“If you think the Post Office Scandal is bad…” have a look at the HMRC clawback

[advent2016]

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When I was contracting colleagues said they had this amazing tax avoidance scheme that saved them twenty grand a year. I asked my accountant / tax adviser who was ex IR and he said "Any planned avoidance scheme might be seen as evasion and to put any saving into an investment so that you could potentially pay it back later" I didn't take up this plan, he gave me some other excellent tax saving methods that were all legal and very good.

I know quite a few doctors, nurses and other contractors who have been hit with this.

I think HMRC should be going after the employers not the employees

[RedKettle]

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When I was contracting colleagues said they had this amazing tax avoidance scheme that saved them twenty grand a year. I asked my accountant / tax adviser who was ex IR and he said "Any planned avoidance scheme might be seen as evasion and to put any saving into an investment so that you could potentially pay it back later" I didn't take up this plan, he gave me some other excellent tax saving methods that were all legal and very good.

I know quite a few doctors, nurses and other contractors who have been hit with this.

I think HMRC should be going after the employers not the employees

You were given excellent advice.

That scheme failed the too good to be true test in my opinion and people taking it up should have thought about that.

[8MillionDollarMan]

Very tenuous linking this to the Horizon scandal and how anyone thinks being paid in that way is not avoidance is beyond me.
Ignorance is also not a defence.

[Spunky34]

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This sets out the government/HMRC’s position. Extract below suggests that where possible they will go after the employer not the employee.  Ultimately I’m on HMRC’s side here.  I don’t think this really bears comparison to the Post Office/Horizon.

“If an employer set up a scheme then the tax liabilities will fall to them and not the employee. HMRC will only seek payment from the employee if it cannot be collected from the employer, for example where the employer no longer exists or is off-shore. In these circumstances HMRC would collect the liabilities owed from the employee, who benefited from the scheme.

HMRC has a legal duty to collect the tax owed. It would be unfair to the honest majority of taxpayers if avoidance scheme users escaped paying their share of the taxes that pay for our vital public services such as the NHS, police, and social services.”

[MissWolf]

Id be asking the mods for a title change , comparing this to and implying it's worse than the horizon/post office case is frankly more than a bit insulting and completely wrong

[Blackpool Rock]

Id be asking the mods for a title change , comparing this to and implying it's worse than the horizon/post office case is frankly more than a bit insulting and completely wrong

In fairness the linked articles hype it up and make the comparison so the OP is just posting what the articles say (rightly or wrongly)

[MissWolf]

In fairness the linked articles hype it up and make the comparison so the OP is just posting what the articles say (rightly or wrongly)

Yes but if he did a bit of reading and research then this would have been an excellent stand alone thread.

Obviously comparisons will be made if posters don't research and the PO scandal has been so prominent in the news of late, and rightly so, meaning that the press are going to piggyback off it to get their stuff read.

However my first line stands and its a shame as I said because this is a worthy discussion in its own right but very different from the PO imo 

[advent2016]

Very tenuous linking this to the Horizon scandal and how anyone thinks being paid in that way is not avoidance is beyond me.
Ignorance is also not a defence.

>Very tenuous linking this to the Horizon scandal
I didn't , I started a new thread. News media linked it, I used their title

[PilotMan]

I know quite a few doctors, nurses and other contractors who have been hit with this.

I think HMRC should be going after the employers not the employees

It's not employers offering the scheme, it's employees and contractors willingly letting themselves be duped by false claims from opportunists, in the hope of paying less tax than is rightfully due.

As previously stated, ignorance is not a defence.

[PilotMan]

>Very tenuous linking this to the Horizon scandal
I didn't , I started a new thread. News media linked it, I used their title

No excuse for ignorance when it comes to repeating someone else's clickbait.

[jackdaw]

The version of this story I read in the Telegraph made the claim that this practice (taking a loan that does not not need to be repaid rather than normal wages/salary to avoid tax and NI) was actually legal a few years ago.

The Telegraph then made the claim that when legislation was passed to close this massive loophole, the legislation was BACKDATED to apply to earlier years, and then tax authorities demanded settlement for these earlier years.

If that backdating claim is true I do have some sympathy for the people impacted.

[Spunky34]

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The Chartered Institute of Taxation has quite a balanced view of it (article is from 2019, prior to a review of the Loan Charge, but still makes relevant reading).  Worth bearing in mind that the CIoT is not HMRC, but an independent professional body.  It makes the point that most of those caught by the loan charge are not lower-paid workers.

The article points out that to say that loan remuneration schemes were legal is highly simplistic and the schemes were always likely to trigger a challenge from HMRC.  Its conclusion is that the Loan Charge scheme to recover the tax is a blunt instrument (and the length of clawback period is exceptional), but where people knew what they were doing (which I suspect means those who were being paid enough to take advice on it, rather than the lower paid), the scheme can be seen as reasonable. CIOT urged HMRC to use its discretion with the lower-paid, where the amount of tax unpaid would be lower and where most of the personal benefit is likely to have been swallowed up in agency fees etc.

[SoapyTW]

I think 'employer' is easily mis attributed for blame in this. The contractors would have been their own 'employer' if they were playing it by the book. Instead they went to work for these 'employer' entities in with the aim to avoid/evade tax. I know loads of people who did this. I said to them at the time it looked dodgy as fuck. It's not surprising that HMRC are going after them, and if I was in their position, I don't think I would/could argue against it.

edit: sorry - just saw PilotMan posted the same. 100% agree

[RedKettle]

The version of this story I read in the Telegraph made the claim that this practice (taking a loan that does not not need to be repaid rather than normal wages/salary to avoid tax and NI) was actually legal a few years ago.

The Telegraph then made the claim that when legislation was passed to close this massive loophole, the legislation was BACKDATED to apply to earlier years, and then tax authorities demanded settlement for these earlier years.

If that backdating claim is true I do have some sympathy for the people impacted.

Firstly whether legal or not is not a black or white issue, this is very complicated and can depend on precise facts of each case.

However clearly if the scheme worked it destroyed the UK tax base so it only takes a few seconds of thought to appreciate that it is going to be attacked with everything HMRC and Government has.  In my opinion you were pretty stupid if you used it.

[Spunky34]

I think 'employer' is easily mis attributed for blame in this. The contractors would have been their own 'employer' if they were playing it by the book. Instead they went to work for these 'employer' entities in with the aim to avoid/evade tax. I know loads of people who did this. I said to them at the time it looked dodgy as fuck. It's not surprising that HMRC are going after them, and if I was in their position, I don't think I would/could argue against it.

edit: sorry - just saw PilotMan posted the same. 100% agree

I agree with this - although I have sympathy for the low paid who may be affected if HMRC applies the letter of the law.  I worked for an insolvency firm and we did the administration of a couple of these agencies who had paid workers like this.  Those workers were people like call centre operators and warehouse workers, following the standard practice of the agency for those roles at the time.  If they didn’t want to be paid like that (and who was going to say “no, please tax me more”, when to do so would have meant the agency wouldn’t take them on and they wouldn’t get whatever the job was?) they had no choice in the matter and would not have been in a position to take advice.  I hope that HMRC effectively turns a blind eye to them.

On the other hand, the place I work now used to have loads of well-paid IT contractors (£500+ per day about a decade ago) who were paid through these kind of arrangements.  All the ones I know personally knew exactly what they were doing and some of them went round bragging about how stupid people were who didn’t.  I have no sympathy at all for them.  And once the loan charge came in, if they weren’t getting new advice and approaching HMRC to agree a settlement, they deserve everything they get.

[PilotMan]

I think 'employer' is easily mis attributed for blame in this. The contractors would have been their own 'employer' if they were playing it by the book. Instead they went to work for these 'employer' entities in with the aim to avoid/evade tax. I know loads of people who did this. I said to them at the time it looked dodgy as fuck. It's not surprising that HMRC are going after them, and if I was in their position, I don't think I would/could argue against it.

edit: sorry - just saw PilotMan posted the same. 100% agree

Exactly, they (the individual benefiting from the scheme) knew exactly that they were doing and if the HMRC haven't agreed to it, then you are on shaky ground at best.

The HMRC can be consulted and asked to give approval to a transaction / scheme which may or may not be implemented to reduce a tax charge.

[advent2016]

A few years ago I worked briefly for a consultancy and found that I was receiving Amazon gift vouchers from them. I enquired and they said they were my expenses payments from the company I was working for. I checked with my accountant and he said it was fairly common practice to use some sort of voucher and I must have ticked a box somewhere or it was their default. Everything else was PAYE.
I asked my accountant to check, he spoke to their HR person, did some bank searches, company house etc and said it looked bona-fide. I've always kept scrupulous record of every expense and attached a photo to a spreadsheet, even if my accountant uses SAGE

Previously for almost every other employer  expenses have been paid to my bank (usually another account).

Other than speaking to my accountant (he's Ex HMRC / DWP) how can an individual check that the way a company is paying an employee is legal and above board?

[8MillionDollarMan]

Exactly, they (the individual benefiting from the scheme) knew exactly that they were doing and if the HMRC haven't agreed to it, then you are on shaky ground at best.


The HMRC can be consulted and asked to give approval to a transaction / scheme which may or may not be implemented to reduce a tax charge.

Agree with the 1st point however I asked them many times and could never get a straight answer on my 0% tax situation which wasn't in any way evasion until they decided I was wrong and owed them.
As it was they lost their case,what really makes my teeth itch is certain people/companies seem to be able to negotiate their tax with HMRC.
It was black and white for me as an individual.

[Spunky34]

Agree with the 1st point however I asked them many times and could never get a straight answer on my 0% tax situation which wasn't in any way evasion until they decided I was wrong and owed them.
As it was they lost their case,what really makes my teeth itch is certain people/companies seem to be able to negotiate their tax with HMRC.
It was black and white for me as an individual.

If you’re all that interested, HMRC’s own guidance on its negotiation/litigation strategy is available.  The link below is very summarised, it links to the full guidance.

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[jackdaw]

Other than speaking to my accountant (he's Ex HMRC / DWP) how can an individual check that the way a company is paying an employee is legal and above board?

In theory could check by speaking direct to  HMRC themselves, though that often feels like a difficult field to plough.

Quite often if a professional advisor is giving you advice that you “feel” to be wrong it can be instructive to see their reaction if you ask them to give very specific written assurance on the particular point. “Okay, you’re confident, so please put it in writing that you personally guarantee that…..” Sadly many advisors become less sure at that point!

In a recent case where advice to me seemed suspect, I simply rang another advisor, got a few pointers from them…then guided by their advice used Doc Google to check a few specific points. On going back to the first advisor, quoting the research, soon established the original advice was wrong.

[QQwerty]

Possibly one of the most misleading thread titles ever. Innocent post masters accused of theft, fraud, imprisoned, bankrupted after incompetence and cover ups on a gargantuan scale VS greedy contractors who attempted tax evasion using a scheme which always sounded too good to be true made to pay up after they got caught.

If it comes with a "barristers opinion" on the sales pitch then you know it's dodgy.

[snaitram99]

The version of this story I read in the Telegraph made the claim that this practice (taking a loan that does not not need to be repaid rather than normal wages/salary to avoid tax and NI) was actually legal a few years ago.

A "loan" that does not have to be repaid is not a loan

[RedKettle]

Possibly one of the most misleading thread titles ever. Innocent post masters accused of theft, fraud, imprisoned, bankrupted after incompetence and cover ups on a gargantuan scale VS greedy contractors who attempted tax evasion using a scheme which always sounded too good to be true made to pay up after they got caught.

If it comes with a "barristers opinion" on the sales pitch then you know it's dodgy.

To be pedantic it was tax avoidance, albeit high up the scale, not tax evasion. Otherwise agree completely.

[webpunter]

Possibly one of the most misleading thread titles ever. Innocent post masters accused of theft, fraud, imprisoned, bankrupted after incompetence and cover ups on a gargantuan scale VS greedy contractors who attempted tax evasion using a scheme which always sounded too good to be true made to pay up after they got caught.

If it comes with a "barristers opinion" on the sales pitch then you know it's dodgy.

As @MissW has pointed out
Disingenuous to link the two

The subject line could be sumfink like
"V.Dodgy loan tax evasion scheme falls apart, have a look at the HMRC clawback, serves em right"

[webpunter]

To be pedantic it was tax avoidance, albeit high up the scale, not tax evasion. Otherwise agree completely.

It looks like evasion to me
Not paying any tax
There are schemes to defer tax & reduce it
Paying nowt, good luck with that

It's those peddling the product making money out of it who HMRC need to take aim at
Maybe lessen the penalties for those who used it
They still need to pay the tax perhaps not hit them with a huge surcharges depending on the circumstances
These can be up to 300% of the amount of unpaid tax in question
Tho i suspect that Zahawi was let off on his his tax avoidance mullarkey with substantially less, quelle surprise 

[jackdaw]

A "loan" that does not have to be repaid is not a loan

I agree. I think it says a lot about the complexity of our tax system that the scheme had any prospect of working (at end of day it took a specific law change to scupper it).

A zero interest loan that doesn't need to be repaid? At very least that should be a taxable benefit, with tax charged accordingly (indeed that should apply to any loan that does not need repayment, or any loan with artificially low interest.)

I do have sympathy with SOME of the people who used the scheme (if for example they completed accurate tax returns, and declared they were using the scheme...then HMRC should not have failed to tax them for year after year after year.)

But the scheme itself was appalling, its a pity that its creators are unlikely to see any adverse consequences.

[advent2016]

Something on the radio yesterday. People transferred their pensions before they were age 55 to scammers and some  lost £500K HMRC now want to tax these poor souls who have already lost nearly everything.

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[QQwerty]

To be pedantic it was tax avoidance, albeit high up the scale, not tax evasion. Otherwise agree completely.

Avoidance is utilising the system in a legal way to minimise tax, this was shown to not be legal hence evasion imo.

[RedKettle]

Avoidance is utilising the system in a legal way to minimise tax, this was shown to not be legal hence evasion imo.

There were using an interpretation of the law and they were declaring the transactions.  It was proved to be wrong, in fact it was not as Government changed the law.  That is avoidance and that is how HMRC are treating it.  There are no criminal charges.

Evasion is straight forward illegal, typically taking money without declaring it at all.

HmRC do distinguish between acceptable and unacceptable avoidance but there is no basis in law for that. Even than unacceptable avoidance is not evasion.

[RedKettle]

It looks like evasion to me
Not paying any tax
There are schemes to defer tax & reduce it
Paying nowt, good luck with that

It's those peddling the product making money out of it who HMRC need to take aim at
Maybe lessen the penalties for those who used it
They still need to pay the tax perhaps not hit them with a huge surcharges depending on the circumstances
These can be up to 300% of the amount of unpaid tax in question
Tho i suspect that Zahawi was let off on his his tax avoidance mullarkey with substantially less, quelle surprise 

It may look like evasion to you but it is not, see my reply above.

HMRC started focusing on providers of schemes some time ago, quite rightly

[RedKettle]

For those linking news stories I think the more interesting link here is that Baroness Mone's husband made his money from flogging tax schemes like this.  Puts interesting slant on their story that they were just trying to help the country with PPE.

[jackdaw]

For those linking news stories I think the more interesting link here is that Baroness Mone's husband made his money from flogging tax schemes like this.  Puts interesting slant on their story that they were just trying to help the country with PPE.

Jeez, what a guy!

Their defence when finally to be proven lying to the press and others about Baroness Mone having no interest in the PPE company was brass necked beyond belief (“Its not illegal to lie”. “We didn’t want our family to be brought into it”).

Not a great fan of the overall US justice system…but one thing we could learn from it is to be much more ruthless with financial malpractices of all kinds.

Really, really wish Labour had spent some of their wilderness years on coming with radical ideas to reform tax system, and ways of making the likes of Baroness Mone and hubby face significant penalties.
 

[webpunter]

Jeez, what a guy!

Their defence when finally to be proven lying to the press and others about Baroness Mone having no interest in the PPE company was brass necked beyond belief (“Its not illegal to lie”. “We didn’t want our family to be brought into it”).

Not a great fan of the overall US justice system…but one thing we could learn from it is to be much more ruthless with financial malpractices of all kinds.

Really, really wish Labour had spent some of their wilderness years on coming with radical ideas to reform tax system, and ways of making the likes of Baroness Mone and hubby face significant penalties.

Baroness & hubby are reportedly selling assets
Moving money off-shore beyond the reach of the UK courts ?

I agree with the tax system being reformed
It should be consistent between the parties
However i get the impression that the conservatives are less likely to pursue people at the high end due to political connections
Concerned maybe about what info will reach the surface when whoever it is are defending themselves [with funds available to afford hard hitting lawyers]

If the US justice system operated here the damages claims relating to the post office [TPO] would be eye watering
Here it seems to be like ooooh you were bankrupted 15 years ago & lost however much being turfed out of the house & the Govt seems to think that if they pay back the same amount its ok
Anyone in the board positions @ TPO doing the same in the US could easily face jail time
Here its like they seem to think the only punishment will be getting slaughtered in the media & ripped to pieces in front of the house of commons
Things blow over & get forgotten about

Tho i detect [& hope] with TPO there is a long way to go yet
With senior TPO staff benefitting from income generated pursuing & bankrupting sub post masters
It must be in their minds to try & get in first revealing what went on by who in the hope of more lenient treatment

[mh]

The loan charge is very different from the Post Office scandal.

HMRC gave warning after warning that the schemes were almost certainly illegal and that there would be consequences - and there were. The employees were quite fairly told to repay their loan or pay the missing tax.

HMRC should go after both employer and employee. Only one has to repay the missing tax.

The companies that offered the arrangement structures also need to be prosecuted for defrauding their clients.

[RedKettle]

The companies that offered the arrangement structures also need to be prosecuted for defrauding their clients.

I don't know but I suspect that many of the companies were SPVs that were quickly emptied of cash after the wave of sales and have nothing in to go after.  Which leaves difficult legal routes to go after shareholders and directors, who may even be offshore.