The Point of No Return
16th March 2012
Individuals who were members of BN66 schemes will be aware that in the Huitson case, the Supreme Court on 7th February 2012 rejected the application for permission to appeal the Court of Appeal decision. The HMRC newsletter dated 15th February 2012 states "HMRC intends to make arrangements to finalise all open enquiries and all open appeals". They go on to say that they will "also liaise with scheme promoters to discuss finalising individual appeals".
It is our belief that HMRC will now adopt an aggressive stance. Where closure notices have already been issued, they will demand payment in full. Where closure notices have not yet been issued, they will now be issued. They will encourage individual scheme members to "throw in the towel." Where scheme promoters continue to argue that collection action should be deferred pending the possible intervention of the European courts, we believe that HMRC will bypass those promoters and pursue former scheme members individually.
For the past three years we have been working with a number of former scheme members on an alternative strategy. We believe that the BN66 schemes as set up for contractors were, in many cases, fundamentally flawed. A key part of all BN66 schemes was that members provided services under a self employed arrangement. It is our view that in most cases a compelling argument can be put that the arrangement was a sham and a true analysis of it would show it to be an employment arrangement. We further believe that all monies paid as a consequence of that arrangement are also payments under an employment arrangement. Where an arrangement can be shown to be employment rather than self employment, the norm is that the employer rather than the employee is responsible for paying tax.
You may ask why hasn't your scheme provider explored this possible solution. The answer is simple, because the company that is responsible for the tax payable is (highly probably) your scheme provider and/or a company connected with your scheme provider.
We are arguing on behalf of the former scheme members we are representing that scheme organisers did not properly consider the employment/self employment question and that as a result PAYE is due from the paying company on all monies received. HMRC have aggressively challenged this argument but have not managed to break it and their current stance is one of lengthy delay. Maybe the delaying tactics are a deliberate ploy by HMRC to enable them to corral as many BN66 users as possible into an irreversible position, i.e. so that when we achieve the result (that our Tax QC considers to be correct) that our clients are not liable to pay any tax under BN66, and it will then be too late for you to consider our solution.
We have set out below a "decision tree" format of what we believe are the options for former scheme members.
Q1. Do you believe the scheme promoters will ultimately be successful before the European Courts?
Q2. Do you wish to accept the position as outlined by HMRC that the tax is now payable in full?
Q3. Do you have the funds or can you raise the funds to pay HMRC in full?
Q4. Do you have sufficient income to pay the tax in instalments over a period of no more than 3 years?
A – Complete and submit the enquiry form on the right and we will be in contact with you. Alternatively, please ring Tim Warr on 0161 477 6789 for a no obligation discussion.
B – Continue to take advice from the scheme promoters until a final conclusion is reached.
C – Contact HMRC and request an up to date statement of outstanding liabilities and interest, check the calculations and make a full payment.
D – Obtain and check a statement as in "B" above and then negotiate a payment plan with HMRC. If you have an accountant he may be able to assist in these negotiations.
E – Seek advice from an Insolvency Practitioner.