HMRC offers offshore loan settlement

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Robert Lovell
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HMRC has given 16,000 offshore loan scheme users the opportunity to pay the tax they owe or risk facing bigger tax bills and legal costs.

The Revenue said that on average, each of the users of the contractor loan schemes covered by this settlement opportunity owes £11,000 a year in tax. The total amount of tax owed by these users is £430m.

The schemes, which are used by a minority of contractors (used by just 1% of contractors) and are “particularly aggressive”, involve complex arrangements with individuals signing a contract of employment with an offshore employer, HMRC said.

They then receive their pay from contracts in the UK through an offshore company or trust in what are claimed to be non-taxable loans, rather than as income.

Users will have until January 2015 to take up the settlement opportunity, which applies to schemes used before the Disguised Remuneration rules were introduced in April 2011.

HMRC said if they do they will pay the tax and interest due on the sums they received as loans under the scheme. But if they continue to challenge the Revenue in the courts, they risk having to pay additional tax charges and penalties, as well as the costs of litigation if they lose.

Jennie Granger, HMRC director general for enforcement and compliance, said: “Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.

“This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they've understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users,” she said.

HMRC offers settlement opportunities like this for some types of marketed tax avoidance schemes that have large numbers of users and where there is a range of possible outcomes in law.

They are one of a number of tools HMRC uses for tackling tax avoidance, whichinclude the new accelerated payments powers introduced this month as part of the Finance Act 2014.

The introduction of accelerated payments means HMRC will now be able to make taxpayers pay disputed tax in advance rather than waiting for the outcome of a tribunal ruling.

The Revenue will also be able to issue follower notices for cases of tax avoidance that resemble others where principles were previously established, and taxpayers will be required to pay in advance of an agreed final position.


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By Aln B
31st Jul 2014 12:31

"Accelerated Payments" ??

I must admit to not being completely clear on this aspect.


The HMRC can take a disputed tax case to Tribunal and (whilst legal and financial minds go about their ponderings and make a balanced judgement), the party targetted MUST pay ALL of this disputed tax in advance ??


So, let's take a recent case -- the old Rangers football club holding company has been cleared by two Tribunals.

But ... under these new powers they wouldf have had to stump up over £48m as was claimed ?


But ... years later they would have been cleared and found to be not liable to have payed that money ?


In the meantime, they would have gone bust for that single reason, and the HMRC claim wiould be solely responsible.


Can others see where this is going ?

HMRC are going to end up in court over vexatious and vindictive "tax" claims that simply destroy companies and people.


yet another nail in the coffin of British commerce -- brought to us al by a supposedly hands-off Conservative Government !!

Thanks (1)
31st Jul 2014 13:32

I can't understand how HMRC lost the Rangers case

Who on earth would pass up real pay/salary in exchange for a tax free loan unless the loan was non-repayable, and if it is non-repayable then it isn't a loan.

Thanks (2)
01st Aug 2014 10:38

Substance over form

ShirleyM wrote:

Who on earth would pass up real pay/salary in exchange for a tax free loan unless the loan was non-repayable, and if it is non-repayable then it isn't a loan.

I think that was the view of the accountant on the original First Tier Tribunal (basic substance over form). The lawyers on the other hand were more interested in the actual legal wording.

Thanks (1)
By Aln B
31st Jul 2014 17:17

HMRC & Rangers

HMRC were told several times -- even although they were trying to collect in retrospect, the existing alw at the time applied.


In the layrinthine, convoluted ways of finance, the nature of the EBTs set up for Rangers FC players fell inside the law and were thus legal.


The setting up of this scheme, using a completely seperate agency (abroad) to deal with and issue the loans, made this outside the remit of the old Finance Acts.


Top legal minds have examined this forensically and there's no mistake.

It's not legal now that the loopholes have been closed, but it was legal and perfectly above board then.


The issue for the loans is a matter for that seperate agency to deal with.


A devious way of payment, and one that actually didn't save the club too much money even then.


HMRC will have better luck looking into the marginal aspects of termination and one-off payments that Lord Doherty referred back.


But this should have been of no surprise to anyone -- it was a doomed case, and the more you look at all that has gone on in the background against Rangers FC, the more you have to wodner if there's more than just money and precedent in this.

Maybe something personal from somebody with influence ??

Thanks (1)