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Sam
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I was on the EBT scheme for one year in 2005/06. The scheme

Resolved Question:

I was on the EBT scheme for one year in 2005/06. The scheme was registered as DOTAS. Can HMRC challenge it now after 8 years and ask for the tax on the EBT payments received during that period ?
I have received a settlement opportunity letter from HMRC asking I fill in form D03 and then they will calculate how much I owe.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
Sadly HMRC can go back as many years as they like if they feel that payments you received were not treated appropriately for tax purposes.
And this is one of many schemes which HMRC have successfully received settlements on, which go back as many years as is required.
As you had received benefits from being part of this scheme, to the extent that the tax and National Insurance you should had suffered was lesser than what you actually did suffer, then I am sure you can appreciate that this is legitimate money you owe HMRC.
So provide what HMRC ask for - so they can make a correct calculation , you may want to engage a specialist in tax investigations/EBTs to manage this for you, or see what support the administrators of this scheme can offer in support for those that participated as a start point.
I wish the news was more favourable, but at this stage HMRC would not be asking for information if they felt it was not due, and that the scheme was one which was approved by HMRC.
But I will stress this - if the company for whom you had this EBT are in the process of challenging HMRC through court, and they do win, then you will be refunded back any money you have paid over to HMRC - along with interest. So this is why I suggest you establish whether the admin of the scheme are undertaking any challenge to HMRCs investigations and whether they offer any indication that HMRC can be proved wrong.
I wish I had a more solid answer for you, but there are so many of these schemes that HMRC have won appeals on, and only the odd few that are deemed to be legitimate and fall under being approved by HMRC, and they usually do not result in a settlement letter being issued, which suggests the scheme you were part of was not operated appropriately with HMRC approval and you did (as indicated above) benefit wrongly from lesser tax/National Insurance deductions.
Please do feel free to ask any follow up questions
Thanks
Sam
Customer: replied 2 years ago.

Hi

The company that I was paid EBTs has since dissolved.

But my point being, can HMRC really change their mind. They issued a Dotas number and are fully aware of the scheme. Now they are saying it is not legit. How can they change their mind when it was all aboard and now they are claiming it is not. If this was made clear in the beginning, then I never would have entered into the scheme.

Can HMRC really change the rules when it suits them and then back date it. Fair enough, if they bought in a new legislation, but back dating it is totally unfair and unreasonable.

Expert:  Sam replied 2 years ago.
Hi Rita
Thanks for your response
With the company dissolved - then your only other hope is to find a tax specialist that has dealings specifically with that particular scheme -
HMRC did not change their mind, clearly this was not a scheme that fully met with HMRC approval., Many of these EBTs advertised the fact they met with a legitimate loophole and that this position was endorsed and accepted on, by HMRC but this was not the case. Many of these schemes did not even seek HMRC approval when they should have, and its was companies wanting to get rich quickly with what they believed was with a loophole, that never even existed or had been closed.
However in this case - just because a DOTA5 number was issued, did not mean that the scheme was approved, it was merely registration of the scheme, and if the disclosure of this scheme, meant a loophole was closed on the back of that, then HMRC have just used the legislation available to them to proceed it that manner (and I appreciate that this seems unfair but the bot***** *****ne is this - is it fair that you are better off than your equivalent taxpayer who did not enter into a scheme, and its on the stance that HMRC operate the law) I cannot comment on this particular scheme and whether it was above board and then HMRC changed its mind, and backdated the legislation or whether it never filled with the approval that should have been in place, but the fact the company has since dissolved is unfortunate and also a little telling, that they knew it maybe did not meet the full approval required, But your only recourse is to either
1) Find a tax specialist to represent you that has knowledge of this specific scheme or
2) You ask for more information from HMRC stating that this scheme had been approved - on the basis that a disclosure had been made and ask for the information relevant to the legislation that saw this decision overturned and implemented and why you as a participator of this scheme were not alerted, as you acted in good faith based on the facts, which holds the company responsible. (Do not mention that the company have since dissolved, I am sure HMRC are aware of this - but plead ignorance at this stage)
There are no guarantees here - but you have nothing to lose by trying to appeal on this basis - at this first stage.
Then seek the support from a tax specialist which details on what grounds HMRC are backdating any change of legislation and whether there is scope for your particular case to be appealed successfully on the basis of HMRCs timeline and implantation of changed legislation, and also the operational aspects of the scheme and whether they remain to comply with the guidelines as laid out by HMRC.
This, I am sure you can appreciate would require a tax specialist the time to pot over all of this, within the paperwork you hold, and what HMRC are stating, to see if there is any aspect of HMRCs actions that can be properly challenged either through
1) The way the company operated
2) HMRCs actions
3) You as individual and your position and beliefs during 2005/2006 and up until the date you received the disclosure notice.
I have added a link here re the disclosure and the way the schemes are reviewed and acknowledged by HMRC
http://www.hmrc.gov.uk/aiu/
Let me know if you have any further questions. I wish I could offer you more hope here, but I would not wish to give false hope, which I am sure you can understand.
Thanks
Sam
Sam, Accountant
Category: Tax
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