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Old 16.02.2019, 17:23
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UK 2019 Loan Charge - Retro Taxation

Hello,

I have worked freelance most of my life and between 2007 and 2010 was contracting at a London Bank via an umbrella company. The tax avoidance scheme they operated was based on loans provided via an offshore trust arrangement. The scheme had been reviewed by a senior tax barrister as being tax compliant. It was the same structure used by Rangers Football Club to fund execs and players. The recent Supreme Court ruling in the UK said that the employer was liable for the tax, the important point being the employee was not liable.

Such structures became common place it the contracting community in the UK and went unchallenged by the tax man until about 2012 when they attempted to claim tax fron the employees. They have dragged their feet now for 5 years in my particular case avoiding going to court on the matter as they know they will lose the case.

To get round this they are introducing a new law effective for the 2019/20 tax year to tax outstanding loan balances and explicitly transferring the tax liability from employer to employee. They are also going back to 1999 onwards to apply this.

The UK tax man estimates 50,000 individuals will be affected. Many individuals are facing large 6 figure bills, some in excess of £500,000.

So my question is where would the Swiss authorities sit in relation to this retro -tax from the UK agaisnt Swiss residents ?
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Old 16.02.2019, 17:32
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Re: UK 2019 Loan Charge - Retro Taxation

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Hello,

I have worked freelance most of my life and between 2007 and 2010 was contracting at a London Bank via an umbrella company. The tax avoidance scheme they operated was based on loans provided via an offshore trust arrangement. The scheme had been reviewed by a senior tax barrister as being tax compliant. It was the same structure used by Rangers Football Club to fund execs and players. The recent Supreme Court ruling in the UK said that the employer was liable for the tax, the important point being the employee was not liable.

Such structures became common place it the contracting community in the UK and went unchallenged by the tax man until about 2012 when they attempted to claim tax fron the employees. They have dragged their feet now for 5 years in my particular case avoiding going to court on the matter as they know they will lose the case.

To get round this they are introducing a new law effective for the 2019/20 tax year to tax outstanding loan balances and explicitly transferring the tax liability from employer to employee. They are also going back to 1999 onwards to apply this.

The UK tax man estimates 50,000 individuals will be affected. Many individuals are facing large 6 figure bills, some in excess of £500,000.

So my question is where would the Swiss authorities sit in relation to this retro -tax from the UK agaisnt Swiss residents ?
The Swiss expect contractors to be employees & don't like abuse of the system. They will cooperate with UK courts, Switzerland does not have the concept of bankruptcy so it's not the place you want to be, if you want to get out of your debts.
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Old 16.02.2019, 17:33
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Re: UK 2019 Loan Charge - Retro Taxation

Hahaha! Nice try, but cough up.

Possibly, and extremely unlikely, the Swiss may have raised an eyebrow were you a Swiss citizen, but a British citizen being pursued for tax evasion by HMRC?
Forget about it.

And when you say ‘individuals’, you actually mean youself?
Another nice try at playing the victim card.
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Old 16.02.2019, 17:39
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Re: UK 2019 Loan Charge - Retro Taxation

It was legal avoidance, not evasion.

The point I'm interested in is whether the debt, if it does crystallise, can be persued in Switzerland.

Also I've heard that retro tax is not allowed in Switzerland. Any views on that ?
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Old 16.02.2019, 17:42
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Re: UK 2019 Loan Charge - Retro Taxation

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It was legal avoidance, not evasion.

The point I'm interested in is whether the debt, if it does crystallise, can be persued in Switzerland.

Also I've heard that retro tax is not allowed in Switzerland. Any views on that ?
The problem is it was not legal, as you will no doubt be paying a fine plus interest in addition to the tax.

Debts can definitely be pursued in CH.

Switzerland used not to consider tax evasion a crime, they do now where the amount is large, I suspect you may qualify
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Old 16.02.2019, 18:02
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Re: UK 2019 Loan Charge - Retro Taxation

It was definitely not evasion and it was totally legal.

There are no fines or interest involved as the new law creates a new source of income for the 2019/20 tax year.

If it was evasion they would have slapped the cuffs on years ago.

The UK taxman brands it as "aggressive tax avoidance" to justify the new retro-tax law.

Retro taxation is against the law in some jurisdictions, is Switzerland one of them ?
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Old 16.02.2019, 18:03
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Re: UK 2019 Loan Charge - Retro Taxation

The "senior tax barrister" OPINED it as being tax compliant


You missed out one tiny little word their....
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Old 16.02.2019, 18:14
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Re: UK 2019 Loan Charge - Retro Taxation

The UK Supreme Court ruling in the Rangers case trumps all opinions. That set the law that the employer was liable.

That was the end of the matter basically in terms of interpreting the complexities of the UK tax code on this particular matter which is why HMRC avoid any court hearings on the contractor schemes.
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Old 16.02.2019, 18:56
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Re: UK 2019 Loan Charge - Retro Taxation

What exactly do you think is going to happen?

The Swiss government is going to protect you from HMRC?

You are pissing in the wind. Being a contractor you already had many allowable expenses and dividends to exploit, but you went full retard, and have been caught out by a change in the legislation.

Where do you see the injustice in your predicament?

I’m not seeing any. You earnt the money, avoided the tax, now HMRC has had the law changed, and retrospectively want their tax.

Why aren’t you, and the rest of the victims of this heinous misscarriage of justice, taking HMRC to court in the UK, class action style?
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Old 16.02.2019, 22:47
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Re: UK 2019 Loan Charge - Retro Taxation

Here we go, some sob stories as well:

Link to taxavoiders crying in their milk

There is a Loan Charge Action Group, so I daresay you can join up.

HMRC will recoup £3.2 billion in avoided tax, and there will be NO reductions.

Sweet.

Last edited by Fish Paste; 16.02.2019 at 22:58. Reason: url hell
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Old 16.02.2019, 23:12
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Re: UK 2019 Loan Charge - Retro Taxation

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Here we go, some sob stories as well:

Link to taxavoiders crying in their milk

There is a Loan Charge Action Group, so I daresay you can join up.

HMRC will recoup £3.2 billion in avoided tax, and there will be NO reductions.

Sweet.
I know of people that would closer and open limited companies every 2-3 years just in case something like this happened...

Short answer is, you avoided the taxes for a while... you're probably safer in the UK, where you can declare bankruptcy.
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Old 16.02.2019, 23:35
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Re: UK 2019 Loan Charge - Retro Taxation

The bit that was wrong with the offshore loan setup was that you normally paid no tax at all, with the offshore loan company liquidating every year so writing off it’s outstanding loans and an identical v2 company then setting up to carry on the system. During the 90’s using standard Ltd companies you could reduce your tax to low figures, are out. 10-15% and all perfectly fine and hmrc were ok with that but 0% was never going to work in the long term: just think about t the basic premise, you use public services but do not contribute to them at all. It just doesn’t add up. Hmrc were going to bag it retrospectively at some point I’m afraid and the UK approach is now they give you the bill and you have to prove you don’t owe it, which is not easy.
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Old 17.02.2019, 00:20
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Re: UK 2019 Loan Charge - Retro Taxation

Well the OP has been under investigation for 5 years and HMRC are open to repayment plans, so we could guess that’s 10 years approx they have had/will have to pay tax owed on approx 4 years of work.
Doesn’t sound too onerous.
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Old 17.02.2019, 00:37
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Re: UK 2019 Loan Charge - Retro Taxation

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So my question is where would the Swiss authorities sit in relation to this retro -tax from the UK agaisnt Swiss residents ?
How the debt arose is not relevant from a Swiss point of view, so long as the correct paper work is supplied from the UK it can be pursued through the Swiss courts. if it was a small about it is unlikely that it would be pursued from the UK, but given the size of the amount due, you can expect that it will catch up with you.
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Old 17.02.2019, 01:37
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Re: UK 2019 Loan Charge - Retro Taxation

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It was definitely not evasion.
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I have worked freelance most of my life and between 2007 and 2010 was contracting at a London Bank via an umbrella company. The tax avoidance scheme they operated was based on loans provided via an offshore trust arrangement.
Right....
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So my question is where would the Swiss authorities sit in relation to this retro -tax from the UK agaisnt Swiss residents ?
Very simple, they give you 3 options.

1. Pay voluntarily.
2. Have your assets seized.
3. Leave the country.
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Old 17.02.2019, 02:55
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Re: UK 2019 Loan Charge - Retro Taxation

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It was legal avoidance, not evasion.
It was thought to be avoidance but has been ruled to be evasion, that is why you have the problem.

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The point I'm interested in is whether the debt, if it does crystallise, can be persued in Switzerland.
Yes and given the size it is reasonable to assume it will be followed up. The Revenue Services have schemes in place to pay such debts in installments. If the debt is factored for collection no such options will be available in Switzerland. Consider your options carefully.

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Also I've heard that retro tax is not allowed in Switzerland. Any views on that ?
No relevant, that is for the UK courts to decide since the debt arose in the UK, but they will need a judicial decision from the UK - not just an invoice, from what I remember. The Swiss concern is only to ensure that the correct process has been followed in Switzerland for the collection of a valid foreign debt.
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Old 17.02.2019, 02:57
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Re: UK 2019 Loan Charge - Retro Taxation

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3. Leave the country.
He already has!
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Old 17.02.2019, 06:26
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Re: UK 2019 Loan Charge - Retro Taxation

At least if you have a huge debt, you can write off Swiss taxes against it?
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Old 17.02.2019, 07:17
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Re: UK 2019 Loan Charge - Retro Taxation

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He already has!
he's no longer in switzerland???
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Old 17.02.2019, 08:31
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Re: UK 2019 Loan Charge - Retro Taxation

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No relevant, that is for the UK courts to decide since the debt arose in the UK, but they will need a judicial decision from the UK - not just an invoice, from what I remember. The Swiss concern is only to ensure that the correct process has been followed in Switzerland for the collection of a valid foreign debt.
What is this mysterious Swiss government department that will be checking the debt is all above board?
How will they know about the debt?
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