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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4208
Experience:  FCCA FCMA CGMA ACIS
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I work as a self employed contractor and short period

Customer Question

Hi, I work as a self employed contractor and for a short period in 2010 (6 months) I used an off-shore Umbrella company on the Isle of Man. The HMRC has now issued me an APN notice for that period, asking me pay outstanding taxes.
The umbrella company I was with at the time is submitting a case on the behalf of its contractors issued with APN's. I'm not sure if I should look to take up the option to include myself in the case or negotiate with the HMRC around the amount I need to pay.
Any advice would be much appreciated and happy to answer any questions.
Thanks in advance.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you in this matter. It is all a matter of costs, depending upon the tax HMRC want you to pay on the APN Notice and the fee needed to join in with the umbrella company's action. Joining the action may not be cost effective unless substantial sums are involved. HMRC view these remuneration methods with deep suspicion and are of the opinion that such schemes are tax avoidance at the very least or at the worst, tax evasion. Furthermore, if you feel that the assessment by HMRC can be reduced then this may be a safer option than any action by the umbrella company. I do hope that my reply has been of assistance and helped show you way forward..
Customer: replied 2 years ago.
Hi Keith,Thanks for your response.I'm personally not keen to pursue the legal case option through my umbrella company, because the amount charged is not very large, and I'd like to be done with this. What's frustrating is that I never consciously choose an off shore umbrella company, but was advised to use them by my recruitment agency at the time.However, I would like to explore negotiating with the HMRC around the amount they have charged. I've outlined my reasons below (with figures); it would be very helpful if you could let me know your thoughts/ suggestions.The total amount I received during the period (May 2010-Feb 2011) was £27933.29 of which £8040.41 was as salary and £19892.88 were as 'loans'. The HMRC has asked me to pay £12130.65, which is 43.42% of the total amount I received. I think this amount is quiet high. I thought that they would ask for tax on the amount that I received as 'loans', and with that understanding and taking the tax rate as 40% I believe I should be charged £7957.15. If not lower since my total pay was less than £30000.Again, your thoughts would be great, and thanks in advance.Regards
Expert:  bigduckontax replied 2 years ago.
I would submit that your income for the period was GBP 8040-41 which, with your personal allowance, would mean that you paid no tax at all. The GBP 19892-88 was a loan to you and, provided it is to be repaid, then it would be outside the scope of UK taxation. However, you will appreciate that such loans are effectively disguised income and if this is indeed the case then HMRC's desire to tax is appropriate. Have HMRC explained why they want so much tax? If they have not then demand an explanation of the reason. At the level of pay you are quoting, with your personal allowance, you would be within the 20% tax bracket.
Customer: replied 2 years ago.
Hi Keith,The HMRC have mentioned in their letter that I'm being charged on the basis of using an off shore tax avoidance scheme. Additionally there is the below paragraph in the letter'The figure charged for the APN relates to the loan amounts received in the year as related to the use of the Aston Management Ltd scheme. where the loan amount figures were not availablb, to the best of our information and belief, we have estimated that the loan received would be approximately six times your p"vlior Aston Management Ltd as per the P14 end of year summary completed by them.'On the basis of the above, I will take this up with the HMRC, specially that the amount I'm being charged is too much considering that I only received 19892-88 as 'loans', not taking into account as you mention that if only the loans are considered I'll still be within the 20% tax bracket.Thank you again for your thoughts, please let me know if there is anything else I can mention to support my argument.Regards
Expert:  bigduckontax replied 2 years ago.
The key to this is the repayment of the loans. If these really are loans and not disguised remuneration then they should not be included in the assessment. Furthermore, HMRC have admitted that their figures are estimated. You should lodge an appeal against their assessment. Th appeal is simple, you just write a letter to your tax office disputing the position.
I have a sneaking suspicion that HMRC ore on the right track. They have been cracking down on these umbrella companies for some time.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.