HMRC’s heavy-handed approach in EBT case pays off
The case against an IT contractor over whether payments into an employee benefit trust constituted taxable income, turned out to be more than just another EBT case for HMRC.
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What a refreshingly good write-up (right up my street one might say)! I note the author is a professional tax writer, so that's perhaps not surprising. See my humble efforts here: https://www.accountingweb.co.uk/any-answers/hoey-coa-published
A fair summary of a complex case.
The point about the FTT having no jurisdiction is one that is likely to lead to some trouble I feel.
Where the facts as heard by the FTT in a lead case such as this, are incomplete or not sufficiently presented to or examined by the Tribunal, where do subsequent claimants go to get these reviewed?
The FTT has ruled itself out (and the CoA agreed that was correct).
The prospect of going to non tax specialist Court to rehear what are complex tax issues, is not one I'm looking forward to.
Indeed it is. Not only will County Courts have to grapple with s 59B TMA and reg 185 and the like, it follows that no entries in the return about these things, including the common adjustments made when underpayments are coded out, can be enquired into by HMRC under s 9A, nor do they fall under Sch 1A as claims are not involved.
Just goes to show the fairness of the system is heavily stacked against the so called customer. Which normal” individual has the ability and funds available to take questions to Judicial Review.
Interesting take on S684 - since when has HMRC decided that it’s reasonable for any officer to ignore another avenue for recovery of the extra pound of flesh.
Great article and shame Hoey didn’t put in the wee white box on his return “and in the alternative if my first line of defence is not sustainable then it was not reasonable for HMRC to ignore the employers duty to operate PAYE if the monies were remuneration and I will be entitled to a notional tax credit for the amount of the employers failure”
Part of the problem there is that unless Mr Hoey could look into a crystal ball in 2011 and predict the secret and hidden HMRC policy that first appeared inside the department in December 2018, he would have had no reason to include the message.
He could have said "in the event HMRC does not agree with matters disclosed or not on this tax return I reserve the right to scour the 30,000 pages of UK tax law to suggest alternative means of taxation and relief from taxation".
HMRC has a very handy time machine here in which all manner of unsavoury incompetence and failed investigation work can be conveniently buried.
Yes indeed and it forever amazes me how totally dumb comments here get a "Thanks" and quite often multiple "Thanks". Dumb Britain and all that I suppose.
Why do you say that? The CofA said that that was exactly what he couldn't do, as no notional PAYE credit was available to him. He had already accepted he was liable to tax on earnings after Rangers.
So do you prefer the Red Top logic of "he had the money, paid little tax and deserves all he gets - read all about it here" to the rule of law?
So basically the miscreant got away with paying any tax due to a technicality .
IIRC, I read in one of the case reports some time back that this 'miscreant' [really?!] had declared the benefit of the interest free loans. If that's right (and I'm not confusing my own thoughts with the reality of what happened), and the loans turn out to be taxable as remuneration, I wonder what has happened to the BIK tax. Far from paying too little, this fella might end up paying too much - unless credit is given for the BIK tax v the remuneration tax.
and the loans turn out to be taxable as remuneration...
That has already been conceded, of course.
No. The loans are loans. He was taxed on SC Rangers' ratio per RT above (which did not concern the onward loans at all).
Your knowledge on these situations is much deeper than mine (I've never dealt with this in practice), and I don't deny my thought was somewhat superficial.
But, for the record, the thought wasn't that the loans weren't loans [I know that's the usual allegation in here from others who don't deal with this in practice]. The fact that loans existed is kind of underlined by the fact that Hoey later undertook a loan restructuring exercise.
What I was wondering was... if the logic for taxing a loan from an EBT is that the employer facilitates the loan by providing the funds to the EBT (as HMRC says in EIM26110) and if the logic for taxing the payment to the EBT as remuneration is that it is in effect the employee's money which he has allowed to be diverted to the EBT (the "SC Rangers' ratio"... though have I misstated it?)... then doesn't the one argument undermine the other? If it's his money that's going to the EBT, then it's not the employer's; if it's not the employer's, then it's not the employer funding the loan; if it's not the employer funding the loan, then does s173(2)(b) apply?
Because if it doesn't.... there's no BIK tax. Or shouldn't be, anyroad.
if the logic for taxing a loan from an EBT...
I should of course have said "taxing the benefit of a[n interest free] loan..."
See also paras 178 and 198 (discussed by Justin here: https://www.accountingweb.co.uk/any-answers/hoey-coa-published)
Could HMRC not have found a single QC capable of arguing both the ITEPA/PAYE and the TOAA points, and did this case really require three juniors in addition to two Silks?
Different cost/benefit calculations at least part of an answer? Hoey just had his costs and tax liability at stake so couldn't justify more*. HMRC had also all the tax at stake in the other, similar cases.
*Or was there a (formal or informal) support group standing behind him?
Part of the reason was that one of the barristers for HMRC was apparently well known for their expertise in ToAA. (Even been suggested that they were he brains behind that policy).
Given that HMRC was forced to concede on day 4 of the hearing that their ToAA position was untenable, it makes you wonder how much taxpayer money has been wasted an that?