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helen
Junior Member
174 Posts |
 Posted - 02 April 2008 : 22:31:57
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Hi, we are currently awaiting the result of a test case on a tax planning scheme of which my husband, working as a computer contractor, was formerly a member. The basic arrangement was that we were paid through an Isle of Man Trust in order to reduce our tax burden, which was considerable due to legislation regarding personal service companies for contractors, known as IR35.
We currently have 6 previous tax years under investigation; although the test case is not our particular trust, the decision will affect us. If successful, the Inland Revenue would be able to claim at least £150K from us + interest + NI payments. Unfortunately, we are not in any kind of position to repay any of that sum. Our house was valued at about £450K 2 years ago, but we failed to sell it at that time. We have a big mortgage on it, which we can't currently pay, but we do have some equity too. It is our only asset. If we sold and went into rented, and then went bankrupt, presumably this would prevent the Revenue taking money from the sale of our house, which after all, we have worked for for over 20 years?
We have 3 school age children, no other debts, no other real assets, and my husband is currently contracting, now through an umbrella company.
Any other advice very gratefully received. My apologies if this is too long a question.
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melanie_giles
Senior Member
1191 Posts |
Posted - 02 April 2008 : 23:31:54
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Hi Helen and welcome to the forum
I am aware of this test case, and my own opinion is that HMRC will eventually be successful, but that is just a personal opinion.
How much equity is there in your property at the moment. Selling the property will not remove the creditors right to have the money from that sale if you declare yourself bankrupt, so I would sit tight and await the outcome.
Who advised your husband to take part in this scheme and does he have any recourse for professional negligence under his accountant's PI policy? |
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helen
Junior Member
174 Posts |
Posted - 03 April 2008 : 09:19:03
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Hi Melanie, Thanks very much for your reply.
I have replied to this post, but it hasn't appeared, so apologies if my answer appears twice.
Our house was valued at £450K but we failed in our attempts to sell it 2 years ago; however another on the road has just gone for over £600K. Our mortgage is £238,000, so I suspect our equity is 200K - no more I don't think.
My husband entered the scheme due to a complete lack of info from even the IR in 2001 regarding which contracts were caught by IR35 and which weren't. This made it impossible to be paid with any certainty and indeed, we once waited 9 months for a decision from the IR re: IR35. Worse still the timing of the introduction of the legislation clashed with 9/11 and a general economic downturn. There was just no advice available at the time. He thoroughly researched the Isle of Man scheme - they are tax consultants, not accountants, and vow to fight for us up to the House of Lords - no win, no fee. But it is really dragging on and causing us major anxiety as we have young children and I am not currently working. We have been finding it hard to manage due to a period of unemployment last year. To be honest, even if our tax consultants win, we will find it hard to pay their bill, which is substantially less.
Re: HMRC, I respect your views, but have to say, hope you are mistaken! Looking at contractor web sites, there are various cases, usually over IR35 disputes. Until recently, I think I am correct in saying, the Revenue lost a massive % of these. But recently, there were two victories for the Revenue, and one contractor was ordered to pay £99K back.
If the worst happens, should we be considering bankruptcy or insolvency? My husband has been told that in such cases the Revenue sometimes agree a settlement of part of the money, simply because not many people can come up with 200K just like that. How likely is this? Do they just relentlessly pursue you till you pay over every penny? At this point, do you then become eligible for some kinds of benefits and social housing, given that they are making you homeless?
To reiterate, the house is everything we have worked for - can we not sell it and put the money offshore, perhaps in trust for our children, rather than just hand it all over? We are in our early 40s, feel like we are being treated like criminals (this wasn't tax evasion after all), and live in the south east, which would obviously mean moving if we lost all our house equity.
Sorry if I am sounding emotional, and do realise I am asking hypothetical questions, so may be impossible for you or any of the other experts to answer.
Very much appreciate this forum and your comments,
Best regards
Helen
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JulianDonnelly
Junior Member
United Kingdom
325 Posts |
Posted - 03 April 2008 : 19:41:44
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Hi Helen,
Im sorry to hear of your troubles, but welcome to the forum.
Obviously all of your potential issues fall around the decision on the test case, but I would not hazard a guess on which way it will fall, however you are doing the right thing by seeking advice on the worst case scenario to prepare yourself.
The Customs and Revenue although relentlessly pursue their debts are not averse to negotiating a settlement deal should things go the wrong way for you.
I have seen many settlements with the customs and revenue over time, but it will depend on certain factors to do with your and your husband’s situation.
I suggest you contact one of the experts who post on the forum and discuss your case in greater detail and they will be able to explain the full details of what you can do should things not work out as planned for you.
All the Best
Julian Donnelly
Spokesperson for www.Bankruptcyhelp.org.uk |
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melanie_giles
Senior Member
1191 Posts |
Posted - 04 April 2008 : 01:39:50
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| Sorry Helen - you cannot remove assets to put them out of reach of potential creditors, and if you do they will be traced and you will end up with a BRO on top of that most likely. Sit tight and await the outcome of the Court case. HMRC are really clamping down on IR35 issues across the board, but this is out of your hands until resolved so try and keep calm. If the house has to go you will recover - most people do. |
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JulianDonnelly
Junior Member
United Kingdom
325 Posts |
Posted - 04 April 2008 : 09:40:30
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Hi Helen,
Although as Melanie says "you cannot remove assets to put them out of reach of potential creditors"
There are certain equitable accounting rules regarding property which may assist you in negotiating with the Customs and Revenue.
I take it the property is jointly owned, but who's is the potential debt to HMRC? would this be solely your husbands liability or a joint liability for you and your husband?
Julian Donnelly
Spokesperson for www.Bankruptcyhelp.org.uk |
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helen
Junior Member
174 Posts |
Posted - 04 April 2008 : 14:30:43
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Hi, I keep trying to send replies, so hopefully you will get this one. Re: Julian's question, the property is held as tenants-in-common, not jointly, and we believe the liability is my husband's alone as he is a sole trader and it is his tax return. At any rate, I have not been involved in any way since we closed our limited company in 2001.
Melanie, I will try harder to keep calm - not easy obviously. IR35 doesn't really come into our situation, but presumably this clamping down is really on the contractor industry.
We are now thinking we should sell the house anyway as we can't afford the mortgage and prices may drop further.
I have emailed this site to ask for a call back and received a text message asking me what time would be good to speak. Unfortunately, I cannot text the people back as there is no number. I will try the phone number of the site next.
Many thanks
Helen
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JulianDonnelly
Junior Member
United Kingdom
325 Posts |
Posted - 04 April 2008 : 15:19:53
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Hi Helen,
If you try the helpline number someone will be on hand to give you advice for your situation
All the best,
Julian Donnelly
Spokesperson for www.Bankruptcyhelp.org.uk |
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helen
Junior Member
174 Posts |
Posted - 04 April 2008 : 15:25:17
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Thank you, Julian, I will do,
Regards
Helen |
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melanie_giles
Senior Member
1191 Posts |
Posted - 04 April 2008 : 23:44:26
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Julian
Are you talking about marshalling? |
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Helpful Advice
Average Member
United Kingdom
646 Posts |
Posted - 05 April 2008 : 19:07:30
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Hi Melanie,
It looks that way and after reading the thread this jumped to my mind also.
Helen, you say you are tenants in common rather than joint tenants, what is the reason for this?
Also how is the equity split between you and your husband with regard to the equity?
Interestingly enough I have just completed a case very similar to this.
The husband had an HMRC liability of £125,000 in relation to his business.
On setting up his business he had remortgaged the matrimonial property and injected funds into the business, although in this case the property was still under joint ownership we were able to use an equitable accounting rule to identify that the wife was entitled to a larger share over the equity.
After a twelve month negotiation we were able to agree on a settlement of £15,000 and avoided him going down the Bankruptcy road.
I hope this helps
Kind Regards,
Brett England
Bankruptcy Specialist
England,Jackman & Spacey
WebSite www.ejands.co.uk
View my personal story & blogs at:
http://brettengland.blogs.bankruptcyhelp.org.uk/ |
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JulianDonnelly
Junior Member
United Kingdom
325 Posts |
Posted - 05 April 2008 : 19:36:41
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Hi Melanie,
Yes I was, it looks as if Brett covered the questions I was going to ask.
Did you manage to speak to the Helpline Helen?
Julian Donnelly
Spokesperson for www.Bankruptcyhelp.org.uk |
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Helpful Advice
Average Member
United Kingdom
646 Posts |
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melanie_giles
Senior Member
1191 Posts |
Posted - 06 April 2008 : 02:28:06
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OK - this is an issue to be addressed when, and if, the Court case rules against you. Marshalling of assets need to have very firm evidence behind it to be successful, and out of 20 cases brought one might be successful - so again do not hold out your hope unduly!
For an informal chat about any financial difficulties, or advice as to the options available, I can be contacted via my website - www.melaniegiles.com |
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helen
Junior Member
174 Posts |
Posted - 07 April 2008 : 09:45:26
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Hi Brett,
Thanks for your encouraging reply. We are tenants-in-common because we were advised to be when we made our wills two or three years ago. Although not wealthy in any kind of accepted sense, just the fact of living in Herts with a house of about 450K, makes it probable that our children would have a lot of inheritance tax to pay if we remained joint tenants. As I understand that gives us each a half share whilst we are living, and there is also something about the house not being able to be sold to pay for care home expenses - sorry I am not very good on this.
I haven't worked whilst we have had this house as have been bringing up children, so I haven't put any lump sums into the property, but previously we owned other properties where I had worked and contributed, but not very much as I was always paid a lot less than my husband.
Brett, I would like to know more about the tax case you mention - that sounds hopeful.
Melanie, I do not understand what marshalling is. Where can I find out more about this or is it just too technical!
Julian, I will be calling the helpline later, either today or I may wait for these interminable easter hols to be over and ring tomorrow!
Thanks very much for your contributions
Helen |
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JulianDonnelly
Junior Member
United Kingdom
325 Posts |
Posted - 07 April 2008 : 10:32:54
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Hi Helen,
No problem, alternatively you can contact Brett via the link to his website, where im sure he can explain more about marshalling and the cases he has worked on.
All the Best
Julian Donnelly
Spokesperson for www.Bankruptcyhelp.org.uk |
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advice very gratefully received
