Tax avoiders to be deliberately bankrupted.....?..

Tax avoiders to be deliberately bankrupted.....?..

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Discussion

johnfm

13,668 posts

249 months

Monday 24th July 2017
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fblm said:
johnfm said:
How they've been put in the same class as an avoidance scheme is beyond me.
My uneducated guess would be that the substance of the company was deemed that of a tax avoidance scheme not a film finance one, even if it did invest in some successful films. AIUI in some schemes using loan leverage and claiming relief on future interest payments an 'investment' of x can generate 4x in tax relief, which is clearly taking the pi55.

[quote]


I expect the devil is in the detail. If they were taking the pi55, then fair enough. I expect HMRC to chase the clearly bogus 'film production funds' which never made anything or merely had some st scripts on their books. Some of the bogus EIS film companies were a joke. Some big names behind a few too. That dodgy Nicola Horlick was behind one.

anonymous-user

53 months

Monday 24th July 2017
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johnfm said:
I expect the devil is in the detail.
No doubt, maybe Alpinestars can enlighten us...

Murph7355

37,651 posts

255 months

Monday 24th July 2017
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untakenname said:
One of my friends was a supply teacher for a while and is now being chased by HMRC for tax evasion, he worked at a state acadamy and didn't realise he wasn't being paid in the conventional way by the temping agency he was working for.
Is there any leeway for those who were only earning 20k per year and had no idea that they weren't paying the correct tax?
Feel quite sorry for him as he had no say in the matter plus you don't expect stuff like that to hapoen to people who earn minimal amounts.
No.

Every individual is expected to know how much they should be paying. HMRC don't take ignorance as an excuse (which has a degree of irony when you speak with some of them). Nor mistakes generally.

If he pays what he owes and explains the circumstances he may be able to get let off interest and/or fines. But it depends how much he's racked up.

Sheepshanks

32,530 posts

118 months

Monday 24th July 2017
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untakenname said:
Is there any leeway for those who were only earning 20k per year and had no idea that they weren't paying the correct tax?
If he was only earning £20K per year then he can't owe too much - a couple of £K on that.

Could be worth taking advice as there might be things he could do to reduce the bill.

Eric Mc

121,779 posts

264 months

Monday 24th July 2017
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As Murph says, not knowing how your own tax is being handled on your own income is not going to impress HMRC as an argument when explaining why you paid the wrong tax.

There is a serious problem though in that many, if not most, individuals, have a very poor grasp as to how tax on their income is calculated.

Although HMRC has deferred quarterly returns for traders and landlords Making Tax Digital for at least two years,some elements of the new system WILL definitely be implemented.

The one that will affect everybody is the Digital Tax Account, which, in theory, will allow ALL taxpayers (that means those under PAYE and in employment) will be able to access their tax situation at HMRC at any time and correct any errors or omissions that may exist. Indeed, HMRC will EXPECT taxpayers to notify HMRC through the Digital Tax Account when circumstances change. There will be penalties etc associated with failures to notify.

The upshot is that all taxpayers will need to adopt a much more hands on approach to their tax affairs. I think this is all well and good up to a point, but the UK tax system is getting more and more complex and many people simply will not know whether their affairs are correct or not.



Eric Mc

121,779 posts

264 months

Monday 24th July 2017
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Sheepshanks said:
untakenname said:
Is there any leeway for those who were only earning 20k per year and had no idea that they weren't paying the correct tax?
If he was only earning £20K per year then he can't owe too much - a couple of £K on that.

Could be worth taking advice as there might be things he could do to reduce the bill.
You might be surprised how much HMRC actually gets based on an individual on £20,000 per annum. For tax year 2017/18, HMRC would expect to collect £4,853.69 made up of -

£1,800.00 Income Tax
Employees NI - £1,420.32
Employer's NI - £1,633.37

With some of these schemes, HMRC might be expecting the taxpayer to pay over ALL the amount owed (including the Er's NI). So, imagine if an individual is asked to pay over a three year backlog - plus interest plus penalties. They could be footing a bill not far short of £20,000.

Sheepshanks

32,530 posts

118 months

Monday 24th July 2017
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Eric Mc said:
As Murph says, not knowing how your own tax is being handled on your own income is not going to impress HMRC as an argument when explaining why you paid the wrong tax.

There is a serious problem though in that many, if not most, individuals, have a very poor grasp as to how tax on their income is calculated.
One of my son-in-laws is a teacher and it was only when my wife (who used to work for HMRC) helped with his and our daughter's mortgage application that it became apparent he'd been taxed at basic rate for the whole time (several years) he'd been working. He had no idea, but HMRC should have picked it up.

Sheepshanks

32,530 posts

118 months

Monday 24th July 2017
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Eric Mc said:
You might be surprised how much HMRC actually gets based on an individual on £20,000 per annum. For tax year 2017/18, HMRC would expect to collect £4,853.69 made up of -

£1,800.00 Income Tax
Employees NI - £1,420.32
Employer's NI - £1,633.37
I hadn't considered the NI. I guess the nature of his employment is pretty critical - in any case, would he really be liable for employers NI?

Murph7355

37,651 posts

255 months

Monday 24th July 2017
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Sheepshanks said:
...He had no idea, but HMRC should have picked it up.
It's not HMRC's job to "know" what the right rate of tax is for a job someone has. The problem is that everyone's circumstances are different and for some that may well be a justifiable position.

I have sympathy with anyone dealing with HMRC - I had a position where my coding was incorrect despite HMRC being told. After a serious amount of correspondence with them (my employment situation wasn't straightforward, and I had an accountant) they scrubbed the fines but were insistent on interest. Part of the reason for the amount of correspondence was that I was digging in on principle (the amount left to settle in the end was relatively small).

They were not for budging. Their view was I should have known exactly how much tax I should have been paying and should have been making sure that amount was actually being received by them, even if that then resulted in overpayments should they get their act together.

Anyway, eventually I listened to the advice just to pay it and draw a line under it. It galls me to this day and my feelings about HMRC have been massively prejudiced by not only the outcome of my dealings with them, but more so their attitudes during the whole affair. They treat people like criminals and talk down to people like no other government department I've come across.

I would dearly love them to focus far more energy on simplifying the tax code than acting like they are some sort of god figures. But that seems unlikely to ever happen.

Eric Mc

121,779 posts

264 months

Monday 24th July 2017
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Sheepshanks said:
I hadn't considered the NI. I guess the nature of his employment is pretty critical - in any case, would he really be liable for employers NI?
It's avoiding NI that is behind so many "alternative employment" schemes - such as the one used by Rangers.

HMRC will chase whoever they can for missing money. If the employer has gone bust, they may go after the employee.

If the employee was operating through a personal service company, IR35 would allow HMRC to chase the personal service company i.e. the "employee".

sugerbear

3,961 posts

157 months

Monday 24th July 2017
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Murph7355 said:
I would dearly love them to focus far more energy on simplifying the tax code than acting like they are some sort of god figures. But that seems unlikely to ever happen.
It's the chancellor of the exchequer that is blame to for the complexity of the tax system , HMRC apply the rules and have a responsibility to collect owed. PAYE is about as simple as it's ever likely to get.

Sheepshanks

32,530 posts

118 months

Monday 24th July 2017
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Murph7355 said:
Sheepshanks said:
...He had no idea, but HMRC should have picked it up.
It's not HMRC's job to "know" what the right rate of tax is for a job someone has.
I didn't get too closely involved but my missus reckoned "the system" should have picked up that he was on a BR (ie he had no tax-free allowance) code and done something about it. She assumed he'd ignored letters etc but on getting his tax-office to check it had never been picked up.

HMRC does "know" anyway - although it obviously only knows what it's told. It acts on the information it receives from employers so a lot of people not on self-assessment get automatic tax rebates. Indeed my wife just got one, because HMRC knew she'd paid too much tax.

Murph7355

37,651 posts

255 months

Monday 24th July 2017
quotequote all
Sheepshanks said:
I didn't get too closely involved but my missus reckoned "the system" should have picked up that he was on a BR (ie he had no tax-free allowance) code and done something about it. She assumed he'd ignored letters etc but on getting his tax-office to check it had never been picked up.

HMRC does "know" anyway - although it obviously only knows what it's told. It acts on the information it receives from employers so a lot of people not on self-assessment get automatic tax rebates. Indeed my wife just got one, because HMRC knew she'd paid too much tax.
IME the system doesn't make these sorts of check, at least not to favour the individual. And the stance of HMRC is as I've described (or certainly was - I have to admit the last couple of times I had cause to call them they were slightly more human).

As you note, HMRC only knows what it's told. Sometimes not even that (again IME). But the answers will be the same from HMRC wink

Try a friendly letter/phone call explaining the mistake and the circumstances. If it's a genuine error, recent and not much cash they may get lucky. Doesn't hurt to try. But expect nothing.

Derek Smith

45,514 posts

247 months

Monday 24th July 2017
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I submitted my tax returns as per normal. A couple of entries were queried. It took time to work out the details but I answered them will inside the limit. Then another query. Again I answered them, this time with just two weeks before the published deadline.

I was then given 9 days to pay all but £10k or else be fined on a daily basis. I phoned - in those days they answered - only to be told that there was an unpublished deadline. It wasn't even on their website. Everyone I spoke to said I would get the money back, one even saying I didn't owe them anything, but no one would take my objection higher.

They don't care.

I was told I would get the money returned in 6 weeks. It was five months later I was credited. I tried phoning but they refused to discuss the matter.

I now have an accountant. Their fees were paid, nearly twice over, by the money they saved me in the first year. The following year I got a rebate, not much, but it paid for a meal for my family. This year I asked if I could claim for a purchase of camera and I was told 'Of course.' I bought a lens today and I'll claim for that next year.

Perhaps there's a bit of karma as I stopped a chap driving a Merc with red-edged index plates, suggesting that it was destined for export. I was out of my depth but called customs - they had offices nearby - and two turned out and after five minutes told the bloke to clear all personal property from the 9-month old S-Class as they were confiscating it.

A few months later the bloke phone me asking if there was anything I could do to get his car back. I phoned the customs chap and discovered that because the chap had claimed exemption from VAT incorrectly they'd be selling the car via auction in the near future. When I asked how much the owner was likely to get back I was told that with storage and other expenses, including a sort of fine, they'd be nice and not charge the chap for the shortfall.


anonymous-user

53 months

Monday 24th July 2017
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Whilst the amount HMRC are required to take is egregious, on the few occasions I've had to deal with them, to be fair, they were really helpful and responsive. You want to try dealing with US federal, state and city taxes; they have turned absurd, unintelligible complexity enforced by draconian penalties into a twisted art form.

Alpinestars

13,954 posts

243 months

Monday 24th July 2017
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fblm said:
johnfm said:
I expect the devil is in the detail.
No doubt, maybe Alpinestars can enlighten us...
I set out my understanding at page 3. It was ostensibly a tax deferral scheme, not really an avoidance scheme.

At a basic level the business bought rights from Disney, income was supposed to accrue over 20 years or so, and it was financed with a loan from Barclays. The "magic" was that the interest on the loan was paid in year 1, giving an up-front tax deduction for investors, which was worth significantly more than the money invested by them.

Had the business run its course, no tax would have been avoided.

It failed not because it was a deferral or avoidance scheme, but on a technicality. The Court ruled that the partnership was not trading for tax purposes (it was ruled to be an investment partnership), which meant that no deduction was available for the interest - accelerated or not.

Eric Mc

121,779 posts

264 months

Monday 24th July 2017
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In theory, HMRC SHOULD know. And the new Digital Tax Accounts system is going ahead on the basis that they do know.

However, in practice, it is actually quite clear that HMRC struggles mightily to merge together all the information they have on one single individual when that information is coming in from multiple third party organisations.

When a person (say) has three sources of income handled under PAYE (an example would be someone with two ex-work pensions and a part time employment). HMRC needs to obtain all the relevant information from those three different sources. Up until recently they didn't always co-ordinate the data correctly although it has been getting better.

anonymous-user

53 months

Monday 24th July 2017
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fblm said:
Whilst the amount HMRC are required to take is egregious, on the few occasions I've had to deal with them, to be fair, they were really helpful and responsive. You want to try dealing with US federal, state and city taxes; they have turned absurd, unintelligible complexity enforced by draconian penalties into a twisted art form.

I have to agree. I've been doing my tax returns for years, and my wife's. Never had any issues with HMRC and rarely had trouble understanding how to do the return correctly, even with some quite significant CGT and trust issues to consider.

I used to use accountants but in all honesty don't think they ever suggested anything I wasn't aware of and certainly never saved me their costs.

At the end of the day, it's not rocket science. Any reasonably numerate and literate person, with application, should be able to understand what's needed.

Of course if you're talking of significant corporate accounting, you'll need number crunchers and bean counters but even then I'd make sure I knew what they knew!

Register1

2,130 posts

93 months

Monday 24th July 2017
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Happened to a work colleague. 61 years old now, this happened 2 years ago,
Had a place in Spain, and he ended up being banned from ever going to Spain, or the police would arrest him.

That place ended up being lived in by our equivalent of gypsies.

He had a place in Burnley, just a 2 bed terrace, took that off him, and sold it, for about 115k, and as it didn't cover all the unpaid taxes he owed, they also made him bankrupt.
He ended up moving in with some old girl, a few houses down the street.
Moral is,, "pay your taxes", even if self employed, as a good chance of getting caught.

Eric Mc

121,779 posts

264 months

Monday 24th July 2017
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REALIST123 said:


At the end of the day, it's not rocket science. Any reasonably numerate and literate person, with application, should be able to understand what's needed.
Yes - it's not rocket science. Rocket science is logical and follows recognised scientific principles. Also, rocket science doesn't change every three months.

We had four Budgets in the 12 month period March 2015 to March 2016.

We are scheduled to have three budgets in 8 months this year - although so far we've only had one and the second budget has gone missing - so it may not happen.

This year, HMRC has announced that it's own computers cannot cope with the tax changes made to dividends and interest and as a result they will be issuing incorrect tax calculations to thousands of taxpayers. HMRC will not fine anybody if they pay the wrong amount IF the person points out to HMRC that they thought that HMRC's incorrect calculations were really correct/

At the moment tax policy in the UK is a completely shambolic and disorganised. Being logical and literate is of little help. Indeed, it might even be a hindrance at the moment.