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I would add something else....everyday/week there are clients who will query the bill...no matter how small (fee sensitive/service sensitive etc). Yet whenever I see these schemes £000's have been paid in fees with what seems to be little or no resistance....!?
David12345 - I guess you will probably be able to provide the answer for that - value for money?
There was little or no resistance because the fees were not paid directly out of the account of the 'client'. In many cases the 'client' just saw a larger number appearing in their bank account than they were used to, very few people question why they are getting more money, you have to remember that many of these contractors were working long hours in their own industry and spending hours researching tax law was not a priority.
I guess I wouldn't question things if I simply saw more money in my account than my payslip said I should be receiving....call me ignorant....apparently that's fine....FFS?!
Which Pay slip would you be looking at? The one from your own personal service company you previously used where you were receiving a small salary? The rest having been taken as a dividend, or I expect in many cases just transferred from the company bank account to your own personal account with the accountant set to sort it out a long way after the end of the year. How would you know what amount of tax (and NI) you would be paying had the whole amount gone through PAYE, rather than as a small salary and a loan or do you expect everyone who was in these structures to be running their own payroll system just to check.
Which Pay slip would you be looking at? The one from your own personal service company you previously used where you were receiving a small salary? The rest having been taken as a dividend, or I expect in many cases just transferred from the company bank account to your own personal account with the accountant set to sort it out a long way after the end of the year. How would you know what amount of tax (and NI) you would be paying had the whole amount gone through PAYE, rather than as a small salary and a loan or do you expect everyone who was in these structures to be running their own payroll system just to check.
We were recommended a scheme by an established specialist accountancy practice that employed ex HMRC “ tax specialists” who liaised with colleagues still in the employ of HMRC . It was “sold “ as a well established practice for a considerable fee. This post isn’t about criticising the vast majority of good practitioners out there. It’s a statement as to what happened to busy genuine small / medium sized businesses , who were not experts in this field , whose own smaller accounting practices didn’t profess to have the necessary expertise in complex tax planning. HRMC had a duty of care to act as soon as such schemes were mooted - let alone implemented. The Revenue cannot now pretend they didn’t know what was happening as it was their former employees that were selling the schemes in cahoots with their very own employees. The whole tax system is way too complicated/costly now and needs a radical overhaul as its penalising smaller businesses .
Entrepreneurs are busy yes, but surely the word 'loan' would send an instant message to any intelligent entrepreneur? A properly constituted loan arrangement with security, commercial interest and commercial repayment conditions should be part of that loan and in that case it's pretty obvious it's a "loan". Flies, floats and quacks and all that.
If it's on the basis of a nod and a wink that you never have to repay it, that's entirely different and for so called 'tax specialists' to charge huge sums for that advice was entirely wrong.
What we as entrepreneurs feel aggrieved about is HMRC did not act swiftly enough and allowed this mess to develop unchecked and then got the Government to introduced retrospective powers for HMRC to collect the tax from individuals and to go back and re-introduce out of time limits. Sweeping powers to cover their own muck up and to boot allowing them to interfere in properly and legally constituted loan contracts between two independent parties which were most certainly not 'disingenuous loans' derived to deprive the taxman of his cut. I agree entirely the tax system has become way too complicated, as is the law. But sadly as the saying goes, there's a law but there's no justice.
comes back to one thing....so you knew you took a loan....when you paying it back!
(I presume these people have taken mortgages from banks, and realise that the deal is the capital has to be repaid at some point)
Sympathy definitely for being forced to settle by a date determined by the idiots in charge though.
But unfortunately these things don't happen by accident - it requires a lack of responsibility at all levels. Those in charge who didn't see what was happening, those inventing the schemes to make a quick buck, those pushing the schemes to get a kick back and those blindly buying into the schemes.
Its tough to take it I realise, but you need to have some empathy with the majority of advisers who had no involvement in these schemes yet appear to be clubbed together as being part of the problem.....
There has been a failure by HMRC to get on with dealing with this. Along with a general failure to deal with most of the things they are supposed to do. This seems somehow to have coincided with the loss of most of their knowledgeable old Inspectors and their replacement by a few low-paid bods in call centres. The loss of personpower (is that a word? It is now) is not an issue to be dismissed.
Not everyone affected is a hard-nosed tax dodger. There are actually some innocent victims. I know of a person from an African country who worked here in Social Work for councils via Agencies - on fairly low pay. Her first Agency recommended an Umbrella company which happened to be one that paid her NMW + loans. She had no idea she wasn't complying with the law.
She got shifted from one Umbrella company to another being reassured everything was fine. One of these Umbrella companies was based in Valletta - so not much chance of HMRC nailing them.
She came to see us for advice once she had the loan charge letter - and was stunned to learn she owed many thousands of pounds (which of course she doesn't have).
nobody said they were tax dodgers...although bizarrely all have the same in common...they actually paid very little tax on their income....but I guess they overlooked that....(again this is specialist scheme providers we are talking about, and yet the average joe bloggs accountant is expected to feel some empathy or even guilt for what "their" profession is responsible for when actually the majority of scheme providers are not actually accountants, but are made up of barristers etc.....
Why would anyone on low incomes enter such schemes, surely if they do not earn much there tax affairs should be fairly simple and so such their tax liabilities.
I know Andrew, its bizarre....albeit I presume they were forced into using a Ltd Co (which may be a requirement of their contract)….and then forced to 'remunerate' themselves via a loan (less convincing argument on this said)...I presume they are all migrants and therefore need to be lead by these cheapskate accountants....(the ones who have the barristers in their pockets)…
All these schemes have one thing in common - it involves a loan...yet at every stage HMRC/local accountant etc is to blame...yet it never seems to be addressed that the loan will at some point be repayable.....funny that....
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