Trouble with the taxman

trev2014

So my mum dropped a bombshell on me just before xmas! In a nut shell shes in big trouble with the tax man! She's a social worker and has been contracting through an agency for the last 6-7 years. It transpires the accountancy firm she used was under investigation by HMRC and have since ran off into the sunset. The results are; she and many of her friends/colleagues are under investigation for unpaid taxes. HMRC have informed her, that so far, shes owing roughly £37k of unpaid personal tax (including fines and interest). This is likely to increase as they've only looked at the last 3 years and will go back further. Shes been using a new accountant for the last year who are dealing with HMRC on her behalf, however, they're also charging huge sums of money in fees for sorting through all the mess. This evening she told me HMRC now also want another £12k corporation tax. It seems, at some point, she was setup as a limited company.

I'm finding it hard to show much sympathy for her as she has played blissful ignorance and probably knew, deep down, she wasnt paying the right sums of tax. On the other hand its my mum and i'm worried she'll have no option but to sell her house. Shes in her late 60's and planned to retire in a year or two.

Does anyone know of any bodies or organisation that offer free advise in these situations. I know this is mostly self inflicted but I get the impression her new accountant is taking her for a ride and it sounds like HMRC are demanding the highest possible sums as she has no option but to pay whatever figure they're coming up with.

TheGardener

Yes - she needs to talk to Business Debtline and/or one of the personal debt charities (Stepchange, CAB or National Debtline) All are free and she needs to talk to them asap.

Stevep42

Would you be able to confirm whether your mum and her friends were using umbrella companies that were advised by accountants and agencies ? These were completely legal for many years and considered a main stream way for contractors to work and be compliant with IR35 legislation. HMRC have introduced something called the Loan Charge on these arrangements with retrospective affect that goes back 20 years - there are many Locum health workers and social service workers that have been using these schemes in many cases with no choice.

The Loan Charge Action Group was set up to help people affected by this ridiculous legislation that is going to bankrupt thousands of ordinary workers. I can't post a link here, but are easily found.

HMRCVictim

Hi Trev,

First things first. This isn't your Mum's fault.

I'm making an assumption that your mother was in a Loan Scheme Arrangement, or LSA. Tens of thousands of people worked through similar arrangements which were heavily sold by accountants and sometimes were actually a requirement of employment. She probably didn't actually save much money at all as the accountants charged very high fees which left roughly the same amount of money for the employee, just with a lot less admin than a standard Limited Company setup. HMRC use the derogatory term "Disguised Remuneration", which is a complete misnomer - nothing was "disguised", most LSA's were disclosed in minute detail to HMRC.

A House of Lords committee recently published a report heavily criticising HMRC's conduct in these cases and calling for the Loan Charge law to be overhauled. The Loan Charge effectively sweeps HMRC's own mistakes under the carpet (they did very little for many years to identify and shut down arrangements that they now claim they never approved of) by retrospectively passing all blame and liability to the employees. There is no comeback on the accountants.

There a few groups who I can recommend. The Low Income Tax Reform Group have some free information available online and may be able to offer some advice. TaxAid is another similar charity.

However, the Loan Charge IS law and there is little that either of these two groups can do aside from agree what the bill with HMRC. HMRC are not entertaining any suggestions that they reduce the amount they are claiming is due, no matter how unfair it is or how little the individual understood or how little they gained.

If your mother is interested in fighting back, then I would recommend that she contact the Loan Charge Action Group (I am an active member of this group). LCAG is supporting members who wish to directly lobby their own MP's. We have 111 MP's already publicly declaring their opposition to the Loan Charge (see Early Day Motion #1239) and maybe half as many again who have privately offered support. We have been telling MP's and ministers for some time that many low-paid public sector workers are affected by the Loan Charge - information which HMRC and the Treasury find embarrassing and have been trying to suppress. We really would like people like your mother and her friends/colleagues to step forward and prove this to the doubting MP's. The government currently show no sign of caving in and are trying to defend the indefensible, but the drumbeat continues to build. The Loan Charge law can be stopped if enough people take action and do not go quietly to HMRC to settle or declare bankruptcy.

Once again, don't blame your mother. The best tax minds in the country signed off these LSA's and it took a Supreme Court case to prove that they didn't entirely work as intended (the Supreme Court said that the employer should be held liable - the Loan Charge was HMRC's reaction to overrule that judgement).

I wish you and your mother all the best,

HMRC Victim

trev2014

Many thanks for all the feedback and advise. I'll collate the above and forward on to my mother and her colleagues.

I've just read a few online articles and going on the little info provided, i'm positive she was setup with the loan scheme arrangement.

luvchocolate

Wow great information given on this this thread, many thanks

Stevep42

Please ask your Mum and her friends to contact Loan Charge Action Group via the website and mark for my attention please - I am one of the founder members. We are in contact already with social workers who are victims of the Loan Charge.

Miranda_W

Hi Trev,

This is most definitely not your mother's fault. I am in exactly the same position as it had nothing to do with 'blissful ignorance', but rather clear advice and direction from all the major agencies who reassured us all that these umbrella schemes were "HMRC Approved" For some of us our agencies would not employ us without using these schemes. Effectively almost all agency staff across many sectors including health, social care, education as well as others including pilots, IT and banking, for example, have over many years been recommended to use different schemes to optimise pay. Initially the recommendation was to work through a Ltd Company, which many of us did, but then the government changed the rules around the use of Ltd Companies and it was no longer beneficial for us to use these. We were then recommended to use what were referred to as ‘Umbrella Companies’ and were sent lists of “government approved” ones. I need to be 100% clear these schemes were legal and locum workers across many fields used them in good faith.

The government have recently decided to change the law around the use of these umbrella schemes, which in itself is not necessarily an issue, but for reasons only known to them the government decided to enact the changes retrospectively. For some schemes up to 15 years retrospectively! In short many agency workers are now facing bankruptcy, losing our homes, having to sell possessions etc as bills amounting to 10’s of thousands if not 100’s of thousands of pounds are being issued. There are well documented cased of people committing suicide and people losing their homes and all their possessions. This is not an exaggeration put "Loan Charge Action Group" into YouTube where you can see for yourself what I am referring to. There are many of us now working together to seek Judicial Review and some very high profile lawyers are seeking to challenge this frankly bonkers decision. I liken it to the government saying we know the speed limit on urban roads has been 30 miles an hour, but we have decided to change it to 20 miles an hour and not just that but we have also decided to make this change retrospective for the last x amount of years so any of you who drove at 30 miles an hour in that time will be issued with speeding fines and potential loss of your licences. It is simply crazy.

You need to direct her to the Loan Charge Action Group as a matter of urgency, they will support her through this as they have done with me.

maxmycardagain

It seems, at some point, she was setup as a limited company

as a director?