Finance Bill

Written evidence submitted by Nathan Hamilton (FB19)


I am a private individual who due to business activities carried on (and ceased) many years ago, has an interest in this bill.

I am writing in response to the request for submissions on the Finance Bill 2017 and in particular, Schedule 11 - Employment income provided through third parties: loans etc. outstanding on 5 April 2019.

I was then, an IT consultant, who due to the IR35 legislation which made contracting very difficult, was in search of a payroll company which was able to manage the invoicing for me. I was assured that the arrangements of the said company were entirely legal, and had been vetted by a top tax barrister as being within the law. I submitted tax returns to HMRC annually, and at no time did HMRC or anyone else EVER inform me that the arrangements were an abuse of the tax system.

At no stage has HMRC or indeed HMG made ANY real effort to sort the problem out by legislating the closure of these abusive schemes. DOTAS reporting requirements have meant HMRC can go after the little guy, but HMRC nor parliament do not seem to bother going after the arrangers of these schemes. I am aware that HMRC publish "spotlights" one of which deals with these EBT Loan Schemes, but they are not exactly widely publicised, and it was only this year, 10 years after exiting an arrangement, that I became aware of this whole sorry saga.

Why are HMRC not going after promoters of these schemes, some of which are still around in one form or another? Some of these schemes are offering "2019 Loan Charge avoidance schemes" which are in ANY reading of the law, an avuse of DOTAS, ITEPA 2003, FA 2019, you name it. What will then happen, is HMRC will go after the use4rs of these avoidance schemes again. Why not fix the root cause of the problem and not the end users

If as HMRC contend, these are disguised remuneration, then in effect they are saying these loans never existed in the first place but were really salary. HMRC have 4 years to chase the PAYE employer and 6 years to chase the PAYE employee to recover the tax not paid. They missed the boat for very many of us who saw the light years ago and got out of these schemes.

However if HMRC say these are indeed loans, and on paper they are, then the tax is retrospective, as the "charge" was not in place at the time the loan was taken out. Has I known when the loan was taken out, that in 2019 I would be liable for the tax the employer should have deducted for PAYE tax that would have changed the calculus entirely

In judging whether this legislation is proportionate, you must also consider the asymmetric knowledge. We were experts in our fields in IT, engineering, accountancy, HR etc. but not in tax. We were effectively preyed upon by so called experts with sharp schemes, and fancy letters from QC’s saying these management companies were entirely legitimate.

I would propose that the minimum fair change to this legislation, is to only include loans going back 6 years. This is compatible with the principle that for non-fraudulent omissions from a tax return, the HMRC have 6 years to open an enquiry and demand further tax be paid. To back 20 years is implying that the omission was fraudulent and that would be very hard to prove.

I really do hope that our members of Parliament and the Public Accounts Committee can understand that whilst we do need to reduce tax avoidance, going after arrangements which were perfectly legal after so many years has elapsed is not proportionate.

October 2017


Prepared 19th October 2017