Tax avoiders to be deliberately bankrupted.....?..
Discussion
REALIST123 said:
So what you guys are saying is that it would be OK for me to claim against my tax bill for anything HMRC hasn't made illegal? That's what happened here and is generally the case with these schemes. This was a clear piss take of the agreement for tax relief to be available in the film industry.
For instance I know there are tax breaks for farmers. I live near some farms so decide I should get relief for some associated reason; or I claim relief for various expenses I incur. HMRC hasn't made any of my 'schemes' illegal so that's OK is it?
Be assured of one thing. The advisors and investors in this film 'investment scheme' would have been well aware of the risks investing in such a large scheme which was bound to be examined. They gambled and lost and have only themselves to blame if they didn't provide for the risk.
In my experience, those organisation who promote complex tax avoidance schemes trend to DOWNPLAY the risk to their clients in order to sell the scheme. There is strong evidence of professional malpractice in the way many (not all) of these schemes are sold. Unfortunately for the clients, if it all goes belly up, the firm that sold the scheme will probably be long gone.For instance I know there are tax breaks for farmers. I live near some farms so decide I should get relief for some associated reason; or I claim relief for various expenses I incur. HMRC hasn't made any of my 'schemes' illegal so that's OK is it?
Be assured of one thing. The advisors and investors in this film 'investment scheme' would have been well aware of the risks investing in such a large scheme which was bound to be examined. They gambled and lost and have only themselves to blame if they didn't provide for the risk.
The sale of complicated tax avoidance schemes is the accountancy profession's "mis-selling" scandal.
Hosenbugler said:
Must admit, this all comes across to me, as being a bit nasty. To me, it comes across as a goal post changing witch hunt. Either what the people concerned have done is legal or illegal. If the former, leave them alone , if the latter , then indeed recoup monies that should have been paid. Plus of course,if the legal routes used are upsetting government , close the legal loopholes as to prevent further use not bully people who appear to have acted in good faith.[/footnote]
Pretty much how I feel tbh. Anyone who has done anything illegal, regardless of who they are, should be stumping up.But if it was legal at the time then it's tough!
BigMon said:
Pretty much how I feel tbh. Anyone who has done anything illegal, regardless of who they are, should be stumping up.
But if it was legal at the time then it's tough!
I thought half the issue was that the law is so vague on what is legal or illegal that it basically comes down to a "taste test" vs. "you have done X and Y which is against law X"?But if it was legal at the time then it's tough!
MarshPhantom said:
Why don't people get punished more for avoiding tax? Seems pay what you owe eventually and everyone is happy.
It's a bit like stealing something and not getting into troublè if you give it back.
Not quite true. The professional services and management fees for these schemes are always substantial. The "investor" will have wasted these expenses.It's a bit like stealing something and not getting into troublè if you give it back.
Plus there will be interest to pay as well as the original tax saved.
Plus you are putting up a very big flag saying "please go through all my affairs with a fine tooth comb so you can see what else I am doing which you might disapprove of".
Edited to add that often the legal costs of fighting HRMC is usually divided between the investors. So that is another cost to bear in mind. Plus I would genuinely imagine there is a degree of real personal stress involved as these schemes unravel. After all, who wants to pay potentially limitless legal fees fighting against the government when they know deep down they shouldn't have done it.
Edited by EddieSteadyGo on Sunday 20th November 10:46
MarshPhantom said:
Why don't people get punished more for avoiding tax? Seems pay what you owe eventually and everyone is happy.
It's a bit like stealing something and not getting into troublè if you give it back.
I wonder if you have ever held down a full time job? It's a bit like stealing something and not getting into troublè if you give it back.
One that excludes sitting in an office, in front of a computer, producing insubstancial b
ks that in the real world is actually worthless, whilst being paid either directly or laterally from the public purse???Eric Mc said:
In my experience, those organisation who promote complex tax avoidance schemes trend to DOWNPLAY the risk to their clients in order to sell the scheme. There is strong evidence of professional malpractice in the way many (not all) of these schemes are sold. Unfortunately for the clients, if it all goes belly up, the firm that sold the scheme will probably be long gone.
The sale of complicated tax avoidance schemes is the accountancy profession's "mis-selling" scandal.
The sale of complicated tax avoidance schemes is the accountancy profession's "mis-selling" scandal.
clarkey said:
The numbers dont make sense to me.
£50m invested
£790m borrowed
So total capital £840m?
Spend £503m on film rights
Leaves £337m
Pay first 10 years interest - £293m
Leaves £44m
Where did this £44m go? This is nearly enough to pay back the £50m originally invested, regardless of tax relief. The £1.022b return over 20 years will pay back the £790m borrowed. I wonder what fees the advisors took.....
I just can't see where the 20x sum invested comes from, doesn't make sense to me. Can anyone on here explain it, or don't we have enough detail?
I'm not that close to the detail but my understanding is as follows;£50m invested
£790m borrowed
So total capital £840m?
Spend £503m on film rights
Leaves £337m
Pay first 10 years interest - £293m
Leaves £44m
Where did this £44m go? This is nearly enough to pay back the £50m originally invested, regardless of tax relief. The £1.022b return over 20 years will pay back the £790m borrowed. I wonder what fees the advisors took.....
I just can't see where the 20x sum invested comes from, doesn't make sense to me. Can anyone on here explain it, or don't we have enough detail?
Cash flows;
Barclays loans investor partnership (LLP) £790 million
Investors invest £50 million
Total into LLP is £840 million.
This is used as follows;
£503 million to Disney on account of licence fees.
£44 million to a fInancial intemediary as fees.
£293 of up front interest. This would have been offset against investors' income in the year it was paid (sideways relief). It effectively gave tax relief of more than the initial investment, and probably led to tax repayments to investors.
Disney paid Barclays £497m back, retaining £6m for presumably being party to the scheme.
Effectively all the Barlays' money did a merry go round back to them. And the investor money was effectively used to pay a financial intermediary (£44m) and Disney (£6m).
The LLP was due to make £475m of future income and pay £525m of future interest.
The case revolved around whether the LLP was trading or not. It was crucial for the scheme that it was, because interest relief is only given if it was trading. It was held that it was not trading, therefore no interest is tax deductible for the investors. Which I think ultimately means the future income is taxable without any relief, notwithstanding that it will all go to pay interest to Barclays.
No tax rules have been changed by HMRC. Whether something has been trading or not goes back 200 years.
Alpinestars said:
I'm not that close to the detail but my understanding is as follows;
Cash flows;
Barclays loans investor partnership (LLP) £790 million
Investors invest £50 million
Total into LLP is £840 million.
This is used as follows;
£503 million to Disney on account of licence fees.
£44 million to a fInancial intemediary as fees.
£293 of up front interest. This would have been offset against investors' income in the year it was paid (sideways relief). It effectively gave tax relief of more than the initial investment, and probably led to tax repayments to investors.
Disney paid Barclays £497m back, retaining £6m for presumably being party to the scheme.
Effectively all the Barlays' money did a merry go round back to them. And the investor money was effectively used to pay a financial intermediary (£44m) and Disney (£6m).
The LLP was due to make £475m of future income and pay £525m of future interest.
The case revolved around whether the LLP was trading or not. It was crucial for the scheme that it was, because interest relief is only given if it was trading. It was held that it was not trading, therefore no interest is tax deductible for the investors. Which I think ultimately means the future income is taxable without any relief, notwithstanding that it will all go to pay interest to Barclays.
No tax rules have been changed by HMRC. Whether something has been trading or not goes back 200 years.
Top summary. The scheme from a Barclays' perspective looks superb Cash flows;
Barclays loans investor partnership (LLP) £790 million
Investors invest £50 million
Total into LLP is £840 million.
This is used as follows;
£503 million to Disney on account of licence fees.
£44 million to a fInancial intemediary as fees.
£293 of up front interest. This would have been offset against investors' income in the year it was paid (sideways relief). It effectively gave tax relief of more than the initial investment, and probably led to tax repayments to investors.
Disney paid Barclays £497m back, retaining £6m for presumably being party to the scheme.
Effectively all the Barlays' money did a merry go round back to them. And the investor money was effectively used to pay a financial intermediary (£44m) and Disney (£6m).
The LLP was due to make £475m of future income and pay £525m of future interest.
The case revolved around whether the LLP was trading or not. It was crucial for the scheme that it was, because interest relief is only given if it was trading. It was held that it was not trading, therefore no interest is tax deductible for the investors. Which I think ultimately means the future income is taxable without any relief, notwithstanding that it will all go to pay interest to Barclays.
No tax rules have been changed by HMRC. Whether something has been trading or not goes back 200 years.
EddieSteadyGo said:
turbobloke said:
EddieSteadyGo said:
RYH64E said:
I don't want to pay any more tax than the bare minimum that is due, but I've always been very suspicious of these convoluted, artificial schemes. You just know that if (when) they go wrong the advisors will point out various clauses in the small print that mean it's not their fault, and the investors will be the ones handing over another pound of flesh to HMRC. Not worth it, imo.
100% correct. I can't recall the exact words but the essence is that if in the view of a reasonable person the scheme is designed to avoid tax as one of its main objectives, it isn't legal.
turbobloke said:
EddieSteadyGo said:
The only reason the vast majority of these schemes existed was to avoid tax.
Sure, why not? Avoiding tax, aka paying the amount due in law and no more, is lawful and quite reasonable.Out of interest it would be helpful to know how much extra tax the avoidance critics would be willing to pay voluntarily, and how much extra they actually pay.
Choosing when to pay into a pension. Deciding the exact split between salary, dividend and what you leave in the company. Income splitting between husband and wife. All of these activities are lawful ways of reducing your tax liability which no-one should have any problem with from a moral standpoint.
What we are talking about here is artificial schemes, which have no commercial rationale, that use some convoluted scheme to either create a paper taxable loss or extract funds from a company without the tiresome practicalities of having a salary or declaring a dividend.
They have been taking the piss and can have no complaints if HM R&C hit them hard.
EddieSteadyGo said:
Top summary. The scheme from a Barclays' perspective looks superb
Thanks. And hence http://www.bbc.co.uk/news/business-21397844
The government should be very careful when collecting historical tax, shutting the loopholes is a lot more sensible than letting them run their course then asking for payback.
One real life example, someone I know well was investigated and found to owe over a million in tax, after trying to reach a settlement agreement and employing a barrister at £600/hr he was advised to pay up or face jail.
He paid up, sold all his UK assets except his business and moved to Thailand, he now resides under their tax system and not a penny of his personal tax goes to the UK government. I don't know the entire details but he was very bitter about the entire affair, he felt the treatment was very unfair and as such made his protest clear.
One real life example, someone I know well was investigated and found to owe over a million in tax, after trying to reach a settlement agreement and employing a barrister at £600/hr he was advised to pay up or face jail.
He paid up, sold all his UK assets except his business and moved to Thailand, he now resides under their tax system and not a penny of his personal tax goes to the UK government. I don't know the entire details but he was very bitter about the entire affair, he felt the treatment was very unfair and as such made his protest clear.
As others have said, these schemes were created with the pure intention of reducing tax, not the purpose the relevant legislation was created for, namely encouraging film investment.
As such, reclamation of tax relief which should not have been claimed in the first place is perfectly appropriate.
StottyEvo said:
The government should be very careful when collecting historical tax, shutting the loopholes is a lot more sensible than letting them run their course then asking for payback.
One real life example, someone I know well was investigated and found to owe over a million in tax, after trying to reach a settlement agreement and employing a barrister at £600/hr he was advised to pay up or face jail.
He paid up, sold all his UK assets except his business and moved to Thailand, he now resides under their tax system and not a penny of his personal tax goes to the UK government. I don't know the entire details but he was very bitter about the entire affair, he felt the treatment was very unfair and as such made his protest clear.
Nothing is being shut down. No retrospective law has been changed. The law in question has been around for over 200 years. What started off as a tax efficient investment opportunity was turned into a money making scheme. HMRC has been looking at these schemes for many years, and the FTT decision was back in 2011, having taken a number of years to come to the Tribunal. One real life example, someone I know well was investigated and found to owe over a million in tax, after trying to reach a settlement agreement and employing a barrister at £600/hr he was advised to pay up or face jail.
He paid up, sold all his UK assets except his business and moved to Thailand, he now resides under their tax system and not a penny of his personal tax goes to the UK government. I don't know the entire details but he was very bitter about the entire affair, he felt the treatment was very unfair and as such made his protest clear.
The only thing which doesn't sit so well with me is that the investors are being asked to pay tax on income they'll never receive. But unfortunately that's how the rules work and it's probably something that was never contemplated/explained by the promotors.
My advice is that where someone promotes a tax scheme which seems too good to be true, propose a contingent fee structure to the promote, ie, pay their fees as and when the tax computations of the investor are agreed. I've never seen a promotor agree to this.
JagLover said:
You are missing the point a bit here Turbobloke.
Choosing when to pay into a pension. Deciding the exact split between salary, dividend and what you leave in the company. Income splitting between husband and wife. All of these activities are lawful ways of reducing your tax liability which no-one should have any problem with from a moral standpoint.
What we are talking about here is artificial schemes, which have no commercial rationale, that use some convoluted scheme to either create a paper taxable loss or extract funds from a company without the tiresome practicalities of having a salary or declaring a dividend.
They have been taking the piss and can have no complaints if HM R&C hit them hard.
That about sums it up for me, I'll take full advantage of income splitting, dividends, pensions, entrepreneur's tax relief etc, but I draw the line at signing up to some artificial scheme that borrows money to save more tax than the original investment. Choosing when to pay into a pension. Deciding the exact split between salary, dividend and what you leave in the company. Income splitting between husband and wife. All of these activities are lawful ways of reducing your tax liability which no-one should have any problem with from a moral standpoint.
What we are talking about here is artificial schemes, which have no commercial rationale, that use some convoluted scheme to either create a paper taxable loss or extract funds from a company without the tiresome practicalities of having a salary or declaring a dividend.
They have been taking the piss and can have no complaints if HM R&C hit them hard.
The old rule of 'if it looks took good to be true it probably is' applies, and if there isn't a rule that says 'don't take the piss out of the taxman' then there should be.
loafer123 said:
As others have said, these schemes were created with the pure intention of reducing tax, not the purpose the relevant legislation was created for, namely encouraging film investment.
As such, reclamation of tax relief which should not have been claimed in the first place is perfectly appropriate.
I'd agree if that was the position. But I think it's a bit more complex. See above. As such, reclamation of tax relief which should not have been claimed in the first place is perfectly appropriate.
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