Contacted by HMRC for taxes to be paid as part of an LLP

pradhanr

Hi,
I needed some urgent advise.
From December 2012 to February 2014 , I was contracting through a Limited Liability Partnership (LLP).

As a partner , I was paid 2 amounts i.e. A Profit Share and a Capital Drawing. I was told at that time that the Profit share was liable for tax deductions but not the capital drawing.
I have now received a letter from the HMRC informing me that an inquiry has been opened and that the above payment arrangement is under investigation. I have also been asked to contact the HMRC as part of the investigation.

I wanted to confirm the following points:

i. Am I liable to pay tax on the Capital Drawing? if so then how much would it be considering average capital drawing was £2900 per month? When I confirmed this with the LLP administrators , I was told that the capital drawing is non taxable.

ii. I have not filed the tax returns for the period between December 2012 to February 2014. What are the implications of this ?

iii. Should I contact HMRC regarding this information and update them ?

I will be grateful to you if you could advise.

Thanks

BoGoF

Would suggest you need professional advice. It seems your little 'arrangement' is being treated as a tax avoidance scheme by HMRC.

Pennywise

Surely the first thing is to contact the advisors who told you the capital drawings were non taxable and ask for "chapter and verse" as to why, so you can pass on the technical details to HMRC. Either that, or with any luck, if they're a reputable firm, you can instruct them to act on your behalf and deal directly with HMRC.

No one else can help you without knowing the exact details. Eg how much capital did you put into the LLP in the first place? If you're just drawing out up the amount you put in, then it certainly looks like it should be tax free. But if you're drawing out more than you put in, it sounds like some kind of tax avoidance scheme, and you need specialist advice, either from the scheme promoters, or you need to engage a tax specialist to act on your behalf.

Keep_pedalling

This sounds very much like a Disguised Remuneration scheme where earnings were paid into an offshore trust, and your capital payments were made from a so called loan from the trust that you never had to repay.

You need to get professional advice, and you need to do that as a matter of urgency, as there are some pretty tight deadlines in place if you want to avoid additional penalties.

https://www.rossmartin.co.uk/disguised-remuneration-zone/3049-disguised-remuneration-2017-settlement-opportunity