Did any of the people who are getting the bills for repayment now honestly think that there was nothing dodgy about getting their salary paid through a convoluted scheme without paying any tax ?

Was wondering if I’d be in a minority with my views but I agree with P-Jay and nealgover. It must have been obvious at the time that what they were doing was exceptionally dodgy. For the most part I tend to see tax avoidance* as pretty much equivalent to tax evasion.

It must be morally obvious that to duck out of paying your fair share back into society in order to take home a higher income is wrong, not least of all because anyone on PAYE is directly subsidising it.

The only thing that makes me a bit uncomfortable is the suspicion that HMRC has targeted contractors because it’s too difficult, politically, to go after Amazon/Google/Apple etc.

* I’d get rid of ISAs too. And the tax benefits on pension contributions.

tricky one. I’m sure the vast majority of the people caught by this were advised to go down this route by people that were properly qualified and well regarded (qualified accountants, tax advisors etc), but ultimately the responsibility lies with the person that benefitted from reduced tax . The beneficiary should have recourse against the person/organisation that advised them to go this route, but I think making it stick will be tough (and expensive), I’m sure the advisors have the small print covered. I’d expect to see some accountants/advisors get damaged by this.

IMO – its not right that the revenue can go back 20 years on this though, 7 years should be the max. If the people who chose to use these ‘vehicles’ were prudent they would have held 7 years worth of tax back, just in case HMRC retrospectively decided that these were illegal. BUt even those that did this, are now going to get stung for taxes and penalties over a much longer period than is normally allowed.

HMRC should also go after the promotors, and those running the schemes, but thats not as easy as going after the little guy.

Am I correct that this scheme worked like this:

– Funds from work get payed to an employee benefit trust
– Trust then ‘loans’ the money to the employee
– Employee never pays back the loan
– Profit.

And now HMRC have basically said, that’s taking the piss, please pay back the loan, or we’ll assume it was actually a form of remuneration and tax it. And since the loan is still in theory current (as it’s never going to be paid back), it’s not retrospective?

Assuming that’s the case, I can’t see how anyone would think that was anything other than massively taking the piss? No matter what a dodgy accountant told them.

I can see how this could cause massive difficulties for families, but at the same time, depriving the country of that tax means that schools weren’t funded and hospitals had longer waiting lists.

A few points:

(1) It is not really a retrospective change, the schemes involved money being paid into a vehicle and then those funds being lent to the taxpayer. Those loans never went away legally, although because many had their hands on the money they didn’t worry about them. They were only ever deferral schemes.

(2) HMRC haven’t been sitting on them, they have fought cases, the Rangers case being notable, and also introduced legislation over a series of Finance Acts.

(3) Many people unwittingly enter these schemes on the false assumption that they are accepted by HMRC and are willing to enter into them because everyone else is doing them without taking independent advice. This was very much the case with the film schemes too. It isn’t only the ignorant, I know plenty of financially sophisticated people who have misunderstood what they were getting into.

EDIT: Ewan, you posted while I was writing, but your analysis in the first para is correct in my view.

Hmmm. Seems shady as hell.

I assume the counter argument is that loans are meant to be repaid – since HMRC gave them three years to pay them back (and these people haven’t) it’s now clear that the loan is not in fact a loan, it’s a payment, so tax needs to be paid.

I too am torn, but fall into the ‘on balance, you were avoiding tax’ view.

Back in the day we were all advised to do this – I nearly did, but chose not to. I paid income tax, on all my earnings. It was tough at the time, but needed doing.

My issue is the HMRC were not more active in warning lots of folk that these were only ever a loan scheme. I’ve also an issue with the companies that promoted and sold these schemes and umbrella companies.

I’m also not understanding folk who earned many, many extra thousands of pounds, clearly enjoyed spending the additional money, and now claim ‘poverty’ after three years to sort out repayment.

Crap situation – but tax should be paid.

They deem a distribution to take place from the trust equal to the outstanding loan

From doing some reading on it, wasn’t the Rangers decision that the loans were all legal and not taxable, but the employers should have paid tax when the funds went into the trust

They were aiming to attack the employers using these schemes at time so this was a good result. There is no question of the loans not being legal and indeed the receipt of a loan is generally not a taxable event. However, there are certain circumstances when the tax law deems loans to be disguised remuneration, this is especially the case where the individual is in “control” of the lender. The law changed a few years ago to say loans from these vehciles would in future be treated as disguised remuneration, if they had been repaid, no charge would arise, hence it ain’t retrospective.

The dude with a £300000 bill but only £100000 assets to his name…..so he avoided paying £300000 worth of tax therefore presumably getting paid a reasonable legitimate wage too and he still has only managed to accrue £100000 of assets by the age of 54.

He has either just had is financial nuts chopped off in a divorce, had a pretty amazeballs lifetime of holidays or has an impressive coke and hookers habit (or all 3).

Despite having done it in reasonable faith and under advice I think I’m still in the hard lines camp. If you had gone years without paying your way surely your moral compass would be twitching that this was not right.

As an aside I had an enlightening evening with a 3 generational family in the building trade the other week. Genuinely lovely people despite being a bit brexity. Started to feel very uncomfortable when conversationed got into ‘honest british family that has always paid its way’ but were very open and honest about the amount of cash flowing through the system. Youngest daughter works for a materials supplier friend and is paid a nominal peppercorn PAYE wage but every month meets her boss in the local cafe and is given her real wage cash in a brown envelope. They have grown up and lived in this environment and genuinely don’t see that this is wrong or unusual. Or that it doesn’t sit well with their UKIPy views that foreign workers are a burden on the state.

I think it all highlights my naive middle class PAYE employed status understanding of what is normal.

I think it all highlights my naive middle class PAYE employed status understanding of what is normal

No, I think it highlights a number of selfish people who are happy to rip off our country when it suits them – in cash, in morals and future opportunity.

The dude with a £300000 bill but only £100000 assets to his name…..so he avoided paying £300000 worth of tax therefore presumably getting paid a reasonable legitimate wage too and he still has only managed to accrue £100000 of assets by the age of 54.

He has either just had is financial nuts chopped off in a divorce, had a pretty amazeballs lifetime of holidays or has an impressive coke and hookers habit (or all 3).

I think he would be getting zero sympathy if he revealed how much tax he had paid over the period and what he was taking home. If he was that good at shifting his income around there is a chance he managed to move some of it elsewhere too before calculating his assets.

How far they can go back is a worry for some people but mostly due to the fact that most of them knew it was a way to pay less tax.

There will be quite a few who may not have realised what they were signing up for, but presumably should have noticed that they did not appear to be paying tax.

With a hint of sympathy I can see how someone working for an agency could be hoodwinked.

Employee: do I need to pay tax and NI? Should be about 30%?

Agency: No you pay us a fee of xx% which includes any tax (or none) to handle all that, just sign this.

Hmrc 20 years later : you owe us 30%, never mind that you paid xx% to the agency.

Ignorance is no defence, and I suspect that those NHS examples are more at the go and consultant level trying to hide four figure day rates rather than agency nurses just scraping by (although some might be and those have my sympathies).

I’m a Ltd co contractor and there are rumours that some form of retrospective IR35 law is next.

Would you pass the old IR35 quiz that was going about? Or are you just doing it as a disguised employee?
Rechecking the rules or investigating people doesn’t always make it retrospective. A lax application of the rules doesn’t mean it should stand.

I think it all highlights my naive middle class PAYE employed status understanding of what is normal.

Indeed. You have a point. It’s only getting towards the end of February and I’ve already had two clients ask me to “knock a bit off if I pay cash.” I’ve explained to each of them that I’d prefer to invoice by email and have them pay by bank transfer (please!). And I’m the one kinda apologising!

Of course, what I’d like to say is, “Oh right, I see…so if you pay me cash, you expect me not to declare the income, save myself 20-25% tax and pass the saving on to you, is that it? So, yeah fine, I’ll evade tax just so you can save a few hundred quid or so on your invoice. And if Mr. HMRC ever finds out, you’ll split the difference with me won’t you…plus interest?”

So, yeah, it appears that middle class PAYE workers don’t get what is normal sometimes.

(Yeah, apologies, slightly outside of the thread topic…and I haven’t a great deal of sympathy for those who’ve been caught out – you can’t go whistling through life earning a shitload without paying a penny in tax and think that somehow it’s all ok. 20 years though! That’s harsh!)

I’ve worked with a number of contractors over the last twenty odd years. TBH most operate as Ltd companies and seem to try and keep things relatively straightforward to avoid getting into hot water with HMRC, but there’s always a few who seem a bit keener on “tax efficient” arrangements.

You know the sort, always looking for a wheeze to get round bits of IR35, apparently paid under £12k with an awful lot of “company assets” and “expenses”, the missus and kids and the cat are on the board of directors somehow this means that they live a relatively luxurious life style but the old trade off of no staff benefits or employment security is still there… But I can’t think of many who would be comfortable with one of these EBT loan arrangements. Feels like outright evasion rather than sitting in that grey area of “avoidance” and they have had a bit of a heads up too TBF…

The dude with a £300000 bill but only £100000 assets to his name…..so he avoided paying £300000 worth of tax therefore presumably getting paid a reasonable legitimate wage too and he still has only managed to accrue £100000 of assets by the age of 54.

He has either just had is financial nuts chopped off in a divorce, had a pretty amazeballs lifetime of holidays or has an impressive coke and hookers habit (or all 3).

If he’s been at it for the full 20 years that’s ‘only’ £15k’s worth of tax a year it soons builds up…

I’d guess the missing 2/3rds of his unpaid tax, have long ago been spent on family holidays, car payments and if he’s at all sensible overpaying the mortgage, and I’d not be shocked if the house was in the wife’s name only to try and put it beyond the tax man’s reach…

The fact that he still has £100k worth of assets that can be directly tied to him is sort of surprising…

So he earned £50-60k a year for 20 years.

It’s all guesstimation of course and ignores any kind of variations but, he would potentially been taking home mid to high £60k’s (avg) rather than the mid £40k’s someone on PAYE would have been taking home… Of course shorten the period and the annual take home (and corresponding tax dodged) increases…

I’m sure if you gave an accountant his unpaid tax bill and the number of years they’d be able to work back to his actual take home far more accurately.

Many of the contractors I know keep some money saved (in their business’s accounts) to pay corporation tax, other bills and for just such situations as this where they are liable for an unforseen cost that just has to be stumped up for… It’s not really a coke ‘n’ hookers lifestyle.

I understand and accept that it makes sense for many people to run their financial life as a business, most are aware of the compromises and understand that HMRC will always seek to recover whatever is due. As such what they can actually do with “their” money is constrained by a different set of rules. Let’s be honest paying yourself an untaxed wage via a “loan” that will forever remain un-repaid is very clearly taking the piss…

Not really.
The loans were made in the past, and loans are not taxable as income (they still aren’t)

The fact that these were never actually loans (they were salary) means that they were always taxable.
It’s just that as the “loans” are still active, and were never paid off, means that the money paid is proved to be salary and not a loan and is taxable.

If it was paid off, like a genuine loan would be, then the tax issue goes away.