardship.

“There's also the point that a lot of these people borrowed money to invest in the scheme, so that's where the Revenue tend to not be too happy,” she said. 

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By AndyC123
02nd Feb 2015 10:30

Media campaign

There seems to be something of a media campaign on this, the tone of which is that footballers have been "at it" and now are being made to pay.

I confess I don't know the full details but the ingenious schemes seem to have invested in genuine films, many of which have been commerically succesful.

HMG offered tax breaks to people preapred to invest.  People invested and got tax breaks.

Now HMG are pursuing them (complete with APNs) and the media are having a field day in the current anti-avoidance hysteria which can barely tell the difference between legitimate planning and robbing a Post Office armed with a sawn-off shotgun.

If bankruptcies follow and Ingenious win their case, what then?  Apologies from HMG? Apologies from the media? I doubt it. It'll probably be portrayed as a win by cheating tax avoiders "on a technicality".

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Replying to lionofludesch:
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By The Limey
03rd Feb 2015 09:59

Circular loans

AndyC123 wrote:

I confess I don't know the full details but the ingenious schemes seem to have invested in genuine films, many of which have been commerically succesful.

HMG offered tax breaks to people preapred to invest.  People invested and got tax breaks.

 

Except they were claiming tax breaks on amounts far in excess of what they actually invested. The way these things usually 'worked' was that there would be a c. £1m genuine investment, and then another £5m borrowed. The total £6m would be 'invested', but with £5m going straight back to the bank who lent the money. Tax relief would be claimed on the full £6m, despite the investor only actually having put in £1m.

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By AndyC123
03rd Feb 2015 11:04

so......

So....the £5m the footballer borrowed from the bank would never have to be repaid?

And the £5m borrowed wasn't used to invest in the film? It was just handed straight back to the bank?

Is that what you are saying?

That would indeed be an odd set up.

Where  have you got your background information from?

My (limited) understanding is that the loans came from ingenious themselves but are repayable and were used to invest in films and will (if the films are succesful) generate taxable income.

http://www.teeslaw.co.uk/news-events/news/lhwt-investment-in-british-film-or-a-tax-avoidance-scheme.aspx 

 

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Replying to gainsborough:
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By The Limey
03rd Feb 2015 14:32

Tax deferral

AndyC123 wrote:

So....the £5m the footballer borrowed from the bank would never have to be repaid?

And the £5m borrowed wasn't used to invest in the film? It was just handed straight back to the bank?

Is that what you are saying?

That would indeed be an odd set up.

Where  have you got your background information from?

My (limited) understanding is that the loans came from ingenious themselves but are repayable and were used to invest in films and will (if the films are succesful) generate taxable income.

http://www.teeslaw.co.uk/news-events/news/lhwt-investment-in-british-film-or-a-tax-avoidance-scheme.aspx 

 

The way I understand it is that although it was 'invested' by handing over to the film company, the film company was usually required to deposit it at the bank which made the loan. And in fact the bank never transferred any money at all - it just made a debit entry for the (non-recourse) loan to the investor, with a credit entry for the deposit of the film company, and the film company could not withdraw that money unless and until the loan was repaid. Any interest was also usually calculated to be circular. So the bank never had any money at risk either.

Yes, taxable income could/would be generated later but that's how tax deferral schemes operate...

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By AndyC123
03rd Feb 2015 16:51

@the Limey. sorry to repeat myself.....

But where did you get your information from?

That's a fairly detailed understanding of the scheme that you're demonstrating.

If the loan was non-recourse, what was the collatoral being offered by the investor?

What exactly did the film company have to gain from this?  It needed money to make a film but didn't get any because it had to give any money it got straight back to the bank?

 

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Replying to [email protected]:
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By The Limey
04th Feb 2015 11:30

Having read some judgements

AndyC123 wrote:

But where did you get your information from?

That's a fairly detailed understanding of the scheme that you're demonstrating.

I have read a few of the judgements on previous schemes. The ones I am describing are some of the direct film investment ones. There are some others that involve investment in film rights (e.g. purchases from Disney, etc) where the arrangements are quite different.

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If the loan was non-recourse, what was the collatoral being offered by the investor?

No collateral - the bank was getting its money back immediately through the circular transaction so didn't need any (in reality, the only 'movement' of money was a book entry at the bank).

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What exactly did the film company have to gain from this?  It needed money to make a film but didn't get any because it had to give any money it got straight back to the bank?

The film company got £1m of the £6m for investing in the film. Of course, the investor had got themselves a current year tax deduction of more than £1m...

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