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Contractor loan scheme notifiable is walkover for HMRC

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HMRC successfully ordered that a contractor loan scheme constituted notifiable arrangements under DOTAS.

28th May 2021
Tax Writer
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HMRC successfully applied to the first tier tribunal for an order that a contractor loan scheme, of which White Collar Financial Limited (‘White Collar’) was named as being promotor, constituted notifiable arrangements under DOTAS [TC07934]. The FTT found that the conditions were met.

White Collar had made representations to HMRC but nobody took the time to defend the indefensible when by opposing HMRC’s application to make the scheme DOTAS notifiable under DOTAS. 

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Replies (12)

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By Justin Bryant
28th May 2021 12:27

This is now effectively the only purpose of DoTAS i.e. forced disclosure per my comments here:
https://www.accountingweb.co.uk/any-answers/interesting-2-dotas-disclosu...

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Psycho
By Wilson Philips
28th May 2021 13:57

Perhaps so - but a promoter that fails to notify continues to do so under threat of penalty (which I know is likely to be nothing in comparison to their fees).

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Replying to Wilson Philips:
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By Justin Bryant
28th May 2021 16:46

That's wrong in virtually all cases, since reliance on a counsel opinion that the scheme is not subject to DoTAS eliminates that potential penalty risk in practice.

Also, I note that there have still been no new voluntary DoTAS disclosures in the latest April 2021 update in the above link.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
28th May 2021 17:06

It's not wrong - read what I said again, carefully this time.

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Replying to Wilson Philips:
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By Justin Bryant
28th May 2021 17:50

It is wrong in practice as in practice there is no such penalty risk - per Mercury "tax counsel opinion counts" (as it was reported in Taxation Magazine I recall) case (and to my knowledge no-one has ever had a DoTAS penalty).

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Replying to Justin Bryant:
Psycho
By Wilson Philips
28th May 2021 18:07

Whatever. Your propensity to misunderstand and/or deliberately misconstrue written language renders further discussion pointless.

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By Paul Crowley
28th May 2021 15:00

As soon as I of M gets mentioned then we all know it is yet another offshore scam
Who buys these products?
Sincerely hope the lender sells the debt onwards

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Replying to Paul Crowley:
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By Hugo Fair
29th May 2021 17:36

Which I believe that many did ... resulting in original 'employees/members' finding that the loan is now repayable (to a 3rd party) - even after all HMRC payments have been settled.

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Replying to Hugo Fair:
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By Paul Crowley
01st Jun 2021 10:07

Difficult to have sympathy.
A loan is a loan
Real loans do not usually come interest free and never repayable.

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Replying to Paul Crowley:
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By gordo
03rd Jun 2021 15:52

Didn't you just contradict yourself?

Difficult to have sympathy, you say, for people having to repay the 100% of the repayable loan on which HMRC have already charged the equivalent of 50% INCOME tax, given that HMRC alleged wrongly that is not repayable.

You actually said "Sincerely hope the lender sells the debt onwards". Remarkable.

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By djn
01st Jun 2021 10:14

I totally agree. Cleverly designed contracts don't change the fact that these schemes have no commercial substance other than to defraud HMRC.
I know one of the expromoters of a massive scheme like this that was picked up by hmrc a few years back. Isle of man scheme too. All seemed great at the time, too good to be true in fact. The 2 existing partners of my firm outvoted me to not get involved- they were so right. At the time I was pretty inexperienced and almost got duped by the spiel. Learnt a valuable lesson all those years back as that could have had serious implications for us.

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By Yorick
08th Jun 2021 11:24

Interesting. A different but not totally dissimilar tax avoidance scheme used to be prevalent among some companies-I don't know if it still is. Salary paid would be declared as payment for services to freelancers, so the employer would be freed from all obligation to pay unemplyoment, health insurance, pension etc. Employees/freelancers would be expected to make their own tax arrangements. On the other hand, they would be given a fixed work schedule, company identification, vocational training schemes, and fixed working hours etc like ordinary employees. One employer I know of in Germany closed down completely every August because 12 months full time work with only one contractor under German legislatioon meant that that the "freelancer" automatically had the right even obligation to become a fixed fulltime employee. The German tax authorities caught up with one comapny I know of, which protected itself by cutting the pay of the"employees"' hourly rates to correspond to the loss to the emplyoer caused by employee tax contributions in the future. As for the past, employees were expected to sign a document in which they agreed to to what was effectively a pay cut (double pay cut because hourly rate was down and they would pay income tax) and to the fact that in the past they had regarded themselves as free-lance employees fully independent with the right to decide what hours they would work, with their signatures thus exonerating the employer for past misdemeanours but making themselves liable for retrospective tax liabilities. To be fair, this was not always about huge profiteering, but often was, small time employers in high tax countriees like Sweden and Germany in some cases could not afford business any other way (any other way than illegally that means) but "employees" should be wary of such schemes; they are often illegal and so may turn round and bite them somewhere down the line.

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