"Possibly the Worst Tax Avoidance Scheme Ever" - report on Property118's buy-to-let tax scheme

[Man of Kent]

Oh no! Apparently Dan Neidle's controlled by the Illuminati!

https://www.property118.com/dan-neidle/

(For some reason the comment that Dan was fired from Clifford Chance - which is a complete lie - hasn't set off their notoriously hair trigger moderation. How very odd.)

[Man of Kent]

And then there's this, which completely misses the point that the 'in-house' exemption from DOTAS doesn't mean that a scheme doesn't have to be notified, but that it has to be notified by the user and not the promoter:

https://www.property118.com/tax-avoidance-dotas-and-the-substantial-incorporation-structure-sis/

Yes folks, it appears they just exposed all their clients to a DOTAS penalty. Top work lads, absolutely sterling job. 

[2buyornot2buy]

48 minutes ago, Man of Kent said:

Oh no! Apparently Dan Neidle's controlled by the Illuminati!

https://www.property118.com/dan-neidle/

(For some reason the comment that Dan was fired from Clifford Chance - which is a complete lie - hasn't set off their notoriously hair trigger moderation. How very odd.)

Who in their right mind thinks I'll make a potentially libellous statement about a magic circle LLP member on a public forum. My God these people are absolute cretins. 

[17 Year Veteran]

I must admit that I’ve lost track of who’s who in this saga, but if I were to back anyone here it would be the ex senior magic circle lawyer bloke. 

[Dyson Fury]

https://www.taxpolicy.org.uk/2023/10/13/ranjan/

Quote

A TV property pundit and YouTuber promotes Property118’s tax avoidance scheme. What he doesn’t say: he’s been paid over £500k for facilitating it

Quote

Part of the Property118 scheme involves the landlord borrowing under a “bridge loan” for a few hours, with the money moving swiftly between three different bank accounts all controlled by the lender. The claim is that this magically avoids £100k+ of tax for the landlord.

But what kind of lender would facilitate such a scheme?

 

[Dyson Fury]

118ers going flat out on this:

https://www.property118.com/why-dan-neidle-is-wrong-about-incorporation-relief/

Quote

Yesterday’s article invited Dan Neidle to withdraw his allegations and apologise in accordance with his promise to do so if we had ‘disclosed the scheme in full to HMRC and HMRC said it was fine’. We have done exactly that, on over 20 occasions in enquiries, and many others on tax returns, all via tax agents. HMRC has never indicated anything other than satisfaction with the structure.

Neidle has not kept his promise as yet. There is still time.

Some of the comments are by Giles Peaker, a respected lawyer who runs the "Nearly Legal" blog.  He is disputing several points in the line taken by Cotswold Barristers.

[Dyson Fury]

https://www.property118.com/accountingweb-are-the-latest-to-delete-evidence/

Quote

Following the article I published yesterday there have been more strange goings on. This time it’s the deletion of discussion threads on the AccountingWEB website dating back to 2018.

The evidence was available up until 19th October 2023 via this link https://www.accountingweb.co.uk/any-answers/esc-d32-what-does-liabilities-tak which has now been deleted.

He is clutching at straws here, the "discussion" was 5 comments in a thread about taking out fresh lending to repay old liabilities.  2 of the comments were by someone using a picture of Miss Piggy as their avatar, and 2 of the others were responses were by the original poster, who goes by the name of "Galaxian".  Not exactly likely to reach an authoritative conclusion on a very detailed aspect of tax law...

Edited October 22, 2023 by Dyson Fury

[msi]

14 hours ago, Dyson Fury said:

https://www.property118.com/accountingweb-are-the-latest-to-delete-evidence/

He is clutching at straws here, the "discussion" was 5 comments in a thread about taking out fresh lending to repay old liabilities.  2 of the comments were by someone using a picture of Miss Piggy as their avatar, and 2 of the others were responses were by the original poster, who goes by the name of "Galaxian".  Not exactly likely to reach an authoritative conclusion on a very detailed aspect of tax law...

This is hilarious. He is taking on a qualified, magic circle level with the self delusion of someone more akin to the loon squad here...

[Man of Kent]

On 22/10/2023 at 18:57, Dyson Fury said:

118ers going flat out on this:

https://www.property118.com/why-dan-neidle-is-wrong-about-incorporation-relief/

Some of the comments are by Giles Peaker, a respected lawyer who runs the "Nearly Legal" blog.  He is disputing several points in the line taken by Cotswold Barristers.

The sight of a bunch of landlords trying to lawsplain to Giles Peaker is absolutely splendid to behold. It's like someone who can't drive trying to tell Max Verstappen where he's going wrong. 

[SDLT specialist]

There is another piece published today by Dan Neidle about perceived problems with how Property118 and Cotswold Barristers implement their Substantial Incorporation Structure: https://www.taxpolicy.org.uk/2023/11/09/badly/

[bluegnu]

Dan Neidle publishes his full analysis of P118...

Quote

We’ve reviewed multiple Property118 client files to investigate how they implement their tax avoidance scheme. We’ve found that the scheme is implemented so badly that our previous criticism is beside the point – a key drafting error means that the scheme fails immediately. It also appears that their clients receive templated “advice” which fails to identify key issues, or warn clients about the legal and tax risks they are running.

https://www.taxpolicy.org.uk/2023/11/09/badly/

I have to admit it's way above my head but the general gist I get is that it's not just dodgy, it's plain wrong and doesn't work.

[Jolly Roger]

Not sure I understand the full background of this scheme and associated drama but feel like this should be picked up by mainstream media, seems it could make a good magazine story.

[2buyornot2buy]

1 hour ago, bluegnu said:

Dan Neidle publishes his full analysis of P118...

https://www.taxpolicy.org.uk/2023/11/09/badly/

I have to admit it's way above my head but the general gist I get is that it's not just dodgy, it's plain wrong and doesn't work.

A work of art. DN calls the barrister, who's also a director of P118, negligent and incompetent. Think about that. A former magic circle partner has called a member of the bar incompetent... 

There's going to be several 00 bankrupt LLs over on P118. 

[regprentice]

34 minutes ago, 2buyornot2buy said:

There's going to be several 00 bankrupt LLs over on P118. 

Indeed. The Landlords have almost certainly breached the terms of their mortgages. There are also 3 major tax problems in the new article for scheme landlords given the new issues that have been identified  

- Transfer of their properties into the scheme probably triggered a Capital Gains Tax liability on the day the scheme was processed. 

- Their mortgage payments are probably liable for income tax

- Their mortgage payments should probably have 20% withholding tax deducted from them.

Why would they pay tax on a liability they are paying out? Because theyve deliberately created a complicated web of ownership where they dont own the property but still repay the mortgage on the schemes behalf. explained in the extract below.  

However, landlords may be better off if these provisions don’t create an obligation for the company to make indemnity payments in respect of the mortgage interest. First, given the debt created by the sale contract, the payments are likely to be “interest” for tax purposes, subject to 20% withholding tax, and additional income tax in the hands of the landlord. 

Edited November 9, 2023 by regprentice

[msi]

13 hours ago, Jolly Roger said:

Not sure I understand the full background of this scheme and associated drama but feel like this should be picked up by mainstream media, seems it could make a good magazine story.

Soon as HMRC get some scalps it will hit the media. That will send shockwaves and encourage more LL's to sell up thinking they can cash out.

[Clarky Cat]

https://www.tax.org.uk/hmrc-one-to-many-letters-concerning-spotlight-63-llp-property-tax-planning

HMRC are already going after people using the other scheme highlighted by Dan Neidle. Extract of letter below:

Quote

You may owe tax if your business uses a hybrid business model Some property landlords have been advised to structure their business using a ‘hybrid business model’. This aims to avoid mortgage interest relief restrictions, Capital Gains Tax (CGT) and Inheritance Tax (IHT). Our view is that following this advice doesn’t produce the tax outcomes it claims to. We’ve enclosed a factsheet about hybrid business models that explains why. If you’ve taken advice and started using an arrangement like this, you may owe tax. We strongly advise you to withdraw from the arrangement and settle your tax affairs.

What you need to do [by xxxx date?]

1. Tell us about your arrangements. Email us at Spotlight63@hmrc.gov.uk or write to us at the address at the top of this letter, including the CFSS-[xxxx] reference. We call this a disclosure. At this stage, you only need to tell us that you’ll be making a disclosure. You don’t need to give any details of the undisclosed income or the tax you believe you owe as we will write back to you for the details we need. If you email us, please first read the attached email protocol disclaimer. When you contact us, please state ‘I accept the risks associated with using email and I am happy to proceed.’ We can’t reply to your email until you do this.

2. You may also need to amend your tax return, which could mean you need to pay more tax. To do this, go to GOV.UK, search ‘Self Assessment tax returns’ and then select the link for ‘If you need to change your return’. If you haven’t paid enough tax, we may also charge you a penalty. If you don’t make a disclosure in response to this letter by 31/1/24, we may open an enquiry and you may have to pay a higher penalty.

 

[Will!]

1 hour ago, Clarky Cat said:

https://www.tax.org.uk/hmrc-one-to-many-letters-concerning-spotlight-63-llp-property-tax-planning

HMRC are already going after people using the other scheme highlighted by Dan Neidle. Extract of letter below:

 

Oh dear.

[regprentice]

Dan appeared on the Accountingweb podcast on monday to discuss a number of issues, including 12 minutes on Property 118. Very interesting, very easy to understand and Dan comes across very well.

https://www.accountingweb.co.uk/content/no-accounting-for-taste-ep152-dan-neidle-talks-property118-autumn-statement-and-tax

• at 4:00 minutes they start discussing P118
• at 16:20 theres a brief explanation of why HMRC dont make any public statements about specific schemes
• at 17:15 they go on to discuss the Less Tax for Landlords scheme 
• at 20:45 onwards the podcast moves to some chat about the budget and general tax approaches  

[regprentice]

On 28/10/2023 at 19:31, Man of Kent said:

The sight of a bunch of landlords trying to lawsplain to Giles Peaker is absolutely splendid to behold. It's like someone who can't drive trying to tell Max Verstappen where he's going wrong. 

That thread has now been removed from P118. ironically its old hyperlink now takes you to a splash page advertising "tax planning"

[Man of Kent]

14 hours ago, regprentice said:

That thread has now been removed from P118. ironically its old hyperlink now takes you to a splash page advertising "tax planning"

How curious, thanks.

[Cardiff Resident]

HMRC are commencing a One to Many (OTM) letter campaign in November 2023 which will target a small population of taxpayers who have incorporated their property business in the tax year 2017/18 but reported no Capital Gains Tax (CGT) liability on their Self Assessment tax return on the basis that incorporation relief under section 162 Taxation of Chargeable Gains Act 1992 applies in full. 

One area suggested to check in the full letter is:

that your calculation of the incorporation relief available to you didn’t include any other type of consideration apart 
from shares received in exchange for the property business - for example, a sum credited to director’s loan 
account

https://www.tax.org.uk/hmrc-one-to-many-letter-capital-gains-tax-incorporation-relief-property-businesses

[msi]

8 hours ago, Cardiff Resident said:

HMRC are commencing a One to Many (OTM) letter campaign in November 2023 which will target a small population of taxpayers who have incorporated their property business in the tax year 2017/18 but reported no Capital Gains Tax (CGT) liability on their Self Assessment tax return on the basis that incorporation relief under section 162 Taxation of Chargeable Gains Act 1992 applies in full. 

One area suggested to check in the full letter is:

that your calculation of the incorporation relief available to you didn’t include any other type of consideration apart 
from shares received in exchange for the property business - for example, a sum credited to director’s loan 
account

https://www.tax.org.uk/hmrc-one-to-many-letter-capital-gains-tax-incorporation-relief-property-businesses

Standard playbook. This are soft warnings to come clean. Once they've gone it'll be full fines, penalty charges, and legal action including forced sales.

 

Lovely

[Dyson Fury]

On 16/11/2023 at 06:36, regprentice said:

That thread has now been removed from P118. ironically its old hyperlink now takes you to a splash page advertising "tax planning"

Fortunately, someone (ahem) had the foresight to archive the P118 page when it was published:

https://web.archive.org/web/20231024061009/https://www.property118.com/why-dan-neidle-is-wrong-about-incorporation-relief/

That is from October 24, and includes the comments up to that date (3 pages). The most recent save (Nov 15) does not seem to work, possibly an attempt to save the page after it had been deleted.

I have also archived 

https://www.property118.com/dan-neidle/

as it seems likely that will disappear soon.

[msi]

14 minutes ago, Dyson Fury said:

Fortunately, someone (ahem) had the foresight to archive the P118 page when it was published:

https://web.archive.org/web/20231024061009/https://www.property118.com/why-dan-neidle-is-wrong-about-incorporation-relief/

That is from October 24, and includes the comments up to that date (3 pages). The most recent save (Nov 15) does not seem to work, possibly an attempt to save the page after it had been deleted.

I have also archived 

https://www.property118.com/dan-neidle/

as it seems likely that will disappear soon.

Not all heroes wear capes.  well done.  I'm sure someone will use that as 'evidence'

[regprentice]

9 hours ago, Cardiff Resident said:

HMRC are commencing a One to Many (OTM) letter campaign in November 2023 which will target a small population of taxpayers who have incorporated their property business in the tax year 2017/18 but reported no Capital Gains Tax (CGT) liability on their Self Assessment tax return on the basis that incorporation relief under section 162 Taxation of Chargeable Gains Act 1992 applies in full. 

One area suggested to check in the full letter is:

that your calculation of the incorporation relief available to you didn’t include any other type of consideration apart 
from shares received in exchange for the property business - for example, a sum credited to director’s loan 
account

https://www.tax.org.uk/hmrc-one-to-many-letter-capital-gains-tax-incorporation-relief-property-businesses

it will be interesting to see what feedback these get when they go out. 

P118 havent written anything about Dan since his 2nd article on the 9th and they have deleted some of the more recent threads on the topic. i think they might go completely silent now. The way their forum works appears to be that you submit a request for a thread to be opened. i doubt they'll open a thread on this topic for their punters to use as a soapbox.