Retrospective taxation campaign
Discussion
Interesting and informative. May I ask were you also a scheme user?
The rational of ensuring fair treatment for all taxpayers under the text quoted seems to me to be admirable.
Clearly the Revenue had the deepest concerns that an artificial scheme was being floated which was seeking to fundamentally alter the ability of UK residents to avoid all forms of UK taxation on income, whilst still living in the UK. Unsurprisingly the Revenue warned all the participators off the scheme and in due course acted to stop the practice. They were successful.
I find that unsurprising, given the obvious real status of the individuals concerned. What did you expect the Revenue to do, they had no choice but to challenge this scheme.
What I do not understand is the bitterness visible in the complaints. The Revenue are clever and very experienced tax men. Probably the best.
Why did anyone think an offshore scheme available to UK taxpayers still living within the UK would NOT attract a major investigation. Ir was absolutely bound to result in major concerns and efforts to outlaw the scheme. It worked. And?
The rational of ensuring fair treatment for all taxpayers under the text quoted seems to me to be admirable.
Clearly the Revenue had the deepest concerns that an artificial scheme was being floated which was seeking to fundamentally alter the ability of UK residents to avoid all forms of UK taxation on income, whilst still living in the UK. Unsurprisingly the Revenue warned all the participators off the scheme and in due course acted to stop the practice. They were successful.
I find that unsurprising, given the obvious real status of the individuals concerned. What did you expect the Revenue to do, they had no choice but to challenge this scheme.
What I do not understand is the bitterness visible in the complaints. The Revenue are clever and very experienced tax men. Probably the best.
Why did anyone think an offshore scheme available to UK taxpayers still living within the UK would NOT attract a major investigation. Ir was absolutely bound to result in major concerns and efforts to outlaw the scheme. It worked. And?
Hansard said:
Hansard
20 May 2009 : Column 1400W
Mr. Timms: Section 62 Finance (No. 2) Act 1987 retrospectively restored the principle that double taxation treaties do not affect a UK resident’s liability to UK tax on their income or gains. HM Revenue and Customs (HMRC) does not believe that any tax avoidance schemes were permitted under that legislation—although the tax avoidance schemes in question here purported to circumvent it.
20 May 2009 : Column 1400W
Mr. Timms: Section 62 Finance (No. 2) Act 1987 retrospectively restored the principle that double taxation treaties do not affect a UK resident’s liability to UK tax on their income or gains. HM Revenue and Customs (HMRC) does not believe that any tax avoidance schemes were permitted under that legislation—although the tax avoidance schemes in question here purported to circumvent it.
Hansard said:
[i]Evidence emerged that a large number of people were using the scheme and in light of a number of factors (including the widespread use, aggressive nature and artificiality of the scheme, the deliberate attempt to flout the clear intention of Parliament in 1987....
I think it's interesting that people campaigning against this judgement are saying it's unfair not because the loophole has any validity but because it's retrospective. Looking at the above it seems to me that it was an attempt by Tax practitioners to exploit a grey area. An area that was always likely to be challenged and which HAS now ben challenged. If your accountant didn't advise you of the risks thne you need a better Accountant.To give an (admittedly absurd)example I could stick a couple of wings on my Ford Escort and call it a plane. Do I then become exempt from speed limits ?
Breadvan72 said:
Not if you are below 10,000 feet! The speed limit is 250 knots, so I hope this is not one of those hotbox Escorts that we see on those charming Essex programmes. HTH.
Could you point me towards any legislation specifically stating that this applies to a 1996 Ford Escort 1.6LX Monoplane? It seems a grey area to me 
Rest assured I will be remaining below 10000ft AGL and 150KIASJust to add - not any legislation pertaining to cars. My Escort is an aeroplane.
So of course it was a grey area, of course it was a loophole and of course HMRC were going challenge it. Such is the way of things.
The question of whether is is acceptable to exploit loopholes and minimise tax paid has been raised several times, which is a valid point although it is a very personal and complex area, which cannot be answered simply. My only response will be that, clearly, I thought it was, and I am the only person here who knows my personal situation, how much tax I otherwise pay, and what I put back into my local community.
The essential point, so far as I am concerned, is that we should be judged according to the law at the time - the actual, codified, written law as it stood at the time that the scheme was in operation. Not what HMRC wanted it to say, not what Parliament thought it said - what it actually said, in black and white. If it needs interpretation, then there are established procedures for doing so through tax tribunals and the law courts.
Our complaint is that this was not done, we did not get our day in court, and we are being held accountable for laws literally did not exist when we made our choice to enter this scheme. The reason this is unfair is that it is so one-sided; if HMRC are allowed to go back in time, then it is only reasonable that we are as well. Why am I not allowed to retrospectively amend my tax return and, for example, increase my pension contributions? Or run everything through a Ltd company outside IR35? Both of those, I presume, are 'acceptable' methods of tax avoidance? At the end of the day, the effect on both my net income and the eventual tax take would be minimal.
Instead, I am now having to pay not only tax that was legally not due at the time the income was earnt, but also pay interest on tax that wasn't legally due at the time that it was earnt, and my ability to make an informed decision on how to manage my finances has been taken away from me as the rules were changed at a time when I am no longer able to react.
The question of whether is is acceptable to exploit loopholes and minimise tax paid has been raised several times, which is a valid point although it is a very personal and complex area, which cannot be answered simply. My only response will be that, clearly, I thought it was, and I am the only person here who knows my personal situation, how much tax I otherwise pay, and what I put back into my local community.
The essential point, so far as I am concerned, is that we should be judged according to the law at the time - the actual, codified, written law as it stood at the time that the scheme was in operation. Not what HMRC wanted it to say, not what Parliament thought it said - what it actually said, in black and white. If it needs interpretation, then there are established procedures for doing so through tax tribunals and the law courts.
Our complaint is that this was not done, we did not get our day in court, and we are being held accountable for laws literally did not exist when we made our choice to enter this scheme. The reason this is unfair is that it is so one-sided; if HMRC are allowed to go back in time, then it is only reasonable that we are as well. Why am I not allowed to retrospectively amend my tax return and, for example, increase my pension contributions? Or run everything through a Ltd company outside IR35? Both of those, I presume, are 'acceptable' methods of tax avoidance? At the end of the day, the effect on both my net income and the eventual tax take would be minimal.
Instead, I am now having to pay not only tax that was legally not due at the time the income was earnt, but also pay interest on tax that wasn't legally due at the time that it was earnt, and my ability to make an informed decision on how to manage my finances has been taken away from me as the rules were changed at a time when I am no longer able to react.
Edited by deckster on Friday 27th April 09:11
The law was not clear. It was arguable that the tax was always due. This point was not determined, as Parliament stepped in to put the point beyond doubt, and ensure that its intention was not flouted. The avoidance scheme flouted Parliamentary intention. It was always a high risk gamble.
If a person pays very little tax, but asserts that they do good work for the community in some other way, they may do, but they are still leaving it to the majority to carry the main burdens of State expenditure. Quite a few of us contribute significantly in tax payments, as well as by conducting economic activities generally, including employing people, spending money on stuff, and so forth; and we also do things like sitting on school governing bodies, serving as magistrates, helping run charities, providing professional services pro bono, etc, etc. Those of us who do such things don't usually argue "hey I'm doing my bit by running a business, or going to school governor meetings, I should not have to pay tax."
If a person pays very little tax, but asserts that they do good work for the community in some other way, they may do, but they are still leaving it to the majority to carry the main burdens of State expenditure. Quite a few of us contribute significantly in tax payments, as well as by conducting economic activities generally, including employing people, spending money on stuff, and so forth; and we also do things like sitting on school governing bodies, serving as magistrates, helping run charities, providing professional services pro bono, etc, etc. Those of us who do such things don't usually argue "hey I'm doing my bit by running a business, or going to school governor meetings, I should not have to pay tax."
deckster said:
So of course it was a grey area, of course it was a loophole and of course HMRC were going challenge it. Such is the way of things.
The question of whether is is acceptable to exploit loopholes and minimise tax paid has been raised several times, which is a valid point although it is a very personal and complex area, which cannot be answered simply. My only response will be that, clearly, I thought it was, and I am the only person here who knows my personal situation, how much tax I otherwise pay, and what I put back into my local community.
The essential point, so far as I am concerned, is that we should be judged according to the law at the time - the actual, codified, written law as it stood at the time that the scheme was in operation. Not what HMRC wanted it to say, not what Parliament thought it said - what it actually said, in black and white. If it needs interpretation, then there are established procedures for doing so through tax tribunals and the law courts.
Our complaint is that this was not done, we did not get our day in court, and we are being held accountable for laws literally did not exist when we made our choice to enter this scheme. The reason this is unfair is that it is so one-sided; if HMRC are allowed to go back in time, then it is only reasonable that we are as well. Why am I not allowed to retrospectively amend my tax return and, for example, increase my pension contributions? Or run everything through a Ltd company outside IR35? Both of those, I presume, are 'acceptable' methods of tax avoidance? At the end of the day, the effect on both my net income and the eventual tax take would be minimal.
Instead, I am now having to pay not only tax that was legally not due at the time the income was earnt, but also pay interest on tax that wasn't legally due at the time that it was earnt, and my ability to make an informed decision on how to manage my finances has been taken away from me as the rules were changed at a time when I am no longer able to react.
Deckster, I think the 3 bold parts are the most important. It WAS a grey area, you DID NOT get clarification of its legality at the time and so the tax that you are now having to pay MAY actually have been legally due at the time. You never got a ruling at the time and therefore you can't say it was due - the case could have ruled against you.The question of whether is is acceptable to exploit loopholes and minimise tax paid has been raised several times, which is a valid point although it is a very personal and complex area, which cannot be answered simply. My only response will be that, clearly, I thought it was, and I am the only person here who knows my personal situation, how much tax I otherwise pay, and what I put back into my local community.
The essential point, so far as I am concerned, is that we should be judged according to the law at the time - the actual, codified, written law as it stood at the time that the scheme was in operation. Not what HMRC wanted it to say, not what Parliament thought it said - what it actually said, in black and white. If it needs interpretation, then there are established procedures for doing so through tax tribunals and the law courts.
Our complaint is that this was not done, we did not get our day in court, and we are being held accountable for laws literally did not exist when we made our choice to enter this scheme. The reason this is unfair is that it is so one-sided; if HMRC are allowed to go back in time, then it is only reasonable that we are as well. Why am I not allowed to retrospectively amend my tax return and, for example, increase my pension contributions? Or run everything through a Ltd company outside IR35? Both of those, I presume, are 'acceptable' methods of tax avoidance? At the end of the day, the effect on both my net income and the eventual tax take would be minimal.
Instead, I am now having to pay not only tax that was legally not due at the time the income was earnt, but also pay interest on tax that wasn't legally due at the time that it was earnt, and my ability to make an informed decision on how to manage my finances has been taken away from me as the rules were changed at a time when I am no longer able to react.
I wrote this on page 1 of this thread:
R11ysf said:
The link in the OP I don't think is an example of retrospective taxation. I think it is an example of "you tried your luck and didn't get caught back then, but now we have caught you we are clobbering you for the lot" taxation.
I had 2 guys come to my office to pitch a scheme to me where I would pay 0% tax. Yes ZERO. In return for this I would pay them 8% of my income and they would set up a convoluted system of accounts and companies based in Isle of Man, Switzerland and a salary sacrifice into a company share scheme of a company worth £0 and therefore avoid the tax.
It was more complex than that but either way I asked what the outcome would be if the Revenue clamped down on this. They said they would fight it in court. I then asked if they lost who would be liable for the unpaid tax, interest and fine. I would. I would therefore be royally f
ked and facing a much higher tax bill than before and out of 8% gross that I'd paid them and probably face bankruptcy. I therefore told them to foxtrot oscar.
Anyone who did a similar scheme and didn't foresee the revenue clamping down on them in times of austerity when the country is broke is an idiot and they deserve everything that gets thrown at them.
and thenI had 2 guys come to my office to pitch a scheme to me where I would pay 0% tax. Yes ZERO. In return for this I would pay them 8% of my income and they would set up a convoluted system of accounts and companies based in Isle of Man, Switzerland and a salary sacrifice into a company share scheme of a company worth £0 and therefore avoid the tax.
It was more complex than that but either way I asked what the outcome would be if the Revenue clamped down on this. They said they would fight it in court. I then asked if they lost who would be liable for the unpaid tax, interest and fine. I would. I would therefore be royally f
ked and facing a much higher tax bill than before and out of 8% gross that I'd paid them and probably face bankruptcy. I therefore told them to foxtrot oscar.Anyone who did a similar scheme and didn't foresee the revenue clamping down on them in times of austerity when the country is broke is an idiot and they deserve everything that gets thrown at them.
R11ysf said:
Firstly I would like to say I DID NOT do this scheme for the very fear of what has happened. As 10PS wrote above this is nothing like your ISA example. These schemes were NEVER legal, it was just that HMRC hadn't found out about them yet and therefore hadn't challenged them in court. Just because an accountant or lawyer tells you that a scheme is legal it doesn't mean it is. People often take their word as gospel when, in fact, and especially in law, it is just their opinion. Often an opinion sculpted to try and sell you something.
These guys took a gamble and it looks as though it may not pay off. That's life.
Sadly you appear to have been taken in by these guys and their sales tactics. They were selling a product and charging you for their advice so of course they are going to say it was legal. The one real stumbling block that put me off was (and hopefully one of the accountant bods will tell me which) legislation that put the onus on you to declare any tax avoidance measures to the revenue before using them. This seemed to appear to me that in order to use one of these schemes HMRC had to clear it first. I know every time I questioned the guys who pitched it to me this was the point at which they became uncomfortable.These guys took a gamble and it looks as though it may not pay off. That's life.
There is one thing I would like you to answer though and that is what tax rate were you paying? I think I can have a pretty good guess but I would appreciate it if you put the number out there. I think that will answer the point about whether or not you have justifiable cause for being upset.
R11ysf said:
deckster said:
So of course it was a grey area, of course it was a loophole and of course HMRC were going challenge it. Such is the way of things.
The question of whether is is acceptable to exploit loopholes and minimise tax paid has been raised several times, which is a valid point although it is a very personal and complex area, which cannot be answered simply. My only response will be that, clearly, I thought it was, and I am the only person here who knows my personal situation, how much tax I otherwise pay, and what I put back into my local community.
The essential point, so far as I am concerned, is that we should be judged according to the law at the time - the actual, codified, written law as it stood at the time that the scheme was in operation. Not what HMRC wanted it to say, not what Parliament thought it said - what it actually said, in black and white. If it needs interpretation, then there are established procedures for doing so through tax tribunals and the law courts.
Our complaint is that this was not done, we did not get our day in court, and we are being held accountable for laws literally did not exist when we made our choice to enter this scheme. The reason this is unfair is that it is so one-sided; if HMRC are allowed to go back in time, then it is only reasonable that we are as well. Why am I not allowed to retrospectively amend my tax return and, for example, increase my pension contributions? Or run everything through a Ltd company outside IR35? Both of those, I presume, are 'acceptable' methods of tax avoidance? At the end of the day, the effect on both my net income and the eventual tax take would be minimal.
Instead, I am now having to pay not only tax that was legally not due at the time the income was earnt, but also pay interest on tax that wasn't legally due at the time that it was earnt, and my ability to make an informed decision on how to manage my finances has been taken away from me as the rules were changed at a time when I am no longer able to react.
Deckster, I think the 3 bold parts are the most important. It WAS a grey area, you DID NOT get clarification of its legality at the time and so the tax that you are now having to pay MAY actually have been legally due at the time. You never got a ruling at the time and therefore you can't say it was due - the case could have ruled against you.The question of whether is is acceptable to exploit loopholes and minimise tax paid has been raised several times, which is a valid point although it is a very personal and complex area, which cannot be answered simply. My only response will be that, clearly, I thought it was, and I am the only person here who knows my personal situation, how much tax I otherwise pay, and what I put back into my local community.
The essential point, so far as I am concerned, is that we should be judged according to the law at the time - the actual, codified, written law as it stood at the time that the scheme was in operation. Not what HMRC wanted it to say, not what Parliament thought it said - what it actually said, in black and white. If it needs interpretation, then there are established procedures for doing so through tax tribunals and the law courts.
Our complaint is that this was not done, we did not get our day in court, and we are being held accountable for laws literally did not exist when we made our choice to enter this scheme. The reason this is unfair is that it is so one-sided; if HMRC are allowed to go back in time, then it is only reasonable that we are as well. Why am I not allowed to retrospectively amend my tax return and, for example, increase my pension contributions? Or run everything through a Ltd company outside IR35? Both of those, I presume, are 'acceptable' methods of tax avoidance? At the end of the day, the effect on both my net income and the eventual tax take would be minimal.
Instead, I am now having to pay not only tax that was legally not due at the time the income was earnt, but also pay interest on tax that wasn't legally due at the time that it was earnt, and my ability to make an informed decision on how to manage my finances has been taken away from me as the rules were changed at a time when I am no longer able to react.
I wrote this on page 1 of this thread:
R11ysf said:
The link in the OP I don't think is an example of retrospective taxation. I think it is an example of "you tried your luck and didn't get caught back then, but now we have caught you we are clobbering you for the lot" taxation.
I had 2 guys come to my office to pitch a scheme to me where I would pay 0% tax. Yes ZERO. In return for this I would pay them 8% of my income and they would set up a convoluted system of accounts and companies based in Isle of Man, Switzerland and a salary sacrifice into a company share scheme of a company worth £0 and therefore avoid the tax.
It was more complex than that but either way I asked what the outcome would be if the Revenue clamped down on this. They said they would fight it in court. I then asked if they lost who would be liable for the unpaid tax, interest and fine. I would. I would therefore be royally fked and facing a much higher tax bill than before and out of 8% gross that I'd paid them and probably face bankruptcy. I therefore told them to foxtrot oscar.
Anyone who did a similar scheme and didn't foresee the revenue clamping down on them in times of austerity when the country is broke is an idiot and they deserve everything that gets thrown at them.
and thenI had 2 guys come to my office to pitch a scheme to me where I would pay 0% tax. Yes ZERO. In return for this I would pay them 8% of my income and they would set up a convoluted system of accounts and companies based in Isle of Man, Switzerland and a salary sacrifice into a company share scheme of a company worth £0 and therefore avoid the tax.
It was more complex than that but either way I asked what the outcome would be if the Revenue clamped down on this. They said they would fight it in court. I then asked if they lost who would be liable for the unpaid tax, interest and fine. I would. I would therefore be royally f
ked and facing a much higher tax bill than before and out of 8% gross that I'd paid them and probably face bankruptcy. I therefore told them to foxtrot oscar.Anyone who did a similar scheme and didn't foresee the revenue clamping down on them in times of austerity when the country is broke is an idiot and they deserve everything that gets thrown at them.
R11ysf said:
Firstly I would like to say I DID NOT do this scheme for the very fear of what has happened. As 10PS wrote above this is nothing like your ISA example. These schemes were NEVER legal, it was just that HMRC hadn't found out about them yet and therefore hadn't challenged them in court. Just because an accountant or lawyer tells you that a scheme is legal it doesn't mean it is. People often take their word as gospel when, in fact, and especially in law, it is just their opinion. Often an opinion sculpted to try and sell you something.
These guys took a gamble and it looks as though it may not pay off. That's life.
Sadly you appear to have been taken in by these guys and their sales tactics. They were selling a product and charging you for their advice so of course they are going to say it was legal. The one real stumbling block that put me off was (and hopefully one of the accountant bods will tell me which) legislation that put the onus on you to declare any tax avoidance measures to the revenue before using them. This seemed to appear to me that in order to use one of these schemes HMRC had to clear it first. I know every time I questioned the guys who pitched it to me this was the point at which they became uncomfortable.These guys took a gamble and it looks as though it may not pay off. That's life.
There is one thing I would like you to answer though and that is what tax rate were you paying? I think I can have a pretty good guess but I would appreciate it if you put the number out there. I think that will answer the point about whether or not you have justifiable cause for being upset.
I can't believe this discussion is still going...
I wrote in this topic some time ago that, in common with many threads, this topic did not go, quite in the way the OP intended. The volume and strength of the disbelief in the virtues of the case proposed and the obvious weaknesses, inherent in the case, caused an unexpected approach on PH.
Essentially many contributors were less than sympathetic to the argument that this was unfair, unjust and retrospective legislation. To the eyes of many, I would suggest, it seemed more a case of, at best, a pretty improbable attempt to railroad offshore status onto a number of individuals seeking to live in the UK, earn a living in the UK and not pay tax in the UK, as a resident.
I cannot think of a tax avoidance scheme more likely to attract the attentions and concerns of the IR. Unsurprisingly, the scheme failed. It was ever likely too. But this leaves little room for sympathy, as the protagonists seem to have discovered.
It seems to me the choice of tax advisers was unwise and has proved expensive. A more traditional firm might have been a better bet for the scheme users. But any offshore scheme seeking to artificially create an onshore residency, whilst still allowing the individual recipient to reside within the UK, would be the Holy Grail of taxation advice. I think that is why the promoters of the scheme are still looking for the answer. All that glitters, is not gold.
Essentially many contributors were less than sympathetic to the argument that this was unfair, unjust and retrospective legislation. To the eyes of many, I would suggest, it seemed more a case of, at best, a pretty improbable attempt to railroad offshore status onto a number of individuals seeking to live in the UK, earn a living in the UK and not pay tax in the UK, as a resident.
I cannot think of a tax avoidance scheme more likely to attract the attentions and concerns of the IR. Unsurprisingly, the scheme failed. It was ever likely too. But this leaves little room for sympathy, as the protagonists seem to have discovered.
It seems to me the choice of tax advisers was unwise and has proved expensive. A more traditional firm might have been a better bet for the scheme users. But any offshore scheme seeking to artificially create an onshore residency, whilst still allowing the individual recipient to reside within the UK, would be the Holy Grail of taxation advice. I think that is why the promoters of the scheme are still looking for the answer. All that glitters, is not gold.
supermono said:
I'm an evil tax avoider and I'm worried i might suffer from retrospective taxation. Currently I avoid paying tax at all on my first 10k earnings via the 'tax code' loophole. Plus I avoid tax on all the profits from investments in my ISA using the loophole whereby ISAs are tax-free investments.
What other evil tax avoiding schemes are we collectively exploiting to the detriment of our fellows?
SM
But here's a LEGAL loop-hole for the ordinary man with kids of school or university age. What other evil tax avoiding schemes are we collectively exploiting to the detriment of our fellows?
SM
Say you earn £30K, and you are 45 years old.
Pay an EXTRA £5K into your pension, bringing Pay to under £25K. Child at University will get Full Maintenance Grant of £2.9K, and depending on the university, the Child will get a 'Child from low pay family' bursary, worth say oh £1.4K a year. (If they pick the right course and university it could be even higher)
Also if you have another child at school, your tax credits will go up to about £2.5K a year, from £500.
"Free" money is worth an extra £6.2K tax free (ie £10K plus)
So basically put £5k in your pension and make it worth £10K.
Wait until you are 55, and take 25% out of pension pot tax free.
deckster said:
I've stood by and watched the mud-slinging and moralizing go back and forth with equanimity, as I know that many people will never agree with tax avoidance of this kind, for whatever reasons and I respect that. However I really can't let this one slide: this is retrospective taxation, as is indeed quite openly accepted by all concerned (yes, HMRC included) and so I'm really not sure why this has come back. It is retrospective, and it is quite unprecedented and I will repeat that until it sinks in.
Deckster - as I mentioned before on this thread - I know someone on such a scheme, and I am all for legal tax avoidance. I spend a lot of time ensuring I pay the least amount. I even looked into offshore schemes, setting up abroad etc, and turned away from them to simply running a UK based company the old fashioned way.When I heard about this the first thing I thought, even before I looked into it was:
Hold on - it is pretty obvious that the workers ARE self employed and NOT working for the IOM umbrella corp. So, they are not earning money for an IOM company, and they don't have an IOM based income.
So, to me, that is not something based on tax treaties to avoid tax - this is a scheme to totally misrepresent your actual employment status to avoid tax.
In reading the judgment, I don't read it as retrospective taxation, indeed IMHO stating this as such is a white elephant to brush under the carpet that the argument clearly is that this scheme was NEVER accepted, and was ALWAYS incorrect - and totally and obviously a totally artificial scheme to misrepresent employment status.
Steffan said:
Avoidance schemes which seek to offer offshore status to residents in the UK can never be simple. The schemes seek to create an artificial status which offers major benefits to the recipient. IF IT WORKS.
All the users of these schemes in question were repeatedly warned by the IR that this could be challenged. From the inception of the schemes. Which it was in due course. And, when it was, the scheme were found to be wholly unlawful.
You may feel hard done by but you have lost nothing. You were relying upon an artificial scheme to avoid tax. Not a good idea. You were warned repeatedly. The scheme failed in its objective. You now have the same tax status qas was originally available to you, in the UK and you are resident and domiciled in the UK.
Therefore you pay UK tax. How do you see this as unfair?
I hold no criticism of your conduct you are free to explore any legal avenue in UK business. In this case it was a blind alley.
Why I wonder, do you feel cheated?
Sums it up well for me.All the users of these schemes in question were repeatedly warned by the IR that this could be challenged. From the inception of the schemes. Which it was in due course. And, when it was, the scheme were found to be wholly unlawful.
You may feel hard done by but you have lost nothing. You were relying upon an artificial scheme to avoid tax. Not a good idea. You were warned repeatedly. The scheme failed in its objective. You now have the same tax status qas was originally available to you, in the UK and you are resident and domiciled in the UK.
Therefore you pay UK tax. How do you see this as unfair?
I hold no criticism of your conduct you are free to explore any legal avenue in UK business. In this case it was a blind alley.
Why I wonder, do you feel cheated?
deckster said:
I've stood by and watched the mud-slinging and moralizing go back and forth with equanimity, as I know that many people will never agree with tax avoidance of this kind, for whatever reasons and I respect that. However I really can't let this one slide: this is retrospective taxation, as is indeed quite openly accepted by all concerned (yes, HMRC included) and so I'm really not sure why this has come back. It is retrospective, and it is quite unprecedented and I will repeat that until it sinks in.
Of course many people will not see that as being a particularly bad thing as, hey, we're all greedy scum who don't pay our way and deserve everything we get (and in particular I must thank the chap whose name escapes me, who apparently wants my wife to leave me and for me to become bankrupt; remind me to take him off the Christmas card list which I can no longer afford), and who am I to think otherwise.
I don't agree that the statutory action taken amounts to "retrospective taxation". It is a retrospective clarification (or amendment) of law that definitively closed the door to an avoidance scheme that exploited a wholly unintended ambiguity or lacuna in pre-existing law. You cannot have had any serious doubt about that.Of course many people will not see that as being a particularly bad thing as, hey, we're all greedy scum who don't pay our way and deserve everything we get (and in particular I must thank the chap whose name escapes me, who apparently wants my wife to leave me and for me to become bankrupt; remind me to take him off the Christmas card list which I can no longer afford), and who am I to think otherwise.
Taxation of earnings is not a concept whose applicability to an ordinary UK resident, working in the UK, doing ordinary work and earning ordinary (but reasonably substantial) income, is obscure, complex or seriously debatable. A tax avoidance scheme that allows a large majority of that income to remain untaxed (in the Huitson case it looks like ~85% of his actual income was claimed to be outside UK income tax) is clearly at the extreme end of the scale of personal income tax avoidance and guaranteed to provoke strong anti-avoidance measures.
If the scheme had actually worked, the loss to the Exchequer would be unlimited - not (just) because of increasing numbers of people exploiting it but because it would work at ANY level of personal income, up to £millions. In the Huitson judgment is is stated that the average effective tax rate paid by Huitson over several years was 3.5% and that the relief claimed in 2004/5 was ~£38k. Rough calculation suggests his total income was in the order of £100k of which he declared £15k as UK income and claimed relief on the balance under the IoM DTA. So we can guess that he paid ~£3k tax (or less). If his income had been double (or treble), his effectve tax rate would have been much lower - ~1.5% or less.
Not much sympathy from me, I'm afraid.
Edited by Observer2 on Friday 27th April 12:50
deckster said:
It is retrospective, and it is quite unprecedented and I will repeat that until it sinks in.
One definition of insanity: doing the same thing over and over again and expecting different results. I think they should fine you and stick you with double taxation as well
"Tax dodger" must stick in your craw.Steffan said:
To the eyes of many, I would suggest, it seemed more a case of, at best, a pretty improbable attempt to railroad offshore status onto a number of individuals seeking to live in the UK, earn a living in the UK and not pay tax in the UK, as a resident.
+1I simply cannot see how anyone could possibly imagine that it's somehow morally justifiable to exploit a grey area in the law to do this, especially when they knew damn well at the time they got into it that it was a known grey area that HMRC knew about and said they were intending to address.
Further, I cannot see how anyone, having willingly engaged in a scheme that they must have known was (a) questionable and (b) extremely likely to be addressed, can now moan that they have been caught out and now have to pay what they should have paid all along.
iT Contractors don't do badly (I know, I'm one of them). It's entirely possible to make a decent living whilst paying a sensible and fair amount of tax that HMRC has no problem with (I know, I do it every year). Schemes like this just pander to people's greed and risk appetite.
Doubtless the defenders of this kind of thing will come up will all kinds of spurious notions about the legitimacy of taxation and defences based on 'sod the morality, if it's legal we should be allowed to get away with it', but I'm sorry, this kind of self-interested crap holds no water with me.
I am really not sure if this was ever stated as being LEGAL by HMRC !.
The guys did not get a request from HMRC stating under this scheme you OWE XYZ. They submitted tax returns stating that they were using XYZ calculations and were consequently paying XYZ tax.
HMRC stated early on that they were not happy with the Tax calculations/treatment used and may challenge it. Everyone was clear the Tax law was being used in a way not intended by HMRC and thought they were being clever.
The guys did not get a request from HMRC stating under this scheme you OWE XYZ. They submitted tax returns stating that they were using XYZ calculations and were consequently paying XYZ tax.
HMRC stated early on that they were not happy with the Tax calculations/treatment used and may challenge it. Everyone was clear the Tax law was being used in a way not intended by HMRC and thought they were being clever.
I, unlike most here , do have a little bit of sympathy for those affected. They've been taken in by people whose thing it is to take people in. I no doubt at all that these people cleverly convinced the contractors that what they were doing was entirely legal and problem free. As long as the contractors bought that fiction, then the IOM people were going to make a lot of money and, unlike their customers, they were going to get to keep it.
, do have a little bit of sympathy for those affected. They've been taken in by people whose thing it is to take people in. I no doubt at all that these people cleverly convinced the contractors that what they were doing was entirely legal and problem free. As long as the contractors bought that fiction, then the IOM people were going to make a lot of money and, unlike their customers, they were going to get to keep it.Singlecoil
I don't believe that people who earn enough money to be looking at complex tax schemes are stupid enough to believe this was 100% legit (even if the Scheme organisers said it was). You don't get very wealthy by being very stupid.
They must have known it was dodgy, therefore the decision to take part in the scheme was a gamble. They hoped that HMRC would go away OR that HMRC would lose any legal challenge. HMRC didn't. They lost the gamble
I don't believe that people who earn enough money to be looking at complex tax schemes are stupid enough to believe this was 100% legit (even if the Scheme organisers said it was). You don't get very wealthy by being very stupid.
They must have known it was dodgy, therefore the decision to take part in the scheme was a gamble. They hoped that HMRC would go away OR that HMRC would lose any legal challenge. HMRC didn't. They lost the gamble
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