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Congratulations
Nick & David- And to our Two helpers David Laws & Oliver Letwin
a)
Now let's Be one Britain striving together. Curb the illegal actions of
HMRC from using INADMISSABLE EVIDENCE before The Tribunals
Service. We are refusing to co-operate in any way until the details of
what 3rd parties did with their carpets are removed from this case. The
evidence of that has nothing to do with the validity of the case and
was obtained on raids made on a carpet supplier being investigated for
tax purposes. No reference to the Croxtons Carpet Schemes appeared on
the warrant for the raids. Yet the HMRC used them at the pre-trial
hearing. Therefore we shall only act in a court of law where such
evidence is unadmissable.
b) Stop services between British Companies & our citizens being run through foreign call centres. Firstly the Data Protection Act has no validitity in many countries and those jobs should be done by British Workers in Britain.Companies who use non-European call centres should not be able to claim those costs as a trading expense. c) Ensure once more that Highly qualified British Workers are not driven out of the Country by punitive measures. d)
Give back the Tax Relief that Pensioners had contracted for on Pre 1997
Pension schemes.
24 hour
Hotline Tel: +44(0) 845 868 2810 /0207 183 4978Fax : +44(0) 845 862 1954 |
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GUESS WHAT. In response to
Natasha Haidar, Acting Appeals Manager, Tribunals Service Tax 45 Bedford Square, London, WC1B 3DN Their reference: TC/2009/09736 Letter dated 16 October 2009 We
have had some epistles from Natasha Haidar at The Tribunals Service
asking us to nominate a date between October- December 2009 in regards
to an application to designate a lead case in this matter.
CONGRATULATIONS, we have been put on "hold" since a meeting with Ms
Nicki Potts in Birmingham on April
23rd 2003 at 11am in regards to a lead case. Now some 13
years after the last household furnishing case was written they are
trying to hurry us up to go before a newly formed court of law.
I'm sorry Ms Natasha Haidar but as shewn below you have had your chance
and you are out of time in both English & European law. We shall be
pleased to designate a date after the next General Election.
Drummond
& Co
22.10.09
In view of the
decision in HM
Revenue & Customs v Benchdollar Ltd {Case
No: HC08C01186} mentioned
below- we note that the court agreed the following principle in regards
to payments of NIC and stated: "5. Claims by the Revenue for recovery of employers'
NICs,
which are made by litigation in the ordinary way, are subject to a 6
year limitation period, pursuant to section 9 of the Limitation Act
1980 as actions "to recover any sum recoverable by virtue of any
enactment". Time runs from the date upon which each relevant payment of
NICs became due. It is common ground that NICs become due and payable
on the 15th day after the end of the income tax month during
which the relevant earnings were paid to the employee. Income tax
months run from the 6th of each calendar month to the 5th
day of the following month."
This is very relevant because in the HMRC's usual acts of brinkmanship they only applied for Protective Writs within the very last days of the 6 year period and in the mistaken belief that the relevant date in the month for these matters was the 19th of the month.We have looked at the few outstanding cases we are defending. And guess what ! One has never had a protective writ and half the rest were issued after the 15th of the month. On all these cases there can be no means of collection. THE GAME IS OVER Since
the last case of carpets being used as a benefit in kind in
November 1996, no legal case has beem heard on the matter. Around 2001
the HMRC began trying to collect outstanding NIC's but initially did
not realise that there was a Statute of Limitations on collecting
NIC's. Virtually at the 11th hour (Which is their wan't) they tried to
salvage their position by getting companies to sign pieces of worthless
paper to say that the claim was acknowledged. In the recent case of HM
Revenue & Customs v Benchdollar Ltd {Case No:
HC08C01186} (see
: http://www.bailii.org/ew/cases/EWHC/Ch/2009/1310.html the
worthlessness of those pieces of paper was recognised by the Court.
Further in the European court in the case of King v United Kingdom
(application no. 13881/02)
the
length of time HMRC had taken to bring the case to Court meant that
they could not obtain any interest. We have been acting for several of
the Companies who used household furnishings (carpets) as a benefit in
kind. Rather like an
insurance company trying to get out of a claim HMRC have written to our
clients on numerous instances asking whether they wanted to continue
with an appeal. About 6 weeks ago Steven Norman wrote again explaining
that there was now a new procedure. And again did our clients want to
continue an appeal. Come off it Mr Norman your letter does not warrant
a response as:
REVENUE
ONCE AGAIN WASTING TAXPAYERS MONEY - 19th February 2009
Drummond & Co 23/09/2009 On
Xmas Eve the solicitors for HMRC ,in his usual fashion, sent out
letters to the General Commissioner asking them to transfer all these
Household furnishings cases to the Special Commissioners. Sneakily
using the Xmas period to get it in. In those letters they continued
with their untruths in order to put a sinister intention on mostly
small little companies in a corridor between Wolverhampton and
Manchester. They stated that the Iranian rugs were held in Iran, when
they knew full well they were held in a warehouse in Kentish Town
,London. They also stated they were sold quickly by the recipients,
when one of their number has inspected the carpets herself still on the
floor of a recipients home.
They failed also to state that the sums involved were moderately small - In some cases as low as £1200, yet they want to spend an amount substantially greater than the amount in question, on calling the Special Commissioners. This, in the knowledge that the General and Special Commissioners will cease to exist at the end of March, and that the chances of any case being listed and heard by the Special Commissioners before that date is unlikely. In downtown Bolton the General Commissioners have agreed with this & refused the HNRC application Now as you all know these cases of NIC are subject to the Statute of Limitations Act 1980, but they are also subject to the Council of Europe and the Human Rights Act. They were defeated in the case of King v The United Kingdom (application no. 13881/02). This case was basically found against the United Kingdom because of the drawn out actions by HMRC in regards to arranging hearings of appeals. Well back in 1998 time was asked for in several of these Iranian rug cases as the judicial opinion had to be sought. It is now 2009- does it take that long to check the judicial opinion. We submit and will submit that this is the case is a far greater example than the King Case. As you will see on May 3rd 2003 the author met with Nikki Potts of the DSS and agreed that a sample case should be heard. Nearly six years on such a hearing has never been arranged. We have spoken to the politicians who were in office between 1979 and 1997 on the thinking behind the various regulations in regards the 1979 Social Security Act. All of them have agreed this was not set up to chase small little companies who gave Iranian Rugs or other household furnishings and it is hoped that at least one ex-chancellor will intervene in this matter . In fact this has all taken so long that there are people involved who were in their nappies at the time of causation, what do they know of the mentality of the legislators at that time? Those companies and recipients have paid their taxes on them at the time in another millenium. It was quite acceptable for as large an item as a car to be given, but not a small Iranian rug. They have recently been contacted by a client who is in the last throes of cancer and wants to settle before his demise. No they want to continue hounding him. As David Laws & Oliver Letwin so ably did earlier in this matter, we are trying to arrange that questions in the House be asked about this matter- especially by taking cases that only need a couple of hours to be heard away from local General Commissioners to Special Commissioners at costs far greater than the alleged NIC's owed. We now ask all of you to approach your MPs about this and we appeal to all General Commissioners to take note. We trust that the below mentioned officer of the HMRC Solicitors Office may one day answer correspondence from us. Or is he afraid of our publication? Michael Davey Drummond & Co drummondco@talktalk.net September 27th 2008 At last an appeal may be heard twelve years after last Carpet scheme was written - This letter just received from HMRC (You can copy each page and view it full size) We have replied to Steven Norman at HMRC as follows: Your ref: SLR 164512/SN At first sight we cannot agree with the
letter sent as:
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GOODBYE
BLIGHTY! |
Dateline February 21st 2008
HERE WE GO AGAIN! Labour
was accused of creating a new "brain drain" last night as it emerged
that more that more than one in ten educated Britons are leaving the
country. An international study found that 1.1 million men & women
with higher education qualifications are now living overseas in other
developed countries.-10.3% of the total.
The Organisation for Economic development said that the "brain drain" was far greater than in the UK than any other 29 leading member countries. More than 5 million people born in Britain now live abroad. This equates to one leaving every 3 minutes. This is a repeat of 1978 and the last Labour administration. Then Thatcher came in & incentives were given to stop the "brain drain". One such was Regulation 19 (1) of the Social Security (Contributions) 1979 which allowed benefits in kind as described below. Soon all we shall have left are tax collectors trying to invent collections on benefits previously allowed. This myopia has led to distrust of the laws and the fear of retrospective collections. This irreproble damage is leaving the country bereft of talent because of the envy of the talentless. Will the last person to leave our shores please remember to turn off the lights. NOTICE: Because of the Directions by The former Chancellor of The Exchequer, Hovis (Don't say Brown), all tax avoidance plans are now being operated by an off-shore company and are created in consultation with the clients as one - off plans for that client only. Neither Croxtons Ltd or Drummond & Co create or sell these schemes in the United Kingdom. We shall be pleased to introduce those interested in Tax Mitigation to the off-shore company.For the information of the Inland Revenue you can read up on all the plans they utilise by reading the Statutes of England and Wales. They are all in there. |
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ORIENTAL CARPET SCHEME Available 1994-1996 |
This scheme was available to companies who wished to save their National Insurance Contributions. Of the many hundreds of schemes underwritten a handful of the last one's properly written have so far been unsuccessfully challenged by the DSS. This page assists those that may be encountering such problems |
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THE BASIC LEGISLATIONIn the Social Security ( Contributions) Regulations 1979
Regulation 19(1) was enacted. It provided: This legislation was in place throughout the period that
Croxtons Ltd. were recommending their plans. CROXTONS LTD's NIC SUGGESTIONSBoth plans were submitted to Counsel initially and also subsequent to ongoing legislation. At conferences held with Counsel the principals of the providing companies were invited and questioned by Counsel on the practices of their trades. In regards to any dealings after April 1994 on Counsel's advice it was made clear to prospective users of the plans that they were for NIC purposes and that there should be no benefit in regards to PAYE. On September 27th 1994 Croxtons Ltd. obtained Counsel's Opinion regards the Oriental Carpet Scheme . The full context of Counsel's Opinion is attached to this statement of fact and legal argument. Counsel' David Ewart of Pump Court Chambers , 16 Bedford Row, London, WC1R 4EB stated as follows.
"The above information is based on our interpretation of the regulations. Whilst Counsel's Opinion on NIC is clear, the PAYE position is not nearly so certain. You may wish to seek confirmation from your own advisers. Croxtons Ltd. and M.Shokri & Associates Ltd. cannot accept responsibility for the information contained herein". Croxtons Ltd. acted as an introducer between professional advisers and providers for their schemes. One such provider was M.Shokri & Associates Ltd. Croxtons Ltd. were paid on an agreed sliding scale of commissions on these introductions. This commission was paid by the providing company. It appears that in November 1998 Croxtons Ltd, and several of the introducing financial intermediaries were visited by the Inland Revenue stating that they were " " in regards to Oriental Carpet Schemes. On following this up Croxtons Ltd ascertained that the Inland Revenue were in no way questioning the scheme as devised by Croxtons Ltd. They were looking into the affairs of a carpet provider. They were trying to ascertain that the transactions were indeed actual. To date no further developments have happened on that front. However all contracts and agreements were made by the ultimate purchasers and the providers. No contracts or moneys were passed between Croxtons Ltd. and the purchasing companies. In fact there was little or no contact between Croxtons Ltd. and the purchasing companies. There was no contact by Croxtons Ltd. and the ultimate recipients. Croxtons Ltd. had no way of knowing who they were. In most cases the only record that Croxtons Ltd. had was by way of commission statements provided by the provider. This list showed the amount, the name of the purchasing company, the name of the professional adviser and the commission earned. To this date no scheme has been successfully contested,
however
the DSS in their wisdom have conducted a war of attrition on a few
later
written cases. Croxtons Ltd. advised on such schemes and still stand by
the
Counsel's opinion on the scheme. This war of attrition is the more
remarkable
as over 99% of the schemes written and were accepted by the DSS
as
proper and legal. In fact to our knowledge only 3 cases have become
subject
to a Secretary of State's determination and two of them seem to be no
different
to those that have been accepted. SUBSEQUENT ACTIONS BY DSS
The response by the Secretary of State for Social Security is that an inquiry on one case should be held on this matter. This inquiry was heard on September 28th ,29th and 30th 1998 at the Britannia Hotel, Portland Street, Manchester, M1 3LA. My reading of the questions asked of me, at that hearing, can be summed up as follows- I show my comment to the questions:
It is interesting to note that the Inquirer is using the following cases as possible relevance. W T Ramsay v Inland Revenue Commissioners {1981} STC 174, through Furniss v Dawson {1984}STC 153to Inland Revenue Commissioners v McGuckian {1977} STC 908 and in considering to what extent the transactions presently under inquiry should be treated as if they were, and in the same way as, tax avoidance schemes having no commercial purpose. The new tact of using the recent case of Inland Revenue Commissioners v McGuckian [1977] STC 908 was predictable but inapplicable in most cases as the recipients of the carpets were on the whole both Directors and controlling shareholders of the relevant companies. They would have had the option of taking a dividend in similar amounts That dividend would not have been subject to National Insurance Contributions. One therefore fails to understand how a person or company can be seen to be using this scheme to avoid a tax (NIC) that they did not have to pay in the first place if they had elected to take dividends. Further the case of McGuchian is judiciously unreliable as the cases ofCraven v White, Gregory v Bayliss,Fitzwilliam and Bowater were never considered in that decision. It has already been ascertained that Inland Revenue Commissioners v McGuckian [1977] STC 908 was not applicable to VAT and there is not, to our knowledge, any authority that says that it is applicable to NIC. The reason most Directors used the scheme was to enhance their Pension rights or in regards to Corporation tax rights. If they had taken the dividends those amounts would not have enhanced their pensions or helped in marginal corporation tax rates. It so follows in regards pensions that in the fullness of time it is the DSS who would have benefited as the recipient would not have to rely on the state. In turn, the DSS are trying to claim moneys that they would never have received if the director /shareholders of the company had taken the dividend route. Therefore it follows that the premise of Inland Revenue Commissioners v McGuckian [1997] STC 908 should be considered as a tax avoidance scheme is not relevant, especially as in the case in matter the full Income tax has been paid as it would have been under the dividend route. The commercial purpose was in fact the enhancement of pension rights or corporation tax. It seems that the DSS is trying to move the goalposts by stating that once a decision had been made to take a discretionary ” benefit in kind” then the decision was made to avoid NIC by using carpets. The fact is that the starting point is the Directors deciding between dividends and discretionary ” benefits in Kind”. It was that choice that Croxtons Ltd. put forward in their "Director's Cut" folder at the time. This reason was also mentioned in the National Press when reported on in the autumn of 1994.( copies of which are attached)
What the recipient did subsequent to receiving the carpets is no matter concerning the purchasing company. The recipient had a completely free hand with those carpets. However in the case of Furniss v Dawson {1984} STC 153 Justice Wilberforce stated that interpretation of intent could not be presumed. This was backed up by DPP v Bagney. It should be further noted that the folders describing both the Grapevine scheme and the Oriental Carpet scheme made no mention of any time limit for holding the investments. Both wines and carpets were recommended for investment purposes and no prescribed time limit was discussed or recommended by Croxtons Ltd. or their suppliers. Nor did Croxtons Limited knowingly have any dealings with the recipients of the investments. One should also question whether in the legislation there is any reference to the timing of purchase, transference or sale of investments. A trader in the City can buy and sell investments many times in a few hours. Once a recipient has received "a benefit in kind" there appears to be no legislation in place to curtail his freedom of action to make up his mind to sell regardless of doing so immediately or after a passage of time. The recipient is a free agent to deal with "the benefit in kind" as he/she wishes.
It is natural in today's world for most legal advisers to use precedents and hold basic copies on a word processor. Surely most conveyance deeds are set out in the right manner to be legally binding. The letters used were done so to ensure that the documentation was correct to conform with the provisions of the Social Security ( Contributions ) Regulations 1979
In all schemes one has to accept that the providers of the goods are people who are genuine traders and respected in their given trade. Previous schemes have utilised gold held offshore, various precious metals, diamonds, gilts, unit trusts and wines. Croxtons Ltd. did their provenance check on all providers. As mentioned before Croxtons Ltd. even took the two main providers to Counsel in order to satisfy themselves that the schemes were properly constructed. In fact another scheme was submitted to Counsel and rejected on Counsel's advice. Whilst Croxtons Ltd. did not check on every consignment. Spot checks were made at random. In order to ensure that dealings in oriental carpets were operated properly Croxtons Ltd. asked a director, Charles Sayer, to make sure that the paperwork was operated properly. From my position ,as Chairman, I can only say that there was only a limited amount of carpet available and many applications for carpets for the Oriental Carpet Scheme were refused because of the lack of stocks. To try and rectify the position I met with several other carpet dealers. However in little over two years the scheme was running the total of sales was approx. £57 million. The average sale was approx. £103,000. Therefore the overall turnover was very modest and well controlled. The inquiry took the form of an Inquisition by Counsel acting on behalf of the DSS. Whilst the hearing was meant to pertain to matters in regards NIC it was noticeable that the questions asked by Counsel went far beyond NIC matters. This included asking a current Director how he had evaluated a payout for shares to the widow of a deceased director. This shows that it is imperative that companies have a legal representative at such inquiries. In asking these questions the DSS is presuming that the payments were bonuses. It is far better to consider them as Discretionary ” Benefits in Kind”. SUBSEQUENT ACTIONS BY THE INLAND REVENUE
On all instances they took Counsel's
advice before proceeding with their plans. Of the many hundreds
of schemes they advised on only a handful ever came under any scrutiny.
Therefore it was with shock and disbelief that two of their former
directors were awoken at 6 am one morning in the autumn of 1998 by the
metropolitan police in cohorts with officials from the special
compliance office of the inland revenue. The
only reason for these raids given was that the officials were "seeking
evidence". Within the next few days Accountants and Financial Advisers who had recommended the Croxtons schemes had similar visits as did the companies who partook of them. To this day the revenue have failed to return papers taken from at least one firm of Financial Advisers. There can be only one explanation for those actions and that was to get an unfair advantage in contesting these cases. These facts should be brought up in every legal hearing on the Oriental Carpet Scheme. There may even be a case against the Revenue of harassment under Section 40 of the Administration of Justice Act 1970. This defines harassment as trying to coerce a person to pay an alleged debt by making demands for payment that are calculated to subject a person to "alarm, distress or humiliation, because of their frequency or publicity or manner". Then silence. Obviously the Accountants, Financial advisers and Companies raided all felt that Croxtons had done something wrong. As a consequence they were loathe to do more business with Croxtons. Their business had been ruined and they did not know why. Eventually the chairman of Croxtons Ltd
(
who had never been contacted by the Inland Revenue Special Compliance
Office) managed to arrange a visit with a Keith Moore and Beth
Smith from the Special Compliance Office from Salford Quays in
Manchester for 11th August 1999 at Somerset House in London. As
the meeting opened Keith Moore stated that they had no interest or
complaint in the dealings, activities or legal standings of
Croxtons schemes whatsoever. The rest of the meeting consisted of the
Inland Revenue representatives asking the Chairman of Croxtons Ltd
about one firm of dealers in Oriental carpets. This information sheet was created by Michael Davey to assist those who had used the schemes. However neither Croxtons Ltd. or their suppliers take any responsibility for these opinions in any specific case as conditions may vary from case to case. October 2002 |
THE ORIENTAL CARPET SCHEME OR THE DIVIDEND ROUTE - THE CONTROLLING DIRECTOR'S CHOICE BENEFITS IN KIND ARE THE BETTER ROUTE FOR CONTROLLING DIRECTORS OFA PRIVATE COMPANY
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COUNSEL'S OPINION27th September 1994. ORIENTAL CARPET AND RUG SCHEME (CROXTONS)2. I shall deal with the various taxes
under
individual headings. 3. National Insurance Contributions ("NICs") are charged on "earnings". This is defined, for NIC purposes, as including: "...........any remuneration or profit
derived from an employment........." Thus the receipt of the Carpets, being a "profit", would be part of the employee's "earnings". However Regulation 19 (1) of the Social Security ( Contributions ) Regulations 1979 provides: " For the purposes of earnings-related contributions, there shall be excluded from the computation of a person's earnings in respect of any employed earner's employment any payment in so far as it is -..............(d) any payment in kind......." In my opinion, the transfer of Oriental Carpets, under the scheme outlined in paragraph 1 above, would be a " payment in kind " for the purpose of this Regulation. In this regard it is very important that: ( i ) the employee never has a choice between the Oriental Carpets and a cash sum, otherwise there is a danger that, on the basis ofHeaton v Bell (1969) 46 TC 211, the employee would be treated as being paid remuneration ( rather than a benefit in kind) equal to the cash entitlement foregone; ( ii ) the employer does not discharge any liability of the employee, otherwise the discharge would be treated as a payment of earnings in cash: R v DSS ex parte Overdrive Credit Card Ltd [ 1991 ] STC 129; ( iii ) the asset is not capable of being surrendered or exchanged for cash, as opposed to being turned into cash by sale; and ( iv ) title to the Carpets passes from the employer to the employee before the employee sells the Carpets for cash. I am satisfied that none of these difficulties would arise with the arrangements as described in paragraph 1 of this Opinion. 4. I can, however, see two possible difficulties with the proposed arrangements. The first is Regulation 21(2) of the Social Security ( Contributions ) Regulations 1979. This provides: " With a view to securing that liability for the payment of earnings related contributions is not avoided or reduced by a secondary contributor following in the payment of earnings any practice which is abnormal for the employment in respect of which the earnings are paid ( hereinafter referred to as an "abnormal pay practice " ) , the Secretary of State may, if he thinks fit, determine any question relating to a person's earnings -related contributions where any such practice has been or is being followed, as if the secondary contributor concerned had not followed any abnormal pay practice, but had followed a practice or practices normal for the employment in question. " It might be argued that, because of the exemption given by Regulation 19 (1) , the employer is not making a "payment of earnings" so that Regulation 21 (2) cannot apply. However , I find that argument unconvincing. The transfer of the Carpets is a payment of earnings withinSSCBA 1992 section 3 ( 1 ). Regulation 19 (1 ) simply provides that certain payments are to be "excluded from the computation of a person's earnings in respect of any employed earner's employment ". It does not restrict the scope of the definition in section 3 ( 1 ). It is my opinion, therefore that one cannot safely assume that as a matter of law Regulation 21 (2 ) has no application to payments in kind. This, of course, leaves the question of whether this particular payment is an abnormal pay practice for the employment concerned. 5. As a practical matter the Regulation 21 (2) power is not often ( if ever ) exercised by the Contributions Agency. In particular, it has never been employed to counter any of the schemes involving payments in kind. In recent years the approach has been to legislate against specific forms of payment. Therefore, I would not be concerned about a possible application of Regulation 21 ( 2 ) to these arrangements. 6. The second possible difficulty is the
principle of statutory construction ( " the new approach " ) set out in
WT Ramsay v IRC (1982 ) 54 TC 101 and Furniss
v Dawson (1984) 55 TC 324 as explained in Craven v White
(1988) 62 TC 1. This principle could apply if the Carpets were
allotted to the employee and sold back to the supplier in a
pre-arranged series of transactions so that it was a " practical
certainty " from the start that the employee would simply receive cash
at
the end of the day. The effect of this principle applying would be that
the
NIC legislation would operate as if the employee had been paid in cash.
If
, however, the employees genuinely become owners of specific Oriental
Carpets
and are truly free to decide how they deal with these Carpets, I do not
think
that the new approach could be invoked to attack the arrangements.
Again,
in practice, the Contributions Agency have never invoked the Ramsey
principle
in relation to any arrangements involving payments in kind. 7. The Oriental Carpets will be an emolument of the employee's employment, under TA 1988 section 19, because it is convertible into money : Tennant v Smith 3 TC 158. therefore, although it is a benefit in kind, it is not taxed under TA 1988 section 154 because this section only applies where the benefit is not otherwise chargeable to tax: see section 154 ( 1 ) ( b ). This does not, of course, in any way affect the fact that the transfer of the Oriental Carpets is a " benefit in kind " for the purposes of the NIC legislation. Although it is an emolument, it is important to consider whether it is subject to the PAYE Regulations (SI 1973/334 ). 8. It is my understanding that the dealer is prepared to purchase the Carpets from the employee at the market price of those Carpets. in other words, he will pay exactly what he would pay any third party who was offering to sell him the same carpets. The employee is, of course, free to keep the Carpets or to sell them to another dealer, or by auction, if that would realise him a better price. There is a ready market in the kind of Carpets which the employee will receive. in practice, however, the price of Oriental Carpets is very stable and so the employee is likely to receive almost exactly the price which the employer originally paid for the Carpets. 9. The transfer of Oriental Carpets from the employer to the employee is clearly not a " payment " on general principles for the purposes of the PAYE Regulations. However the Finance act 1994has introduced new provisions which govern the transactions which are caught by the PAYE Regulations. section 127 has introduced a new section203F into TA 1988 which provides :- " (1) where any assessable income of an employee is provided in the form of a tradable asset, the employer shall be treated, for the purposes of PAYE Regulations, as making a payment of that income of an amount equal to the amount specified in sub-section (3) below. (2) For the purposes of sub-section (1) above " tradable assets " means - (a) any asset capable of being sold or otherwise realised on a recognised investment exchange ( within the meaning of theFinancial Services Act 1986 ) or the London Bullion Market ; (b) any asset capable of being sold or otherwise realised on any market for the time being specified in PAYE Regulations; and (c) any other asset for which, at the time when the asset is provided, trading arrangements exist. " Oriental Carpets are not covered by (a) and, as yet, no regulations have been issued under (b). therefore, one must consider whether the Carpet transaction, as outlined above, falls within (c). The term " trading arrangements" is defined by the new TA 1988 section 203K (2) (a): - "(2) Trading arrangements - (a) for an asset, are arrangements for the purpose of enabling the person to whom the asset is provided to obtain an amount similar to the expense incurred in the provision of the asset." This definition is further expanded by section 203K (3) (b):- "(b) an amount is similar to an expense incurred if it is greater than, equal to or not substantially less than that expense." One must assume that it is very likely that the amount which the employee will realise by selling the Carpets to the dealer will not be substantially less than the expense incurred by the employer in purchasing the Carpets. The only question is whether the employee obtains that amount by reasons of an " arrangement ". 10. This is obviously a case which is close to the line. An argument may well be mounted by the Revenue that there is an arrangement because the employee is pointed in the direction of the dealer who will, in practice, always buy back the Carpets for a predictable price. However, it seems to me that this is caused by the nature of the market in Oriental Carpets, in particular its stability, rather than any "arrangement". The term "arrangement" in section 6 (3) of the Restrictive Trade Practices Act 1956 was considered by Diplock LJ. in Re British Basic Slag Limited's Agreement [1963] 2 AER 807, where he said , at819 :- " Cross J. said: "...... all that is required to constitute an arrangement not enforceable in law is that the parties to it shall have communicated with one another in some way and that as a result of the communication each has intentionally aroused in the other an expectation that he will act in a certain way". I think that I am only expressing the same concept in slightly different terms if I say without attempting an exhaustive definition, for there are many ways in which an arrangement may be made, that it is sufficient to constitute an " arrangement " between A and B, if (i) A makes a representation as to his future conduct with the expectation and intention that such conduct on his part will operate as an inducement to B to act in a particular way; (ii) such representation is communicated to B, who has knowledge that A so expected and intended, and (iii) such representation of A's conduct in fulfilment of it operates as an inducement, whether among other inducements or not, to B to act in that particular way." In my view Diplock LJ, is envisaging a situation in which A's future conduct is conditioned by the informal agreement or understanding with B. In the present case, the dealer is not arranging to do anything in particular. at most the employer and (perhaps) the employee are informed that the employee will in practice be able to sell the Carpets back to the dealer because the dealer is generally in the market to buy that type of Carpets and further that the price is almost certain to be, say, £500 a piece, if the sale takes place within a week or so of the original purchase, due to the stability in the market for Oriental Carpets. In my opinion, that does not amount to an "arrangement" allowing the employee to obtain an amount similar to the expense incurred by the employer in acquiring the Carpets. it is crucial to this view that the dealer can establish by evidence that he actually bought similar Carpets from third parties on the same terms that he bought them from employees within the scheme. 11. these arrangements are certain to be closely scrutinised and probably challenged by the Revenue. there is a serious possibility that this challenge may succeed in the Courts. Croxtons' advertising material ought to make it clear that, while the NIC position is clear, the PAYE position is not nearly so certain. Employers must take their own view, based on their own legal advice, on how to deal with the bonus in relation to PAYE. this all, however, summarise the effect of the PAYE provisions if the Carpet payments are caught by the new section 203F. 12. Where the payment is caught because there are " trading arrangements", the measure of the deemed income is set out in section 203F (30 (b) ;- "(3) The amount referred to is - (b) in the case of an asset for which trading arrangements exist at the time when the asset is provided, the amount which is obtained under those arrangements." ( my emphasis). It seems to follow that there is only an amount of deemed income for PAYE purposes where cash is obtained under the trading arrangements. Therefore, there will be no PAYE liability if the employee holds onto the Carpets or sells them to someone other than the dealer. 13. Where there is deemed ( or notional ) income, the employer is required to deduct income tax from actual payments of income which he makes to that employee in accordance with PAYE regulations: TA 1988 section 203J ( 1 ). regulation 7 ( 2 ) of the Income Tax ( Employments ) ( Notional Payments ) Regulations 1994 ( " the 1994 Regulations " ) provides:- " The time prescribed is any occasion on or after the time when the notional payment is made and falling within the same income tax period, on which the employer actually makes a payment of, or on account of, assessable income of that employee." An " income tax period " is normally a period from 6th of one month to the 5th of the following month: Regulation 2 ( 1 ) of the Income Tax ( Employments ) Regulations 1993. Where the employer is unable to deduct the full amount of the tax from cash payments in that month, the employer is obliged to account for the tax within 14 days at the end of the month in which the notional payment was made: TA 1988 section 203J ( 3 ); Regulation 8 ( 2 ) of the 1994 Regulations. In those circumstances, the employee must reimburse the employer for the tax for which the employer has accounted. If the employer does not do this within 30 days of the notional payment, the tax paid by the employer is treated as further income of the employee assessable under Schedule E:TA 1988 section 144 ( 1 ). There is, however no provision which makes this deemed further income liable to PAYE. 14. As a practical matter, if an employer is intending paying a bonus in Carpets, he ought to take an indemnity from the employee for the tax which he may have to pay. He must also take an undertaking from the employee that he will inform the employer if and when he sells the Carpets to the dealer, since that action might trigger a PAYE liability. Corporation Tax
Pension Contributions
Value added Tax
FURTHER OPINIONIst May 1995 Re : CROXTONS ORIENTAL CARPET SCHEME 1. Regulation 3(a) of the Social Security ( Contributions) Amendment (no4) Regulations 1995 has added a new paragraph 9c to Schedule 1A to the Social Security (Contributions) Regulations 1979as follows " 9,C Any other asset, including any voucher, for which trading arrangements exist and any voucher capable of being exchanged for such an asset". Regulation 3(c) of the 1995 Regulations also adds a new paragraph 19 to Schedule 1A in the following terms: " 19. For the purposes of paragraph 9c of this Schedule " trading arrangements" has the meaning assigned to it in 203K(2)(a) of the Income and Corporation Taxes Act 1988." 2. This means assets in respect of which " trading arrangements" exist are added to the list of assets which are not regarded as benefits in kind for the purposes of regulation 19(1)(d) of the 1979 Regulations, and so are liable to NIC. The term " trading arrangements" is defined by reference to the definition for PAYE purposes in TA 1988 section 203K(2)(a). This does not explicitly bring in further further definitions in section 203K(3). However, the Agency would probably argue that subsection (3) is part of the definition in subsection (2)(a). It would , in my opinion, be unsafe to assume that sub-section (3) does not apply. 3. My opinion of 27th September 1994 must now be applied for the purposes of NIC as well as PAYE. Paragraphs 3-6 of that opinion will only apply if "trading arrangements" do not exist. 4. In paragraph 12 of my opinion, I point out that, for PAYE purposes, the amount of the deemed Income is the amount obtained under the trading arrangements: see section 203F(3)(b). Therefore, there is only a charge where cash is actually obtained under the arrangements. However, regulation 2(b) of the 1995 Regulations has inserted a new paragraph (9) in regulation 18 of the 1979 Regulations as follows: "(a) The amount of earnings which is comprised in any payment by way of the conferment of a beneficial interest in any assets, including a voucher, falling within paragraph 9c of Schedule 1A to these regulations and which falls to be taken into account in the computation of a person's earnings shall, for the purpose of earnings-related contributions, be calculated or estimated by reference to the amount obtainable under the trading arrangements in question as if that amount were obtained on the day on which the beneficial interest was conferred." This means that if there are "trading arrangements" in existence there will be an NIC charge on the amount obtainable under the arrangements at the time when the carpet is transferred to the employee. This charge will apply whether or not the employee takes advantage of the "arrangements" and obtains a cash sum. As a result paragraphs 12-14 of my Opinion are not applicable to NIC.. FURTHER OPINIONDAVID EWART. Pump Court Chambers, 16 Bedford Row, London, WC1R 4EB2nd May 1995 RE: CROXTONS ORIENTAL CARPET SCHEME1. I understand that my Further Opinion of 1st May 1995 has caused some confusion. Apart from one point the NIC provisions on " trading arrangements" are identical to the PAYE provisions which I dealt with in my opinion of 27th September 1994. Therefore, rather than repeating what I said in that Opinion, I simply referred to the points on PAYE which could be applied to NIC.2. My opinion is, on the basis of the evidence which I have seen and heard in Conference, that the Persian Rug scheme does not involve "trading arrangements". My reasons are set out in detail in paragraph 10 of my opinion of 27th September. Briefly, this is because the dealer is prepared to buy the carpets for the open market price which he would offer to any other seller. In my view, this does not amount to a "trading arrangement". |
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BLACK FRIAR Daily Express - Black Friar Column October 15th 1994 That scourge of the taxman Michael Davey, who runs business consultants Croxtons, was beside himself with rage when he rang the Friar yesterday. Davey scrapes a crust by telling the rich how to arrange their affairs, and Social Security Minister Peter Lilley has upset him profoundly. At the Tory conference Mr. Lilley talked of " spivvy schemes" to avoid National Insurance Contributions by paying yuppies in gold bars, diamonds, or vintage wines". " I'll put a stop to them once and for all, " he said. " All rubbish" fumed Davey, who invented most of the old schemes and has devised a devilish new one based on oriental carpets. " if they think they will save £ 50 million, they've got another think coming. You just watch, it will cost them more to write the legislation than they will save. " our plans have nothing to do with spivs and yuppies. If directors of private companies take carpets instead of dividends, they can improve their pension. " we are doing things in antiques and stamps too."
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PEMBROKE COLUMN
Michael Davey, whose Croxton's consultancy specialises in " National Insurance Mitigation" plans, is at it again. Just months after launching his " Gee Gee" scheme, where company bonuses and dividends are paid in racehorses rather than cash, he is trumpeting his new wheeze Oriental carpets. It works like this. The company buys a Persian rug and puts it in bond. then the employee receiving the bonus has the option of taking delivery or selling it. " We had to turn down a £900,000 order because we couldn't get the carpets bur we've done several deals since," he says. |
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By Allson Steed (Filed: 2 2/04/2003 Daily Telegraph) The Revenue is investigating "exotic" tax avoidance schemes, where employees are paid in luxuries ranging from Persian carpets and fine wine to gold bars. Dave Hartnett, deputy chairman of the Revenue, said between 7,000 and 10,000 firms are being targeted, ranging from "big City banks to medium-sized businesses'. He added: "In the 90s, between 1994 and 1998-99 lots of employers used really exotic schemes to pay remuneration, as you do not pay National Insurance or PAYE. We decided to have decided to legislate to stop this, and we have decided to litigate, and we have won all but one of our cases "There is at least another £1 billion to come, and we are going to go out and get it." This hardline stance is part of a new package avoidance measures that are possible after the latest Budget announced an extra £66m in funding over the next three years. The Revenue estimates it extra £1.6 billion over the same period. Mr Hartnett said: 'The sensible thing is for people to realise the game is up, and settle quietly and quickly. It is right in fairness. "A lot of these people are medium-sized companies who have
listened to 'get rich quick' schemes from tax advisers. Tax advisers
who peddle schemes like this are doing their clients no favours at all.
It may surprise you that
not all Inland Revenue inspectors are hard-hearted. John Whiting, tax partner at accountancy firm
PricewaterhouseCoopers, said there have also been a variety of ways of
using shares to avoid tax. He added " If you are given some rights over
shares that say you can get the
shares in 100 years time, they "You pay the NI on that, and then change that right to say
you can get the shares next week, which is much more valuable. I don't
suppose anyone objects to rules being made to stop loopholes. We all
have to pay our
taxes. "But if the Revenue wants to have a system that says you
will
pay NI if you are paid in ABC and D, then don't blame me if someone is
paid
in EFG. If they change the rules to say you will pay tax in ABCDEF and
G,
that is fine. "What's gone is gone. We know they are already challenging a number of these schemes, and it is for their Lordships to decide whether they work. I have got no problem with that at all." However, Mr Whiting added that there are some areas where accountants think the Revenue has got wrong, and they "feel able to challenge these". He added: "Sometimes we feel the Revenue abuses the system, and we challenge the way they are running it." However, it is not just big businesses that are having their
collar felt. The Revenue has already written in the past three months
to a number of small businesses and sole traders, such as builders,
taxi drivers and window
cleaners, who have filed tax returns stating they have earned just
below
£15,000. Over this figure, you have to file accounts to the
Revenue. It used a variety of letters, some designed for particular
trades, and some "designed to be really tough", said Mr Hartnett. He added: "Something like 3Opc increased their turnover in disclosure to us, and something like that [letter] has been massively effective. It signals to us that those 3Opc of people maybe were not getting it right before, and if we get more information, we can consider more strenuous action where appropriate." The Revenue is planning to use a risk-based approach to
tackle tax avoidance, identifying areas through experience that are
likely to cause problems. It will use the extra money to implement new computer
systems
to automate research, and employ specialist commercial lawyers to
tackle
tax avoidance schemes, said Mr Hartnett. |
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Deputy Chairman of the Revenue. Dear Mr Hartnett, We note that you have stated that the Revenue is investigating “ exotic” tax avoidance schemes, where employees are paid in luxuries ranging from Persian carpets and fine wines to gold bars. Whilst I do not wish to disappoint you terribly I rather feel that you are huffing and puffing years after the marathon has ended. Whilst Drummond & Co and their former sister company Croxtons Ltd have been advising companies and individuals on these schemes from the tenure of George to Gordon Brown at no11 Downing Street the political and revenue rhetoric has continued unabated and as usual very warm. Now it is announced that the stealer of pensioner’s money (and I don’t mean Robert Maxwell) has made an extra £66 million in funding available to bring in what? Most of the Persian Carpet and Wine schemes were “arranged” by Croxtons Ltd between 1991 and 1996. There were 561 purchases of carpets that we know of totalling £57 million as well as 767 purchases of wine totalling £50 million. 99%+ have been accepted by the DSS as being genuine “ benefits in kind”. On all those cases the companies and the employees had paid their income tax and the NIC on their basic earnings. They have also paid the income tax on the “benefits in kind”. This left a maximum of 11% of the £107 million that was mitigated. And you have £66 million extra to try and collect The NIC on the small percentage you have not agreed on. We estimate that the maximum you can expect in return would be less than £500,000. What a great way to spend taxpayer’s money. We are not aware that any Class 1 NIC liability has been assessed on any of the Wine schemes and on over 90% of the Persian Carpet schemes. As the last of these schemes were written in November 1996 all cases are now over 6 years old and as NIC is subject to the Limitation Act 1980. In the absence of a properly dated “protective writ” no litigation may commence. Neither the Revenue nor the DSS has ever taken out a case in regards to Persian Carpets or Wine schemes. However this has not stopped you harassing small businessmen in regards to these matters. Most of your local inspectors have not got a clue what this is all about and are just topping and tailing badly constructed letters. In most cases that they are challenging they are quoting two cases that have little to do with the details. They are issuing “protective writs” in excess of 6 years after the “causation” of the alleged NIC and are stating that Persian carpets are tradable assets. When asked for a list of “tradable” and “non tradable assets” no one in the revenue knows. Therefore, if everyone is equal before the law, how can you
try and collect off the remaining 1% who did exactly the same as all
the others? As you may know there are same companies’
accepted one year and not the next. In regards your opinions on
the law in these matters I would point out that:
Our clients suggest that it would be the sensible thing to realise that your game is up and you should forget this matter quickly. Then knowing past history the Revenue will go into a rage and start raiding us and advisers again for no reason other than you have failed. Yours truly, |
United We Stand |
Fax
your letters from DSS or Revenue to us. Thousands of carpets
schemes have been accepted. They ALL should be. Do not accept a decision against you or ask for a Secretary of State's decision as their hearings are more like inquisitions. Just refuse to pay and take the cases to law. |
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Fax : +44(0) 845 862 1954 Emails(UK) : croxtons@ informedinvestor.co.uk |
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