You don’t have to be one of the “UK individuals” to have their name contained in materials seized last week by the taxman to be thinking about recourse if you’ve used an offshore trust.
Concern about schemes that make use of such trusts (and loan arrangements) actually goes much wider. But it’s fair to say that those exposed in the HMRC raid – three “advisers” and their UK clients whose details are on the seized computers – will be the most concerned.
To the unaffected however, the HMRC raid will appear like just another offshore scheme being picked off. The unscrupulous characters sentenced in court, and contractors footing the bill in long term.
The unsympathetic might point out that HMRC have advised for a long time that they intend to hit these schemes; the exchequer needs it and the political spectrum widely signs off on it. But the potential for users to take legal action against the promoters if they advised them that such schemes were ‘fit for purpose’ has not diminished. The fallout from the collapse of this scheme, and its variants, therefore has far-reaching possibilities for bringing a large number parties to account.
With the debt transfer provisions in force, such scheme implosions could have an impact on advisers, promoters, intermediaries and engagers. In addition, although the incentive for former disguised remuneration scheme users to come clean has been extended to March 2017, recruitment agencies too aren’t sheltered, and are turning more and more risk averse.
Unfortunately for scheme users though; HMRC won’t necessarily go directly for the advisers/promoters/engagers of the scheme – ‘the big fish’ perhaps, because their officials will want the maximum return with the minimum effort. So they’re likely to pursue the scheme itself in the first instance, before targeting contractors among its other users. Whether that then results in a criminal investigation into the scheme is a separate issue and likely to depend on the findings of the initial HMRC enquiry.
Remember, the taxman’s view is that each taxpayer (or each company) is responsible for their own tax affairs and he will pursue on that basis, only subsequently looking at other options (e.g. via debt transfer provisions) once the initial option is exhausted. As even the unsympathetic will admit, the fallout from using this type of scheme is potentially life-changing for contractors, who in some circumstances will have simply fallen foul of bad advice.
If that’s you, then as a scheme user (whether it was an offshore trust and/or loan arrangement) you may have the right of recourse to the promoter/engager who sold you the scheme in the first place. Ultimately, this question of recourse is one to pose to a solicitor, although the likes of compliance specialist Qdos and contractor body IPSE can help too.
In a nutshell and oversimplified, the guidance from these parties will likely be that:
– if a contractor has been advised that such a scheme is compliant, AND
– the advice is documented; AND
– it can be demonstrated that the contractor has relied on this advice,
…then the contractor (and any other user who meets all of the above conditions) may have a case for recourse, assuming that they could not reasonably have expected to know that their scheme was potentially unlawful.
If you’re struggling to meet the above conditions, but are still affected by such schemes or have received an APN, it is imperative that you strongly consider professional, tailored advice at the earliest opportunity. Ignoring any notices or paperwork received from HMRC when in these waters could have perilous consequences.