We’ve pulled together a list of frequently asked questions regarding the settlement of tax strategies and our responses.
Why are you charging more than some other companies offering settlement assistance?
We offer a bespoke client specific approach to settling tax planning strategies. We know from experience that no two settlements are the same and therefore our approach isn’t process driven. We will ensure all aspects are fully addressed so you can be confident you have full and final agreement with HMRC and that there are no outstanding issues.
We regularly see HMRC making errors within their workings which can often lead to an increased settlement liability. We can help remove this risk.
We review the settlement agreement – it is essential that this document is technically and factually accurate. Imagine paying HMRC and then finding that the document you ultimately need to rely on is incorrect!
We also hold your hand through the Trust unwind process which can be lengthy and complex.
Get in touch today to find out how we can help.
I paid fees to promoter, to a defence fund, for Judicial Review, why do I have to pay again for settlement?
Bedrock has never been a promoter of or offered defence of tax planning strategies.
We are a tax advisory business that is helping clients, many of which have been left isolated as their previous adviser no longer exists, unravel tax planning arrangements.
This is a piece of tax advisory work that can take several months, it is not something that our technical specialists can undertake without a charge.
Can you give me an indication of the likely settlement figure?
Unfortunately not. There are too many variables to give a truly indicative figure.
However, in our experience settlement figures range from 50% to 70% (and much more where a ‘grossing up’ applies) of the amounts that were put through the structure.
Could I do it myself?
Yes, you could if you are confident that you understand the current ‘terms’ or are happy to rely on HMRC’s workings.
It’s worth being aware that HMRC are not morally obliged to calculate the lowest settlement figure for you, though they do have to provide one that is technically correct.
For example the Finance Act 2017 introduced new overlap provisions which are relevant where two tax charges could apply to the same transaction. We can work with you to apply the overlap provisions in the most beneficial way.
The process is quicker if we work with HMRC on your behalf as our team has regular contact with the relevant HMRC teams.
If you let us manage this process on your behalf you can get on with your life and running your business.
Could you just to the calculation for me?
We provide a full ‘settlement service’ which includes negotiations with HMRC.
We do not provide full calculations to our clients. That is our IP. You will receive a summary of the calculation, this provides totals of each tax payable and a total figure.
The technical arguments / explanation in support of the calculation requires a degree of expertise to assess.
Could my accountant arrange settlement?
In our experience, most accountants are not keen to engage in settlement negotiations due to the complexity, and the additional resource/time required. You would need to be confident in their technical expertise to calculate and agree an accurate settlement figure with HMRC.
If your accountant promoted the scheme you used, they may feel conflicted. It’s potentially easier to engage with a neutral third party.
Can you guarantee you will make a saving?
Unfortunately not. However, we regularly see HMRC make errors within their workings and that is the risk here. Clients often want to remove this risk given the large amounts of tax in question.
Can’t I just make a payment offer to HMRC?
HMRC have published specific settlement terms. It is not possible to offer a ‘reduced sum’ unless there are exceptional circumstances – i.e. settlement would result in insolvency.
We can discuss payment terms with HMRC if you are unable to pay the full settlement figure at the outset. HMRC typically expect an initial lump sum payment followed by smaller monthly payments.
However, be aware it is quite an intrusive process and HMRC do request detailed financial information.
Can’t I just repay the loan to avoid the 2019 Loan Charge?
It’s not that simple, you could repay your loan which will prevent a tax charge arising under the 2019 loan charge provisions, but bear in mind that:
- HMRC will continue their underlying enquires into the scheme to seek the tax, NIC and interest regardless of whether the loan has been repaid by April 2019.
- Following the Rangers decision which went against their use of EBT planning, DOTAS schemes are very likely to receive Follower Notices before 2019 anyway which means you will have to settle within 90 days.
- Ultimately the amount you will need to repay will generally be more than the settlement amount.
Why do I need to close the Trusts?
It is our strong recommendation that the trusts are closed post settlement. This ensures that there are no future IHT exit charges.
It will also prevent the trust and or loans / debts from being affected by any future legislative changes.
If you leave the trust in place you may be charged ongoing fees by the trustees.
If you used an offshore trustee company there is always the potential for them to call in the loan.
What if I liquidate my company / declare bankruptcy?
This won’t avoid the need to settle historic tax planning arrangements.
HMRC are monitoring entries in the London Gazette and are preventing the strike off of companies that have historic tax avoidance arrangements.
HMRC have also indicated that they will pursue individual Directors if companies are put into liquidation to avoid payment of tax.
Bankruptcy has serious implications for you as an individual – it may preclude you from owning or running another business as a director in the future.
Should I wait for the outcome of litigation?
If you delay you will potentially incur additional interest along with further IHT charges.
You may receive a Follower Notice from HMRC, if they believe that your strategy is ‘sufficiently similar’ to another strategy that they have litigated successfully.
This gives you 90 days to regularise your affairs or you could be charged a 50% penalty.
HMRC are winning a lot of cases that focus on tax avoidance, they have the backing of government ministers and have ‘momentum’ to pursue users of tax planning arrangements.