Retrospective taxation campaign
Discussion
supermono said:
So for clarity, the limited company accounts were signed off and accepted by HMRC for all those years before they changed their minds?
SM
1) Small point, but there were no limited companies involvedSM
2) No; most (but not all) of those involved received standard letters from HMRC saying that they didn't like what we were doing, although they signally failed to explain exactly why we were wrong or indeed to take anybody to court to prove that their interpretation of the law was better than ours.
supermono said:
So for clarity, the limited company accounts were signed off and accepted by HMRC for all those years before they changed their minds?
SM
I’m not 100% sure.SM
But I think in the case of this scheme the individuals weren’t directors of Ltd companies.
They would have closed or suspended their companies and signed up as employees of an IOM company and got paid that way.
The IOM company would get the money from the agent. Skim some off the top, then pay it to the ‘employee’ at IOM PAYE tax rates which are quite low.
So, HMRC wouldn’t have signed off their company taxes.
It would have been the IOM tax office that signed off the Umbrella company tax.
It’s possible they would have had to do personal tax returns – although they may have been registered as working abroad so they may have entered £0 as their UK income.
If a chap did work for an IOM company, and was seconded to work in the UK for a year then this would happen and be perfectly legal.
I just think HMRC got annoyed when people were joining the IOM company just to avoid UK tax.
Snowboy said:
It’s possible they would have had to do personal tax returns – although they may have been registered as working abroad so they may have entered £0 as their UK income.
Not so...all income was declared on UK tax returns. Otherwise it would have been evasion, not avoidance, which is an entirely different kettle of fish.Elroy Blue said:
People who undertake serial tax avoidance are no better than the feral types who 'legally' receive benefits they have no right too. Both are bleeding the country dry.
Personally, I find someone contributing less than they ought to less morally repugnant than someone taking more than they should - were all the nation's scroungers to drop dead this afternoon, we'd be in a better situation than if all the nation's tax avoiders did - but two wrongs don't make a right.otolith said:
Personally, I find someone contributing less than they ought to less morally repugnant than someone taking more than they should
What defines what someone ought to contribute? The tax code. If pay what that requires, then that is all they are legally and morally obliged to do. If the government don't like it, change the tax law. The more complicated the law, the more loopholes and unforeseen ways to not pay there will be.deckster said:
Snowboy said:
It’s possible they would have had to do personal tax returns – although they may have been registered as working abroad so they may have entered £0 as their UK income.
Not so...all income was declared on UK tax returns. Otherwise it would have been evasion, not avoidance, which is an entirely different kettle of fish.I would have thought it would have been declared on an IOM tax return.
(not calling you a liar, it just seems odd)
When a friend of mine worked in France for a French company and paid all his tax in France he didn’t have to declare anything on his UK tax return.
It was none of HMRC’s business.
Snowboy said:
Is that true.
I would have thought it would have been declared on an IOM tax return.
(not calling you a liar, it just seems odd)
When a friend of mine worked in France for a French company and paid all his tax in France he didn’t have to declare anything on his UK tax return.
It was none of HMRC’s business.
It's all in the technicalities, and we were self-employed UK citizens working in the UK. Definitely not employed by an IOM company or working in IOM.I would have thought it would have been declared on an IOM tax return.
(not calling you a liar, it just seems odd)
When a friend of mine worked in France for a French company and paid all his tax in France he didn’t have to declare anything on his UK tax return.
It was none of HMRC’s business.
tank slapper said:
otolith said:
Personally, I find someone contributing less than they ought to less morally repugnant than someone taking more than they should
What defines what someone ought to contribute? The tax code. If pay what that requires, then that is all they are legally and morally obliged to do. If the government don't like it, change the tax law. The more complicated the law, the more loopholes and unforeseen ways to not pay there will be.Morally, organising one's affairs in order to minimise one's tax liability within the spirit of the law seems perfectly reasonably to me. Doing so within the letter of the law - but not the spirit - is where I can see the parallel someone was making with those who choose to live off the state when they could choose otherwise. Even then I would make a distinction between someone who contributes to at least some extent and someone who only takes.
singlecoil said:
Is the OP serious about people here paying £200 to read the documents and decide whehter or not to support the protest?
I rather think he was. Which tells me something.This is not retrospective legislation. Nothing retrospective in it IMO. This is the IR realising that various devices have been employed unsuccessfully by the progenitors of this scheme and others like it in an attempt to create an artificial tax avoidance scheme which was not lawful under the existing legislation of the various ITA's and the IR choosing to stop the schemes.
I am not aware of any legislation introduced to outlaw this device. As I understand the situation the legislation is as it was when the scheme was incorrectly introduced. Is anyone suggesting that the IR have drafted new legislation in dealing with this matter?
The IR are attacking these schemes with a vengeance. Doubtless the original premise was set up on a QC opinion obtained with the purpose of creating such a scheme. So much for setting your taxation planning based upon a QC's opinion, Very risky and liable to change. As this has.
To my mind there really is no merit in the extent of the artificial device used and it is unsurprising that the IR are on to the device in this particular scheme. Like this scheme, the film schemes which were tarted about the Tax Avoidance fraternity in recent years always appeared to me to be too artificial to be good tax planning. And it was.
Unsurprisingly again a number of such schemes involving hundreds of millions of pounds recovery by the IR have bitten the dust. No retrospective legislation there either just the progenitors pushing that too far with serious consequences to the investors. And a lot of tax which was always due being collected.
If you indulge in these kinds of overly complex artificial devices in tax planning, then it is wise to keep the savings ready in case the scheme goes down. I cannot see this as retrospective legislation, more of the IR appreciating in time, the full extent of the device being used and acting appropriately within the legislation that already existed.
As a matter of interest I do wonder what guarantees were offered to those joining the schemes if the IR decided to take the schemes on as inappropriate use of legislation. If it was all on Counsels opinions then there is no hope.
Gene Vincent said:
Steffan said:
This is not retrospective legislation. Nothing retrospective in it IMO.
It is by dint of redefining the definition of being a member of a firm retrospectively.The law is old, the inclusions bringing you into the definition, is retrospective.
If you're "avoiding" tax in a scheme which you know is dodgy and may be open to challenge by HMRC then you ought to set aside the money you've avoided paying as tax until you're 100% certain that it's yours.
In this case no sympathy is deserved and those "avoiding" tax are no different and no better than anyone else using red diesel on the road or lying to the DSS about their familial relations or indeed Philip Green.
Everyone else pays their dues through PAYE and doesn't even try to get out of paying what's due. What makes these chancers special?
In this case no sympathy is deserved and those "avoiding" tax are no different and no better than anyone else using red diesel on the road or lying to the DSS about their familial relations or indeed Philip Green.
Everyone else pays their dues through PAYE and doesn't even try to get out of paying what's due. What makes these chancers special?
Steffan said:
Gene Vincent said:
Steffan said:
This is not retrospective legislation. Nothing retrospective in it IMO.
It is by dint of redefining the definition of being a member of a firm retrospectively.The law is old, the inclusions bringing you into the definition, is retrospective.
Which part of that trips you up?
deckster said:
...Those facts are that HMRC were well aware of the details of the avoidance mechanism 15 years ago. 10 years ago, just as the scheme became very popular amongst IT contractors, HMRC took a closer interest and indeed issued an internal memo specifying exactly how it worked, and concluding that it would be very difficult to challenge. Then, for 5 years, pretty much nothing. In 2007, they wrote to all the scheme users saying that they would challenge in the tax courts. In 2008, having failed to take any cases to the courts, they introduced retrospective legislation re-interpreting the meaning of a couple of key legal points (such as what the phrase 'member of a firm' meant, which by the way now apparently doesn't mean what you think it probably does), claiming that they were 'putting beyond doubt' the fact that the scheme does not and never did work. Note that the scheme has never been tested according to the law as it was during the tax years in question. Contrary to what 10PS has said (in all good faith I am sure), the efficacy or otherwise of the scheme has never been proven one way or the other. The fact the HMRC said they were doing to do so; failed to do so; and then retrospectively 'clarified' the law does however to me speak volumes for what they thought their chances were.
I'm not looking for sympathy (although that would be nice) or moral judgement (although I fully accept that people will do so anyway) - but let's start from a position of factual accuracy at least.
One fact you missed is that government has form on this. The 1987 Finance Act had a similar effect (when advocating low taxes for well-off people was in the ascendancy). When you were advised of the scheme were you not also advised that parliament can pre-empt court action by interpreting the legislation itself? I'm not looking for sympathy (although that would be nice) or moral judgement (although I fully accept that people will do so anyway) - but let's start from a position of factual accuracy at least.
I don't want to make a moral judgement either way but if you were unaware of the possibility of this type of legislation I believe you were poorly advised. Aggressive tax avoidance schemes that are opposed by HMRC (rather than the approved types which some posters are trying to draw comparisons with) are risky and those seeking to benefit from them should invest the tax savings until HMRC are time-barred from collecting them.
Gene Vincent said:
Steffan said:
Gene Vincent said:
Steffan said:
This is not retrospective legislation. Nothing retrospective in it IMO.
It is by dint of redefining the definition of being a member of a firm retrospectively.The law is old, the inclusions bringing you into the definition, is retrospective.
Which part of that trips you up?
The emotive suggestion of retrospective legislation in the OP suggests a change in the law acting with earlier effect than the change. This is simply not true. There has been no legislation post this scheme making a difference. The scheme was always doubtful. The IR simply codified the unlawfulness within existing legislation. If you disagreed you could appeal.
I think you would lose the appeal because I do not think this scheme was ever genuinely lawful. There has been no additional legislation, the schemers thought they could flout the law. Not this time.
IMO the suggestion of retrospective legislation is as ill founded as the scheme. It was and remains unlawful from the start.
Steffan said:
Gene Vincent said:
Steffan said:
Gene Vincent said:
Steffan said:
This is not retrospective legislation. Nothing retrospective in it IMO.
It is by dint of redefining the definition of being a member of a firm retrospectively.The law is old, the inclusions bringing you into the definition, is retrospective.
Which part of that trips you up?
They didn't 'codify', they 'redefined' and they redefined retrospectively, so you were not what you were in the eyes of the law any more.
The law had a definition of member of a firm, they changed that definition to include these people, not just from the day they changed it but retrospectively, bringing them, retrospectively, within the taxation scheme.
Dance around the matter if you will, but back-dating legislation is a retrospective act.
Keep repeating it to yourself, you'll get there.
Steffan said:
I rather think he was. Which tells me something.
What it tells you is that the campaign is primarily, and explicitly, aimed at raising funds for us to lobby Parliament to have the retrospective elements of this law repealed. It says this in the front page. I don't see anything sinister in this, as you are implying. Nobody is seriously expecting general members of the public to contribute to what is, I freely admit, a minority (and unpopular) interest.Steffan said:
This is not retrospective legislation. Nothing retrospective in it IMO. This is the IR realising that various devices have been employed unsuccessfully by the progenitors of this scheme and others like it in an attempt to create an artificial tax avoidance scheme which was not lawful under the existing legislation of the various ITA's and the IR choosing to stop the schemes.
I am not aware of any legislation introduced to outlaw this device. As I understand the situation the legislation is as it was when the scheme was incorrectly introduced. Is anyone suggesting that the IR have drafted new legislation in dealing with this matter?
Yes. HMRC are suggesting exactly that. The High Court and the Court of Appeal are, as they were quite understanding that the tax was retrospective. The Chartered Institute of Taxation (p8, sec 7.4) are, as are the Law Society and the Joint Committee on Human Rights, amongst others. The text of the law, delivered in Section 58 of the Finance Act 2008 does, as well:I am not aware of any legislation introduced to outlaw this device. As I understand the situation the legislation is as it was when the scheme was incorrectly introduced. Is anyone suggesting that the IR have drafted new legislation in dealing with this matter?
Section 58 said:
58 UK residents and foreign partnerships.
(1) In section 115 of ICTA (partnerships involving companies: supplementary), after subsection (5B) insert—
“(5C) For the purposes of subsections (5) to (5B) the members of a partnership include any company which is entitled to a share of income or capital gains of the partnership.” (2) In section 59 of TCGA 1992 (partnerships), insert at the end—
“(4) For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership.” (3) In section 858 of ITTOIA 2005 (resident partners and double taxation agreements), insert at the end— “(4) For the purposes of this section the members of a firm include any person entitled to a share of income of the firm.” (4) The amendments made by subsections (1) to (3) are treated as always having had effect.
The rest of your post is absolutely true however. There are no guarantees with these schemes, they are very risky, and of course any sensible person would indeed have ensured that they retained enough liquidity to pay any potential liability. However we aren't all tax experts, and 20:20 hindsight is a wonderful thing, and I for one didn't the faintest idea that retrospective law-making was even possible. All we're asking for is for our cases to be heard according to the law at the time, which doesn't sound like such an unreasonable request to me.(1) In section 115 of ICTA (partnerships involving companies: supplementary), after subsection (5B) insert—
“(5C) For the purposes of subsections (5) to (5B) the members of a partnership include any company which is entitled to a share of income or capital gains of the partnership.” (2) In section 59 of TCGA 1992 (partnerships), insert at the end—
“(4) For the purposes of subsections (2) and (3) the members of a partnership include any person entitled to a share of capital gains of the partnership.” (3) In section 858 of ITTOIA 2005 (resident partners and double taxation agreements), insert at the end— “(4) For the purposes of this section the members of a firm include any person entitled to a share of income of the firm.” (4) The amendments made by subsections (1) to (3) are treated as always having had effect.
The word retrospective used in this context implies generally looking back at what has already taken place. That is not what happened here. there has been no retrospective legislation.
The use of the title retrospective taxation in the topic is misleading because there has been no retrospective legislation. It is not retrospective. It was always unlawful. If it was not then new legislation would be needed to outlaw the scheme. No legislation has been required simply because it was always illegal. Therefore it cannot be retrospective.
The topic is about as well founded as the tax scheme. It was simply wrong.
I have no difficulty in perceiving their mistake. I presume you do.
The use of the title retrospective taxation in the topic is misleading because there has been no retrospective legislation. It is not retrospective. It was always unlawful. If it was not then new legislation would be needed to outlaw the scheme. No legislation has been required simply because it was always illegal. Therefore it cannot be retrospective.
The topic is about as well founded as the tax scheme. It was simply wrong.
I have no difficulty in perceiving their mistake. I presume you do.
Zeeky said:
One fact you missed is that government has form on this. The 1987 Finance Act had a similar effect (when advocating low taxes for well-off people was in the ascendancy). When you were advised of the scheme were you not also advised that parliament can pre-empt court action by interpreting the legislation itself?
Are you referring to Padmore? In which case you should also be aware that the government of the time explicitly wrote the law such that nobody would be adversely affected by the Act; the only retrospective change was, in fact, to prevent people who had not already claimed relief from claiming it for prior tax years. This is made abundantly clear from reading the Hansard transcriptions of the debate (something which, alas, the judges in our appeal cases appear not to have done 
).Zeeky said:
I don't want to make a moral judgement either way but if you were unaware of the possibility of this type of legislation I believe you were poorly advised. Aggressive tax avoidance schemes that are opposed by HMRC (rather than the approved types which some posters are trying to draw comparisons with) are risky and those seeking to benefit from them should invest the tax savings until HMRC are time-barred from collecting them.
I can't disagree and whilst I blame nobody but myself (and HMRC, obviously) for my current predicament had I known of the possibility of retrospective taxation I may well have been rather more circumspect.Steffan said:
The word retrospective used in this context implies generally looking back at what has already taken place. That is not what happened here. there has been no retrospective legislation.
The use of the title retrospective taxation in the topic is misleading because there has been no retrospective legislation. It is not retrospective. It was always unlawful. If it was not then new legislation would be needed to outlaw the scheme. No legislation has been required simply because it was always illegal. Therefore it cannot be retrospective.
The topic is about as well founded as the tax scheme. It was simply wrong.
I have no difficulty in perceiving their mistake. I presume you do.
That's a very long winded way to say you were wrong, but fair enough.The use of the title retrospective taxation in the topic is misleading because there has been no retrospective legislation. It is not retrospective. It was always unlawful. If it was not then new legislation would be needed to outlaw the scheme. No legislation has been required simply because it was always illegal. Therefore it cannot be retrospective.
The topic is about as well founded as the tax scheme. It was simply wrong.
I have no difficulty in perceiving their mistake. I presume you do.
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