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Thousands of workers hit with massive tax avoidance bills

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https://www.theguardian.com/money/2019/feb/16/thousands-of-workers-hit-with-massive-tax-avoidance-bills?CMP=Share_iOSApp_Other

The battle is over the innocuously named 2019 Loan Charge. This measure is designed to claw back unpaid taxes by people who, HMRCsays, used so-called disguised remuneration schemes since April 1999 – with the demands for repayment kicking in from this April.

For some, the bills are utterly life-changing. We spoke to one family whose bill is more than £400,000 – owed by a 56-year-old who worked in IT for years and who says his only option now is bankruptcy.

Another IT worker said his estimated bill is £300,000. “I’m 54, have assets of £100,000 and earn less than £50,000 a year. I’ve already lost my partner due to the stress

 

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21 minutes ago, prozac said:

https://www.theguardian.com/money/2019/feb/16/thousands-of-workers-hit-with-massive-tax-avoidance-bills?CMP=Share_iOSApp_Other

The battle is over the innocuously named 2019 Loan Charge. This measure is designed to claw back unpaid taxes by people who, HMRCsays, used so-called disguised remuneration schemes since April 1999 – with the demands for repayment kicking in from this April.

For some, the bills are utterly life-changing. We spoke to one family whose bill is more than £400,000 – owed by a 56-year-old who worked in IT for years and who says his only option now is bankruptcy.

Another IT worker said his estimated bill is £300,000. “I’m 54, have assets of £100,000 and earn less than £50,000 a year. I’ve already lost my partner due to the stress

 

Id question where the income which has resulted in a 300k tax bill has gone. Divorce maybe?

These insane pay from a offshore loan shemes were so insanely screaming dodgy i fail to grasp how anyone smart enough to earn 50k would have believed them.

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I can't see a problem with this.  HMRC should be collecting taxes and according to one of their spokesmen, this 'issue' was highlighted ten years ago so the warnings were out there.

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Not all were high-earning IT workers. We were contacted by a healthcare professional who was a locum in the NHS for two years.

 

Ahh the guardian line. Locums earn shed loads. Just because they eork for the nhs does not make them innocent, idiots yes...

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2 minutes ago, dougless said:

I can't see a problem with this.  HMRC should be collecting taxes and according to one of their spokesmen, this 'issue' was highlighted ten years ago so the warnings were out there.

The scheme was screaingly obvious a scam. And it was well known well over 5 years ago.

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The schemes were hugely complex, but a simple example would be this. Let’s say the IT worker is hired for £3,000 worth of work. They are advised by their accountant to use an employee benefit trust (EBT), usually set up by a specialist company. The £3,000 is paid not to the IT worker but to the EBT, which then pays it back to them in the form of a loan, after some deductions for their fees. There is no tax paid on the £3,000, and the idea is that there is a mutual understanding that the loan will never be repaid. This is why HMRC calls it “disguised remuneration”. It’s also why many PAYE workers will have limited sympathy for the people receiving bills now, arguing that they were evidently sidestepping income tax.

Its not complex.

You give your earning to an offshore company. They pretend to give you a loan. Then both parties write off the loan, whilst not paying any tax.

Its not complex. Its an idiotic maninthepub tax dodge.

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They are astounded at the retrospective nature of the charges, often dating back more than a decade, long after their tax returns were officially closed, as well as HMRC’s refusal to accept reduced settlements, and what they say is their inability to challenge the charge.

Why are they are astonished?

Hmrc can go back 20 years for deliberate tax evasion ffs.

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Richard Horsley is co-founder of the Loan Charge Action Group. He says that many IT contractors such as himself fell into the loan schemes following measures at the end of the 1990s, known as IR35, to close tax loopholes used by some contractors.

“At the time, tax professionals and QCs came up with solutions where we went on to PAYE for a portion of our earnings, while another portion was a loan, which was not taxable. We asked if it was legal and were told yes. If we knew it was illegal we would never have allowed ourselves into it.”

If you are properly self employed i.e. multiple clients in a tax year then ir 35 is not an issue.

Its when you are basically working for a single company as an hidden employee thats there is a problem.

Let me rephrase the 2nd para - a high charging QC comes up with a hair brained dodge. Hes not going to say oh its illegal.

Edited by spyguy

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Another campaigner, who wished to remain anonymous, says: “We are just the fall guys. I was completely hoodwinked by the scheme administrators, and I feel that HMRC should have acted much, much sooner to advise me that these schemes were not legal. Genuinely naive contractors are being treated like horribly aggressive tax avoiders.” Why, he argues, is HMRC not going after the promoters of the schemes, many of which made millions, but have subsequently dissolved their companies?

Does he want hmrc to tie his does too?

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1 hour ago, EnglishinWales said:

Sweden is laughing their head off right now. Their system of mandatory publicly available tax data for every citizen protects them from such evils as this.

Good point.  I have long thought that all employees should have to wear name tags that showed their gross annual salary.  It would be fascinating to see how that would change the dynamics within organisations.

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https://www.theguardian.com/money/2019/feb/16/thousands-of-workers-hit-with-massive-tax-avoidance-bills

 

“The schemes were hugely complex, but a simple example would be this. Let’s say the IT worker is hired for £3,000 worth of work. They are advised by their accountant to use an employee benefit trust (EBT), usually set up by a specialist company. The £3,000 is paid not to the IT worker but to the EBT, which then pays it back to them in the form of a loan, after some deductions for their fees. There is no tax paid on the £3,000, and the idea is that there is a mutual understanding that the loan will never be repaid. This is why HMRC calls it “disguised remuneration”. It’s also why many PAYE workers will have limited sympathy for the people receiving bills now, arguing that they were evidently sidestepping income tax.”

Edited by PeanutButter

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I briefly (6 mo) shared an office with one of these tax dodge outfits. How it worked was that the legit(ish) recruitment company would contact contract workers for jobs. While they were talking they’d mention the tax dodge place and ask if they could pass on details (to the next desk lol). Tax dodge place would duly ring and try and get them in for hard sell.

The whole place was a lie (one of them used a fake name) and I got the hell out of there ASAP. HMRC should go after the lot of them.

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I hope they all burn. One of my ex-colleagues ended up being paid with these fake loans, and boasted that he was being paid minimum wage so that he paid some tax + NI (this was in 2009). The rest was all a free loan.

Everyone who benefited from these loans should be eviscerated. I don't mean the employers, I mean the employEES. Only if society at large is burned will people shy away from accepting tax-dodges in the future. People have to learn the hard way.

 

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Do the people in the photo have any shame? obviously not! Guardian Comments are interesting, mostly the ones correctly condemning the tax dodgers. Funny how the guardian are picky on when and when not to include House Prices as assets! Whether the following is a home owner or not, they have completely omitted any mention of it. Guess it's not as fashionable to mention as when you're making bank ponzi fuelled HPI gains on top of your unmentioned tax dodging.

"Another IT worker said his estimated bill is £300,000. “I’m 54, have assets of £100,000 and earn less than £50,000 a year. I’ve already lost my partner due to the stress of this and have had suicidal thoughts."

Better you than a victim. Just make sure you pay you taxes before topping yourself. It's a bit much to ask the next generation to pay their taxes instead and buy your fiat ponzi priced house from you after bank's money printing into oblivion and stupidly low interest rates. That's the problem with a zero sum game, either the person doing it has suicidal thoughts if it goes wrong, or if they pull it off an innocent victim does.

Not all boomers are like that obviously, many see things for what they are.

"This will bankrupt me. All I did was follow advice and do what was the norm at the time. This all happened 10 to 20 years ago, and one of the clients at that time was HMRC.”

The HMRC know too well death and taxes are the only certainties so perhaps why this is happening now. They'll try and catch you all before you stick up two fingers while leaving this mortal coil.

Edited by Arpeggio

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39 minutes ago, mrtickle said:

I hope they all burn. One of my ex-colleagues ended up being paid with these fake loans, and boasted that he was being paid minimum wage so that he paid some tax + NI (this was in 2009). The rest was all a free loan.

Everyone who benefited from these loans should be eviscerated. I don't mean the employers, I mean the employEES. Only if society at large is burned will people shy away from accepting tax-dodges in the future. People have to learn the hard way.

 

Blimey. These people are small beer. Who gives a toss? Amazon get a tax rebate in the US, Starbucks UK paid minimal tax because they paid Starbucks Switzerland for the use of the name (or something like that), most of the really rich use the caymans or Monaco so why get frothy about a bloke on maybe 100k ish trying it on?

Edited by Frugal Git

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8 minutes ago, Frugal Git said:

 

Blimey. These people are small beer. Who gives a toss? Amazon get a tax rebate in the US, Starbucks UK paid minimal tax because they paid Starbucks Switzerland for the use of the name (or something like that), most of the really rich use the caymans or Monaco so why get frothy about a bloke on maybe 100k ish trying it on?

Predictable response which is repeated every single time any tax loophole is closed. It's £3.2 BILLION of lost tax money not "small beer".

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34 minutes ago, Frugal Git said:

 

Blimey. These people are small beer. Who gives a toss? Amazon get a tax rebate in the US, Starbucks UK paid minimal tax because they paid Starbucks Switzerland for the use of the name (or something like that), most of the really rich use the caymans or Monaco so why get frothy about a bloke on maybe 100k ish trying it on?

Because us plebs are easy soft targets, and we're not in the privileged club. Nor can we threaten to pull out of the UK and damage the economy. Nor are we rich enough to donate vast sums to powerful and influential friends. We're not the recipient class, we're the feeders and we MUST be kept in our place. 

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Over 10 years ago some "advisors", or snake oil salesmen, asked me "how would you like to pay no tax?"

I rejected straight away. I knew it would not hold water. The scheme they were selling collapsed as did the company and a lot of people ended up with very large tax bills.

The people who claim that they didn't understand that it was wrong are being disingenuous - when people are told there is a way to pay no tax through a special scheme, it is greed that drives them to sign up, not that they were pure victims.

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5 minutes ago, Ah-so said:

Over 10 years ago some "advisors", or snake oil salesmen, asked me "how would you like to pay no tax?"

I rejected straight away. I knew it would not hold water. The scheme they were selling collapsed as did the company and a lot of people ended up with very large tax bills.

The people who claim that they didn't understand that it was wrong are being disingenuous - when people are told there is a way to pay no tax through a special scheme, it is greed that drives them to sign up, not that they were pure victims.

This.

And now, the rest of the people are going to end up with very large tax bills.

I'm shocked that anyone would say that they should be let off - that's disgusting.

 

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more than £400,000 – owed by a 56-year-old who worked in IT

Assuming these earnings were spread over the full 20 years, that means he was avoiding a minimum of 20K in tax per annum, i.e. probably his entire tax bill was being evaded for 20 years, and now he is suddenly surprised to find its not legal??

No sympathy - take everything they own, I would bet that a lot of these people have a bunch of assets hidden abroad.

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15 minutes ago, mrtickle said:

This.

And now, the rest of the people are going to end up with very large tax bills.

I'm shocked that anyone would say that they should be let off - that's disgusting.

 

Yes. The Guardian is painting them as victims. Particularly with labouring the point that some NHS staff got involved. 

They all knew what they were doing. 

For IT staff, they were not even satisfied with the contractors' trick of working through a shell company and paying themselves dividends. They had to go one step further and try and pay no tax at all.

Perhaps they will all need a loan now - a real one - to pay their tax bills. 

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7 hours ago, prozac said:

 

Another IT worker said his estimated bill is £300,000. “I’m 54, have assets of £100,000 and earn less than £50,000 a year. I’ve already lost my partner due to the stress

 

UK women, first sniff of trouble and they are off. So much for the wedding vows

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