Tax avoiders to be deliberately bankrupted.....?..
Discussion
kev1974 said:
"ill-advised" my foot. I've been an IT contractor/consultant for almost three decades now, I remember these loan schemes coming up, the people who went for them were the same ones that went to the trouble of being paid offshore until that got closed down etc. They all knew they were signing up to dodgy schemes, the clue is very much in the word "loan", any halfwit knows that a genuine loan has an expectation that it will be paid back at some point.
I didn't ever partake in any such scheme, I've always paid my due tax each year without evading any of it, so no sympathy from me.
I could have written the post above, exactly my experience and attitude to it as well. I was working at a client site about 10 years ago when Brown was still chancellor IIRC. There were several ex-PWC contractors there all using an offshore 'loan' company and basically taking home 85-90% of their invoice as loans.I didn't ever partake in any such scheme, I've always paid my due tax each year without evading any of it, so no sympathy from me.
I looked into the 'terms' and decided I was not interested for three main reasons:
1. It was obviously 'dodgy', might have been within the letter of the legislation but certainly avoidance if not outright evasion
2. Brown was making noises about closing these 'loopholes', something he never did and nobody has in the intervening 10 years
3. I've no issue paying a fair and reasonable amount of tax (which I must admit has steadily crept up over the last 5 years to where it seems to be getting to a point where avoidance starts to become more morally acceptable, to me anyways, but that's another topic).
I bet some of these guys must be getting some frankly bowel loosening tax demands - best of luck to them. They maybe won't be going to prison, but they will have a few sleepless nights.
JagLover said:
Teddy Lop said:
One question for those in the know - I thought the tax man only went back 6 years?
They can go back 20 years for deliberate falsehood, and 6 years for careless error. kev1974 said:
In addition to that, maybe HMRC are arguing that these "loans" are still outstanding today, so the clock hasn't even started yet.
That’s exactly what they’re saying. The problem with structuring the loans to never be repaid is that, well, they’re still outstanding and available for scrutiny. Hardly magnificent foresight on behalf of those who entered into the schemes. I know some people affected by this, they took and chance but now the game is up. I always played it straight.
What does seem harsh though is that HMRC are not allowing them to negotiate a repayment period they want all the money back straight away which I'm sure will bankrupt some, others will have to sell their houses. I would have thought it would be in the national interest to allow a payback over a number of years and stabilise the situation? Are they just making an example of them?
What does seem harsh though is that HMRC are not allowing them to negotiate a repayment period they want all the money back straight away which I'm sure will bankrupt some, others will have to sell their houses. I would have thought it would be in the national interest to allow a payback over a number of years and stabilise the situation? Are they just making an example of them?
HoHoHo said:
This sounds brilliant, how do I report the idiot contractor who did exactly this and when we ended his contract then took us to a tribunal pretending to be a full-time employee?
If you feel the need to, contact HMRC.We had a contractor leave under fairly bad terms a few years ago and now that quite a few of our contractors are getting stung for "IR35" (which to be fair, when you have been bodyshopped to the same desk in a Client office to be told what to do by them, you really are not a contractor, you could basically draw a target map of our office layout in 2010 and Mr. Whistleblower sat pretty much in the midst of all the guys (funny how it is just the guys, even though our contracting capability must be about 30:70 lassies: lads) now getting fingered, and for some pretty big bills as well. One guy was probably hitting £60-70k to his LTD Co annually over a 6/7 year period but only taking £10-12k from the company as income (Thanks Public House Beta records, very good for nosying what companies out contractors are directors of). Got billed £60k from HMRC (so basically taking his tax take up to what it would have been PAYE). Had to sell his house.
57 Chevy said:
What does seem harsh though is that HMRC are not allowing them to negotiate a repayment period they want all the money back straight away which I'm sure will bankrupt some, others will have to sell their houses. I would have thought it would be in the national interest to allow a payback over a number of years and stabilise the situation? Are they just making an example of them?
HMRC are allowing payment plans - www.gov.uk/government/publications/hmrc-issue-brie..."Settling does not mean the money has to be paid in one go. Flexible payment arrangements are available to anybody who has genuine difficulty paying what’s owed."
"There are no time limits on how long payments can be spread, and each case is considered on individual circumstances."
However... "In most cases we will discuss and agree payments over a longer period. Insolvency will only be considered where users are either at risk of accruing further debt or where they actively avoid paying what they owe."
So it seems that if people want to play ball and pay the tax they owe then HMRC will allow them to do it over a suitable period, but if they don't the gloves come off.
However that doesn't sell newspapers.
PF62 said:
HMRC are allowing payment plans - www.gov.uk/government/publications/hmrc-issue-brie...
"Settling does not mean the money has to be paid in one go. Flexible payment arrangements are available to anybody who has genuine difficulty paying what’s owed."
"There are no time limits on how long payments can be spread, and each case is considered on individual circumstances."
However... "In most cases we will discuss and agree payments over a longer period. Insolvency will only be considered where users are either at risk of accruing further debt or where they actively avoid paying what they owe."
So it seems that if people want to play ball and pay the tax they owe then HMRC will allow them to do it over a suitable period, but if they don't the gloves come off.
However that doesn't sell newspapers.
Thanks, I shouldn't believe what I was told by someone who is going through this. I thought it didn't make sense, they were going full drama lama. "Settling does not mean the money has to be paid in one go. Flexible payment arrangements are available to anybody who has genuine difficulty paying what’s owed."
"There are no time limits on how long payments can be spread, and each case is considered on individual circumstances."
However... "In most cases we will discuss and agree payments over a longer period. Insolvency will only be considered where users are either at risk of accruing further debt or where they actively avoid paying what they owe."
So it seems that if people want to play ball and pay the tax they owe then HMRC will allow them to do it over a suitable period, but if they don't the gloves come off.
However that doesn't sell newspapers.
Eric Mc said:
It's a "chicken/egg" situation -
Simple tax laws usually equates to "easy to avoid".
Complex tax law usually results due to the steps governments feel they need to make to make it difficult to avoid tax.
is this necessarily true?Simple tax laws usually equates to "easy to avoid".
Complex tax law usually results due to the steps governments feel they need to make to make it difficult to avoid tax.
Could it be the complex laws is precisely why companies such as Amazon post no profit in the UK despite sales?
Surely a simple law that states - If you are a reatailer selling goods in the UK, you pay tax on the value of the goods sold. If the transaction is completed in the UK and the goods shipped in the UK you pay tax. It the transaction is completed in the UK and the goods supplied from outside the UK, you pay tax on the value of the sale plus import tax on the goods.
Another law could be - you cannot offset the loss of your operation outside of the UK to your business inside the UK to offset your tax liability or we will demand tax based on the value of your overall global profit based on a proportion of the global sales based on the number originating within the UK
That's a simple rule that with a bit of tweaking could work.
George Smiley said:
is this necessarily true?
Could it be the complex laws is precisely why companies such as Amazon post no profit in the UK despite sales?
Surely a simple law that states - If you are a reatailer selling goods in the UK, you pay tax on the value of the goods sold. If the transaction is completed in the UK and the goods shipped in the UK you pay tax. It the transaction is completed in the UK and the goods supplied from outside the UK, you pay tax on the value of the sale plus import tax on the goods.
Another law could be - you cannot offset the loss of your operation outside of the UK to your business inside the UK to offset your tax liability or we will demand tax based on the value of your overall global profit based on a proportion of the global sales based on the number originating within the UK
That's a simple rule that with a bit of tweaking could work.
So if a firm in the UK sells goods abroad they should have no UK tax liability on the profits from those goods?Could it be the complex laws is precisely why companies such as Amazon post no profit in the UK despite sales?
Surely a simple law that states - If you are a reatailer selling goods in the UK, you pay tax on the value of the goods sold. If the transaction is completed in the UK and the goods shipped in the UK you pay tax. It the transaction is completed in the UK and the goods supplied from outside the UK, you pay tax on the value of the sale plus import tax on the goods.
Another law could be - you cannot offset the loss of your operation outside of the UK to your business inside the UK to offset your tax liability or we will demand tax based on the value of your overall global profit based on a proportion of the global sales based on the number originating within the UK
That's a simple rule that with a bit of tweaking could work.
The sensible solution is to abolish corporation tax altogether.
VAT is already a tax on the value of goods sold in the UK.
George Smiley said:
is this necessarily true?
Could it be the complex laws is precisely why companies such as Amazon post no profit in the UK despite sales?
Surely a simple law that states - If you are a reatailer selling goods in the UK, you pay tax on the value of the goods sold. If the transaction is completed in the UK and the goods shipped in the UK you pay tax. It the transaction is completed in the UK and the goods supplied from outside the UK, you pay tax on the value of the sale plus import tax on the goods.
Another law could be - you cannot offset the loss of your operation outside of the UK to your business inside the UK to offset your tax liability or we will demand tax based on the value of your overall global profit based on a proportion of the global sales based on the number originating within the UK
That's a simple rule that with a bit of tweaking could work.
You mean VAT? No deduction for costs? And which costs are double counted in your example?Could it be the complex laws is precisely why companies such as Amazon post no profit in the UK despite sales?
Surely a simple law that states - If you are a reatailer selling goods in the UK, you pay tax on the value of the goods sold. If the transaction is completed in the UK and the goods shipped in the UK you pay tax. It the transaction is completed in the UK and the goods supplied from outside the UK, you pay tax on the value of the sale plus import tax on the goods.
Another law could be - you cannot offset the loss of your operation outside of the UK to your business inside the UK to offset your tax liability or we will demand tax based on the value of your overall global profit based on a proportion of the global sales based on the number originating within the UK
That's a simple rule that with a bit of tweaking could work.
It’s not as easy as you make out. But most tax systems struggle with 21C business models. Digital services tax is an attempt to address the point.
untakenname said:
It's not just megabuck earning IT contractors, my friend taught for a large London Academy for a short period and he had to go through the agency to get paid and they used one of these schemes, only know about it as I caught up with him at Christmas and he had the HRMC on his back about it.
I think it's unfair to penalise low paid workers who had no choice but accept the agencies terms???? compared to contractors on £500+ per day who willingly chose this scheme to keep under the 40% tax bracket.??
Why does day rate of pay dictate what scheme you use? Agencies don't push you into loan schemes. You chose to operate Ltd, umbrella, or dodgy off shore/loan company.I think it's unfair to penalise low paid workers who had no choice but accept the agencies terms???? compared to contractors on £500+ per day who willingly chose this scheme to keep under the 40% tax bracket.??
kev1974 said:
"ill-advised" my foot. I've been an IT contractor/consultant for almost three decades now, I remember these loan schemes coming up, the people who went for them were the same ones that went to the trouble of being paid offshore until that got closed down etc. They all knew they were signing up to dodgy schemes, the clue is very much in the word "loan", any halfwit knows that a genuine loan has an expectation that it will be paid back at some point.
I didn't ever partake in any such scheme, I've always paid my due tax each year without evading any of it, so no sympathy from me.
Agreed. I think everyone in contracting knows about these schemes and the risk. I only know of one person that signed up. My main avoidance scheme is to pay a huge chunk into my pension every year!I didn't ever partake in any such scheme, I've always paid my due tax each year without evading any of it, so no sympathy from me.
57 Chevy said:
PF62 said:
HMRC are allowing payment plans - www.gov.uk/government/publications/hmrc-issue-brie...
"Settling does not mean the money has to be paid in one go. Flexible payment arrangements are available to anybody who has genuine difficulty paying what’s owed."
"There are no time limits on how long payments can be spread, and each case is considered on individual circumstances."
However... "In most cases we will discuss and agree payments over a longer period. Insolvency will only be considered where users are either at risk of accruing further debt or where they actively avoid paying what they owe."
So it seems that if people want to play ball and pay the tax they owe then HMRC will allow them to do it over a suitable period, but if they don't the gloves come off.
However that doesn't sell newspapers.
Thanks, I shouldn't believe what I was told by someone who is going through this. I thought it didn't make sense, they were going full drama lama. "Settling does not mean the money has to be paid in one go. Flexible payment arrangements are available to anybody who has genuine difficulty paying what’s owed."
"There are no time limits on how long payments can be spread, and each case is considered on individual circumstances."
However... "In most cases we will discuss and agree payments over a longer period. Insolvency will only be considered where users are either at risk of accruing further debt or where they actively avoid paying what they owe."
So it seems that if people want to play ball and pay the tax they owe then HMRC will allow them to do it over a suitable period, but if they don't the gloves come off.
However that doesn't sell newspapers.
Let’s say you have been contracting for twenty years and have avoided tax to the tune of £300,000. The HMRC can levy a loan charge against this amount for the new tax year, which you have to pay. That payment is due in full in a few months time. You technically still have the loan this time next year, so could face a new loan charge.... potentially every year.
Or you could settle the outstanding tax owed with the HMRC. They will want a significant up front payment plus monthly, probably over 60 months. Plus intrest.
Contractor I heard of owing 120k has to pay £40k upfront then monthly of around £2500 to settle. Those figures are pretty punitive.
It’s going to be pretty hard for some people that were earning big bucks in 2004-2012 as a high paid contractor as they probably didn’t save that money, and their income has probably dried up since then as the markets have changed.
Guy I sat next to doing the same job as me was coining £8000 spending money a month, whereas I as paye was getting £2500. He was living a great life, flying off to watch Liverpool play every week, Home, and away, and in Europe. He isn’t going to be able to settle his outstanding tax bill any time soon.
arfursleep said:
The 'accountants' that recommended these schemes, presumably profiting from doing so, are meanwhile dreaming up the next scheme to entice the unsuspecting after washing their hands with their (former?) clients.
https://www.gov.uk/guidance/tax-avoidance-enablers-of-defeated-tax-avoidance-legislation98elise said:
kev1974 said:
"ill-advised" my foot. I've been an IT contractor/consultant for almost three decades now, I remember these loan schemes coming up, the people who went for them were the same ones that went to the trouble of being paid offshore until that got closed down etc. They all knew they were signing up to dodgy schemes, the clue is very much in the word "loan", any halfwit knows that a genuine loan has an expectation that it will be paid back at some point.
I didn't ever partake in any such scheme, I've always paid my due tax each year without evading any of it, so no sympathy from me.
Agreed. I think everyone in contracting knows about these schemes and the risk. I only know of one person that signed up. My main avoidance scheme is to pay a huge chunk into my pension every year!I didn't ever partake in any such scheme, I've always paid my due tax each year without evading any of it, so no sympathy from me.
I was contacted regularly about these schemes up to about 2 years ago. After contacting one of them, just to listen to the spiel, it sounded far too dodgy to me. I rang my accountant for confirmation and she said I would be mad to even consider this.
I’m not surprised this has caught up with some people.
I look at tax as a "licence to operate" in a jurisdiction. If you aren't paying a fair level of tax then you should be swiftly prevented from operating since it is an unfair advantage.
As a contractor I pay what I consider to be a "fair" level of tax. Sales less cost of sales, a bit of income tax and NI, stash a bit away in pension and pay a big chunk of corporation tax. In the past I lived on directors loans then paid them off with dividends. I tend not to bother so much now that they're taxed so much.
With the above setup I live within my means and build up a reserve for times when I find myself on the bench between contracts.
I find myself dead against the tax dodging "loan from IoM" mob but also, at the other end of the spectrum think that IR35 regulations are unfair to jobbing contractors like myself. We should be free to operate a small firm as we choose, living frugally and building reserves for quiet patches.
As a contractor I pay what I consider to be a "fair" level of tax. Sales less cost of sales, a bit of income tax and NI, stash a bit away in pension and pay a big chunk of corporation tax. In the past I lived on directors loans then paid them off with dividends. I tend not to bother so much now that they're taxed so much.
With the above setup I live within my means and build up a reserve for times when I find myself on the bench between contracts.
I find myself dead against the tax dodging "loan from IoM" mob but also, at the other end of the spectrum think that IR35 regulations are unfair to jobbing contractors like myself. We should be free to operate a small firm as we choose, living frugally and building reserves for quiet patches.
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