WorldSIM.com: Recieve international calls for free in over 150+ countries. Reduce bills by 95 percent.Founding Officesinformed investor
The Informed Investor began publishing from offices at 13 Nottingham Place, London, W1 ( See Picture Left) in 1972. It started as a printed publication for Drummond & Co offering Investments and Insurance. Long before today's regime in regards commissions Drummond & Co pioneered discount  selling of  Linked Insurance and Unit trusts- splitting the commissions with the purchaser. Many in the Industry condemned this and many leasing Insurance Groups refused to take their business. Most of those companies have gone out of business today & Drummond & Co are recognised as the Company that led the way. Today 38 years later Drummond & Co still lead the field in Financial Innovations and have advised both the public and professionals. They are now acting on behalf of clients of Croxtons Ltd.
As Financial Commentators the Informed Investor have, over the years, Informed Investors about dangerous offers and Financial mis-doings sometimes years before the scandals broke.
This we continue to do through our many websites. In 2009 & again in 2010 over 79 million visits were made to our pages and over 40 million so far in 2011.

 


Hotline

email

 Welcome to Croxtons. 
www.ukinformedinvestor.co.uk
Now in its 40th year. 208 million views 
13 Nottingham Place, London, W1U 5LE
24 hour Hotline  Tel: +44(0) 845 868 2810 or 0207 183 4978    Fax : +44(0) 845 862 1954
The Informed Investor
website: www.ukinformedinvestor.co.uk
     CONTACT US CLICK
Welcome to The Informed Investor.  Press Control+B to Bookmark this site for later reference
May 2011
AN OFFER YOU SHOULD REFUSE

A certain Mr.Gary Burnett and his project leader Ian Morgan at the Specialist Investigations at HMRC  @ 5th Floor, Trinity Bridge House, 2 Dearmans Place, Salford, M3 5AQ have been writing to relevant companies making an offer they should certainly refuse. Basically they offer to reduce the interest to HMRC if they pay up within a stipulated period on these cases where there has never been a court decision. He well knows that these cases  are  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  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 2011- 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.  The Commissioners in Bolton agreed with this in March 2009.  Not only have we written to Mr.Burnett but have been advised that at least one firm accountants did some time ago.  If he has an answer we will publish it. In the meantime Companies are advised to refuse these offers.  Further it will be interesting to know if under the Data Protection Act the Recipients of the carpets have allowed the informatiom of their dealings re the carpets to be placed in the public domaine- if HMRC has such permission they should declare it. If they have not they should withdraw it.
Further to our Article Below  we wrote to the Tribunals Service in regards to "Inadmissible Evidence". It appears we were wrong as a tribunal may allow evidence to be be presented which is "inadmissible in a Civil Court". This in turn makes any appeal in regards HMRC  a useless exercise and enhances our decision to fight such cases in a Civil Court where the HMRC will have to prove their case without  "inadmissible evidence" instead of the Appellants having to prove their cases where "Inadmissable Evidence" is allowed and in these cases the heart of the matter of that evidence is what the Recipients ( Third Parties) did with the Carpets after the relevant Companies had given them as "Benfits in Kind". In all cases HMRC had accepted the Income tax and years later tried to claim that NICs were owed by the Companies. The Evidence was obtained under a "warrant" on another matter and the Companies were not cognisant of those details and could not obtain knowledge under the Data Protection Act. The reply from the Tribunals service is as follows:

Dear Sir,

 

Inadmissible Evidence

 

Your email dated 15 March 2011 on the above topic has been put before the duty Judge for consideration.  He has asked me to reply as follows.

 

First, I must emphasise that the Tribunal does not give advice – that is the role of advisers such as your firm.  The following comments are general in nature and can have no legally binding force in relation to any individual case.  Each case depends on its own facts and the panel hearing any appeal has complete judicial independence as to how it approaches the issues (including issues as to the admissibility of evidence) which are put before it for adjudication.  There are appropriate appeal/review mechanisms in place so that any dispute on a point of law can be definitively resolved by the higher courts.

 

The Tribunal has no obligation to respond to the points you have raised outside the context of a live appeal, but in an effort to be helpful the following general comments may assist.

 

It is axiomatic that any Tribunal considering a point such as the one you raise will wish to consider all relevant facts and hear all relevant submissions that both parties wish to make before reaching a decision in a particular case.

 

Part of the picture which a Tribunal will no doubt bear in mind is the following provision contained in Rule 15 of the Tribunal’s own procedure rules (the “Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009” – SI 2009 No. 273) relating to evidence:

 

“(2)      The Tribunal may –

(a)        admit evidence whether or not the evidence would be admissible in a civil trial in the United Kingdom; or

(b)        exclude evidence that would otherwise be admissible where –

(i)         the evidence was not provided within the time allowed by a direction or a practice direction;

(ii)        the evidence was otherwise provided in a manner that did not comply with a direction or a practice direction; or

(iii)             it would otherwise be unfair to admit the evidence.”

 

This rule was of course laid down by Parliament and will naturally be interpreted in line with the Tribunal’s “overriding objective” (contained in Rule 2) of dealing with cases “fairly and justly”.

 

It will of course be open to any Appellant who feels that the Tribunal in an individual case has made a mistake of law in admitting (or refusing to admit) particular evidence in that case to appeal that decision through the normal appeals process or, conceivably, via a judicial review application.  Nothing in this letter should be regarded as pre-empting any view of the law taken by any Tribunal, appellate body or supervisory court.

 

I am unclear as to precisely what you mean when you say that you “find it inappropriate to submit to any court that will accept such evidence and we are advising clients and other advisers to ignore correspondence until this is clarified”.  If a Tribunal decides to admit evidence which an Appellant considers should be inadmissible, then a remedy is potentially available to him through the normal processes; however, I should point out that by simply refusing to take part in appeal proceedings, taxpayers would run the risk of either losing appeal rights altogether (through failing to exercise them) or of losing the opportunity to challenge the contested issue (which a Tribunal could only adjudicate on after due argument in the course of a properly constituted appeal).

 

You may be aware that if a number of cases give rise to common or related issues of law, there is a mechanism in Rule 18 of the Tribunal’s rules for a “lead case” to be specified, allowing for the efficient resolution of those issues in relation to all the cases in question.  You may wish to consider whether this mechanism might usefully be adopted in the cases you refer to.

 

I trust you will find these general comments helpful.  The Tribunal is unable to enter into any further correspondence on the matter; if you wish to obtain legal advice, you should do so from an appropriately qualified professional independent of the Tribunal.

 

Yours faithfully

Miss Alice Manders | Administration Officer| Tribunals Service | Ministry of Justic

J'Accuse ("I accuse")
We argue that "the decision by a Tax Tribunal was based on inadmissable evidence and was a misrepresentation of justice."
Further that Companies are being made offers to pay half interest when they do not need to pay any. HMRC Dirty Tricks must be exposed

David Hartnett THE MISUSE OF EVIDENCE OBTAINED UNDER A POLICE WARRANT

It was with shock and disbelief that two of their former directors of Croxtons Ltd. 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".

They took away papers and computers pertaining to Croxtons Ltd.  Within the next few days Accountants and Financial Advisers who had recommended the Croxtons "Benefits in Kind" schemes had similar visits as did the companies who partook of them.

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. When asked if they knew the result of their damaging raids the representatives of the Inland Revenue apologized. End of Story?
  Oh No


In a hearing before the Tax Tribunal in December 2009 HMRC produced "alleged" evidence as to what third parties did with carpets given to them as a "Benefit In Kind" prior to November 1998. Evidence that in many cases the defending companies had no knowledge of... and under the Data Protection Act had no right to know. So where had HMRC uneathed such evidence from?  In the words of Keith Moore no search had been made in regards to the company actions- they were looking into the dealings of a carpet provider. Under the law a Warrant MUST specifically be used for a specific reason, not for a phishing expedition. For over a year now we have requested the source of such information- this they have failed to provide. Therefore the Tribunal should not have considered such evidence, and if such evidence was obtained by the HMRC in the course of the aforementioned raids action should be taken against
David Hartnett and his cohorts.
 

 What is a Police Warrant?

When can the police seize property

Police should only seize goods if they have reasonable grounds for believing that:
  • They have been obtained illegally; or
  • They are evidence in relation to an offence.
In either of these cases, they must also have reasonable grounds for believing that it is necessary to seize the goods to prevent them being lost, stolen or destroyed.


 How voters can hold them accountable

To a great deal of fanfare Prime Minister David Cameron pledged Whitehall departments' new business plans would set out what they intend to do and how voters can hold them accountable for it.

He presented it as an alternative to Labour's culture of targets, which he argued encouraged short-term thinking, as public sector managers sought immediate results to meet centrally-imposed deadlines at the expense of long-term improvements to services. Speaking at the launch of the business plans, Mr Cameron said Labour's targets   " bred bureaucracy... created inefficiency and unintended consequences (and) crushed morale in the public sector … Today we are turning that on its head"

OUR COMMENT

Over the years we have been defending clients over the actions taken under the direction of this man.
Firstly taxpayers should remember that we are not advocating avoidance from paying taxes, but we do advocate:
Oliver Letwin a) That the revenue should not pursue taxes that are NOT owed, and they should not presume without evidence. Our story goes back many years and to this day no court of law has found in favour of Mr Hartnett and his underlings. However he & his underlings have not been slow in wasting taxpayer's money chasing revenue on which legally they have no hope in collecting.
 Back in 2005 we had to obrain the assistance of Oliver Letwin MP and David Laws MP to halt these people trying to arrange expensive tax appeals on National Insurance cases which were outside the Statute of Limitations and were therefore unable to legally be collected.David Laws

b) The HMRC are making offers to try & get Companies to pay NIC's they DO NOT OWE by offering to Halve the Interest!  As we have clearly poimted out and the Commisioners have ratified 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) from claiming interest in cases they have held up. Therefore they are trying to hoodwink companies into paying interest they are not entitled to. Beware offers that would make a second hand car salesman blush. This from people who are meant to be upholding the law.  

There is nothing wrong with the legitimate collection of taxes and National Insurance- but we agree that a man who supervises the waste of taxpayer's monies and the use of inadmissable evidence has not got the moral stature to remain as the country's top tax official.
Get Onto Your Representatives about this
writetothem.com

Contact your Councillors, MP, MEPs, MSPs, or Northern Ireland, Welsh and London AMs about this
   
Do you need help with your postcode?
Tax chief's career in jeopardy as treasury minister refuses to back him
say the Daily Mail 13/09/2010 by Gerri Peev

David Hartnett

He had refused to apologise for the underpaid tax fiasco – and it was only after pressure from the Chancellor that the country's top tax official finally said sorry.

But despite his apology, David Hartnett's career last night hung by a thread after a senior Cabinet minister publicly failed to back him.

Four times yesterday, Treasury Chief Secretary Danny Alexander sidestepped a question over whether the official had his full confidence.

The row began when Mr Hartnett, Permanent Secretary for tax at Her Majesty's Revenue and Customs, refused to say sorry for the breakdown in the tax system which has left millions with incorrect tax codes. Up to 1.4million ordinary families are being landed with unexpected tax demands of around £1,400.

In a pre-recorded interview, broadcast yesterday, Mr Hartnett had told the BBC's Moneybox programme: 'I'm not sure I see the need to apologise'. But nine hours after his comments were broadcast on Radio 4, Mr Hartnett was forced by George Osborne into a climbdown.

Yesterday, as the row raged on, Mr Alexander welcomed the apology. However, he stopped short of backing the HMRC boss. Asked whether he had 'full confidence' in Mr Hartnett, the Treasury minister said: 'I have got full confidence in HMRC's ability to ensure that these issues are dealt with appropriately under his leadership.

'He was right to apologise. This is a problem we inherited from the previous government and of course it's very unfortunate and I'm sorry that some people have got an unexpected tax bill.' But Mr Alexander sidestepped three more chances in a Sky News interview to say Mr Hartnett had his full confidence.

Today, Mr Hartnett faces a grilling in the Treasury from Exchequer Secretary, David Gauke. He will also be brought before MPs on the Treasury select committee when they conduct an inquiry into the tax shambles. On the BBC, Mr Hartnett had also said taxpayers owing large amounts would be given less time to pay it back than those owing a small amount.

He added that claims of 'blunders and IT failure' were not true – despite a report from the National Audit Office which painted a dismal picture of HMRC's ability to collect tax efficiently.But on Saturday afternoon, he said: 'I am deeply sorry that people are facing an unexpected tax bill.'

He apologised if his remarks had come across as 'insensitive', adding: 'I am working flat out with my colleagues to ensure everyone's tax is correct and the new computer system will help us do this.

'It was this new system that revealed the extent and size of reconciliations required and will help us be more accurate in future.


Headlines



writetothem.com

Contact your Councillors, MP, MEPs, MSPs, or Northern Ireland, Welsh and London AMs about this
   
Do you need help with your postcode?
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 4978
Fax : +44(0) 845 862 1954
A
C
WorldSIM.com: Recieve international calls for free in over 150+ countries. Reduce bills by 95 percent.
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:
  • (a) You know the answer. It has been the same at least 12 years. HMRC have been dragging their feet in order to whittle away at real avoidance schemes.
  • (b) You also know that the new tribunals are now considered courts of law- any case you take to that Court therefore comes under the Statute of Limitations Act 1980 and must be brought within 6 years of causation ( The European Courts have reduced this to 4 and a half years). Therefore all these carpets cases are well out of time. As such we are therefore not acknowledging any paperwork sent by you.
This constitutes  our only response to you and we have emailed it to you today.
Drummond & Co
23/09/2009

REVENUE ONCE AGAIN WASTING TAXPAYERS MONEY - 19th February 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:
  • 1. To our knowledge no carpets were held elsewhere than in a UK bonded warehouse
  • 2. To our knowledge no schemes were operated by by either M Shokri & Associates Limited and/or Zahra Carpets Limited. They were just instrumental in the sale of the carpets to various companies and shared the same accountants.
  • 3. The Companies had no control as to what the recipients did with such carpets after they were given to the recipients. It was ,by law, incumbant upon the companies NOT to have any restrictions on the actions of the recipients. But it was ,by law, incumbant that the recipients had no choice as to what they were receiving. The companies had no control as to whether the carpets were retained, sold or exchanged. The  Social Security (Contributions) Regulations 1979 made no provision as to the length of time the recipients must retain the carpets and therefore has no relevance to these cases.
  • 4. The wording of the documents were prepared by Croxtons Ltd , as directed by counsel, in order that the paperwork was correct under the provisions of the Social Security (Contributions) Regulations 1979 and subsequent legislation and were published in much the same form as are books on conveyancing and other legal documents.
  • 5. We shall be studying the cases stated to see if there are any similarities other than they were written under the provisions of the Social Security (Contributions) Regulations 1979
Letter from HMRC
Letter from HMRC
Letter from HMRC
Letter from HMRC

GOODBYE BLIGHTY!Hovis
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.

DEFENDING THE CARPET SCHEME

CROXTONS
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
Dateline August 12th 2008
It appears that Mr Steven Norman (see below) is now writing to ask companies where appeals are pending to write & confirm that they will allow all carpet cases to be heard under a lead case before the Special commissioners. Whilst we applaud this move which was originally promised over 5 years ago we must warn companies NOT to agree until we are able to ascertain which company will be selected as the "lead case". The reason for this is that we have noticed that a few cases have been executed differently to the majority and not as proscribed by Croxtons. Obviously we do not wish to accept one of those. Such an instance happened when there was a Secretary of State's determination on  September 28th ,29th and 30th  1998 at the Britannia Hotel, Portland Street, Manchester, M1 3LA.  Therefore we ask company's who are being asked to refrain from agrreing until we learn the case selected. The DSS accepted many hundreds of the Oriental Carpet purchases. They only contested a few that were transacted in 1995/6 and 1996/7. In some cases the same companies gave carpets more than once (as recipients were so pleased to receive them). The original "carpet benefits in kind" were accepted by the DSS and subsequent ones were not. The DSS and the Inland Revenue have failed to explain why there are such discrepancies in their decisions. In fact over 90% of the carpet "benefit in kind" carpet schemes were accepted and the majority of the cases being challenged are companies in a specific area of Britain. We are meant to be all equal before the law and it is incumbert upon HMRC to inform the commissioners WHY they have discriminated against these few companies. If they fail to respond then we shall once again ensure that questions are asked in Parliament.

Copy of Our latest Letter to HMRC Legal Department on Carpets as "Benefits in Kind"

Crest

24 hour Hotline  Tel: +44(0) 845 868 2810
Fax : +44(0) 845 862 1954

Email: drummondco@drummondco.idps.co.uk

Website: www.ukinformedinvestor.co.uk


Steven Norman

Solicitors Office,

HM Revenue & Customs,

Room P63

East Wing

Somerset House

London, WC2R 1LB                                 Friday, May 09, 2008

 

Dear Mr. Norman

CROXTONS “Director’s Cut “ORIENTAL CARPET SCHEME

 

We have been informed that you have been writing letters to our clients in regards to “Benefits in Kind” paid out in the form of household furnishings (carpets) between 1994 - 1996. As you are aware we have been acting on behalf of the companies listed below since 2003 and we are pleased to hear that you are getting around to actually selecting the test case, which Nikki Potts promised would be selected 5 years ago in May 2003. We believe your latest epistle has been written as a result of a recent hearing in the Thameside County Court.

 

Obviously you have continued to refer to cases that have little comparison to the provision of household furnishings. Those cases you have whittled away are in respect of trade debits, gold coins, platinum sponges and trusts.  You have also tried to base them on actions taken by the recipients after the providing companies had completely finalized their transactions on the household furnishings. As the recipients were, by the very nature of the 1979 Social Security Act not permitted to have a choice in what they received it was only natural that they would not all have wished carpets. Therefore in the majority of cases we believe the recipients were obliged to either exchange their carpets for ones that would have suited their homes or to sell them in order to purchase other benefits they required. As you are perhaps aware we run an updated website on these matters.

 

As such this letter is to inform you that all appeals for our clients will not be withdrawn and we believe that they represent a small percentage of 562 carpet benefits that were provided between August 1994 to November 1996 through the auspices of Croxtons Ltd. It appears that most of the cases selected were in the region between Wolverhampton and Manchester and others in the rest of the country were never challenged.  Below you will find a list of the cases we have been informed you have challenged. And who will continue with their appeals. Obviously we also have the list of the days of causation and believe that most of these cases are now outside the Statute of Limitation ACT 1980 AND COLLECTION CAN NOT BE LEGALLY EFFECTED. It is now over 11 and a half years since the last transaction took place. We would be obliged if you would keep us informed in these matters as our clients requested.


Sincerely yours,

Michael Davey






PLEASE NOTE HMRC ARE TRYING TO CALL CARPETS "COMMODITIES" - THEY ARE HOUSEHOLD ITEMS GIVEN AS "BENEFITS IN KIND" WHICH WERE NEVER LEGISLATED AGAINST. IF YOU SEE  ANY OTHER DESCRIPTION OF THE CARPETS THAN "HOUSEHOLD" ITEMS
Alter the document accordingly. THIS IS JUST A SNEAKY MANOEVRE TO TRY & MAKE OUT THAT NON-COMMODITIES APPEAR TO BE LEGISLATED AGAINST.



January 9th 2008 Update
Section 29(5) Limitation Act 1980

It appears that back in 2000 someone at the HMRC had the brilliant idea to try and ask companies who had utilised the "carpet Scheme" to sign a statement. That statement referred to section 29(5) of the Limitation Act 1980. The statement DID NOT ACKNOWLEDGE the debt within section 29(5) of the Limitation Act 1980 and therefore has no legal standing. Further we have found discrepencies between the signed copies of these notices being exhibited by HMRC and the originals held by our clients. Extra wording had been added by HMRC in the vain hope that they could make these notices appear legal. In cases where the revenue are trying to uphold these scraps of paper remember that  HMRC, as Plaintiffs, must prove that these cases , now at least 11 years old, are not covered by  Section 9(1) of the Limitation Act 1980. It is not for the defence to prove that they are not.

Quite simply the last "Carpet Schemes" advised by Croxtons Ltd were written in November 1996 and it is now over eleven years since the last carpets were given. In all that time NOT ONE APPEAL has been heard.  Out of over 3000 + carpets given as "Benefits in Kind" in exactly the same way HMRC has accepted that all but some 70 odd cases are "Benefits in Kind". Most of those they are trying to extort money out of are Companies resident in a corridor between Wolverhampton and Manchester.. Is this @Regionalism ?

As Section 9(1) of the Limitation Act 1980 states that proceedings must be taken within 6 years of the date of causation. These cases being applied for now are therefore well out of time and the relevant courts should be informed of this. In defence the following should be written:
"In this matter the date of causation as proscribed by section 9(1) of the Statute of Limitations 1980 was the date that the carpets were transferred from the company to the recipients. the ...... of ......... 199...(Please insert the relevant date)
Under section 9(1) an action must be started within 6 years of the date of causation. This was not done by the applicant.
 
In regards to section 29(5) of the Limitation Act 1980.
 
On WEDNESDAY 12 July 2006 in the HOUSE OF LORDS
 
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
Bradford & Bingley plc (Appellants) v. Rashid (FC) (Respondent)
[2006] UKHL 37
 
Section 21.  In Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565,575E-F Kerr J said that the debtor can only be held to have acknowledged the claim if he has in effect admitted his legal liability to pay that which the plaintiff seeks to recover. But his acknowledgment need not identify the amount of the debt.  As we have not admitted legal liability then we can not be held to have acknowledged the claim. 
Therefore the original date of causation stands and therefore HMRC are out of time on this application."


October 1st 2006  UPDATE
PROTECTIVE WRITS
AND ALL THAT


On August 31st 2005 we attended Stafford County Court on behalf of one of our clients where the HMRC have applied for Protective Writs to try and combat the Statute  of Limitations Act 1980. 
 As we have pointed out in the past most of these protective writs were taken out too late.
 
It  appeared that they had to be renewed at regular intervals. The HMRC  should have filled in an application Notice N244 and send it in with a fee of £30. On their own admission (of which we have a copy) they state " In many cases a letter has been accepted by the courts, and a further adjournment to the proceedings agreed." In other words they have as a calculated action failed to utilise the right form and have knowingly deprived the Courts of the  relevant fee."
 
As we have documentary evidence of this in the case of Inland Revenue (NICO)
PW000660 v Lorlec Limited No: ST105115 in the Stafford County Court  The Inland Revenue should have filled in Application Notice N244 and sent a fee of £30 .This they did not. The Staffordshire County Court  dismissed the above case as the HMRC had not renewed properly.  It turns out that such an action by the HMRC was not isolated. As a consequence we have wasted another year whilst  the Revenue have argued with the courts about these protective writs. Eventually they won the Hyde Industrial Case after the appeal had taken place saying that the Courts were wrong in placing a time limit for renewal of a protective writ.  This is now 10 years since Croxtons Ltd. advised on the last of the cases. It is over 3 years since Nicki Potts  of the DSS agreed to select one specimen case to go to appeal. So all these innocent law abiding citizens and companies have continued to be harassed about these cases.  Why you may ask? Well here are a few of the reasons which the press and politicians should start to look into:


a) All these matters in regards to Protective Writs were basically a matter of interpretation between the County Courts and the Inland Revenue. In most of these cases, as stated before, the Inland Revenue had tried to avoid paying County Court fees  and filling in the appropriate forms. ( What if we all did the same to the Inland Revenue? ). The consequence has been that Lisa Sugarman and her cohorts at the Revenue's Solicitors office at Somerset House have been applying for costs against the Companies they are challenging. We even had a recent case where £10,000 worth of household furnishings were rightly given to an employee by a boat company. If NIC had been paid the bill would have been £1100. The  Case was withdrawn but those wonderful money grabbers at the aforementioned office sent a bill for £492. Against our wishes the harassed accountants paid up. This is bureaucracy gone mad. HOW DARE THEY MAKE OTHERS PAY FOR THEIR DISREGARD OF THE LAW.  All this because they had not kept a promise to  select a test case ,which they agreed with us in May 2003.


b) The next feature is their policy of chipping away at Iffy cases such as trusts, Platinum sponges, gold coins and debts in order to obtain decisions in their favour. These cases had little to do with normal "benefits in kind"
. In some of these cases title never passed- in others the object was  to avoid NICs.   Yet each time they got a decision they tried to harass companies who has, as the law proscribed, utilised normal everyday items.

c) Now ,guess what, Sugarman has announced they have a timetable for an appeal in regards carpets. Well we believe it is carpets. But what is she calling the carpets?  The answer Commodities !!!!!!!!!!!!   Why does she do that ? Because there are markets in commodities such as coffee, oil, or even pigs trotters. There has never been one on household items.  I do not go to a a commodity exchange to buy carpets..... I go to a furnishing retailer or carpet dealer, So come off it Lisa lets call a spade a spade.  Obviously the most used "benefits in kind" were household furnishings. Under the law those "benefits in kind" could not be chosen by the recipient. So when they received them they may not have been the style or colour that suited the recipient's home. So he either sold them or exchanged them for household furnishings acceptable for his/her home. It appears that this was not in keeping with the people at the HMRC!!

d) Instead of chasing poor innocents who have obeyed the law of the land they should be looking at TAX EVASION. Much has been written by the Sporting Press about the Soccer Bungs... and whether their has been a breach of Football regulations. Come off it. The most obvious point , in my opinion, was that most of the BBC's televised programme amounted to people asking for cash or payments into Swiss Bank Accounts. This is EVASION & more important than FA laws. But no a boat company obeying the law in the midlands is easier meat,

e) The Solicitor's office has now admitted that they are challenging 72 of the 1250+ carpet "Benefit in Kind" purchases.  Drummond & Co are handling 59 of those cases but they have not informed them of the forthcoming "selected" appeal.  No they will send the papers 48 hours before the hearing as is their wont.

f) My last charge is Regionalization. Except for a handful of cases in the Halifax are of Yorkshire virtually all the other cases Drummond & Co are handling are in the corridor between Wolverhampton and Manchester. An area of diminishing returns and small industrial companies struggling to survive. Yes they are attacking those companies least able to be able to afford to fight them. One client in Lancashire has told us he was being driven to suicide. If there is are offences for racism, feminism, religious persecution etc., why isn't there one against regionalism. For this the HMRC are guilty.


This article is being sent to all MPs in the area and is freely available for any other journalist to re-produce. Any response by the Inland Revenue will, of course, be published. We shall be glad to hear from them.

Michael Davey
Drummond & Co
16 High Street
Chard,
Somerset
TA20 1QB
0870 794 2180
drummondco@talktalk.net





  • Croxtons Ltd United We Stand
    NO COURT HAS AGREED THAT NIC PAYMENTS ARE TO BE PAID ON THE ORIENTAL CARPET SCHEME. DO NOT BE FOOLED INTO PAYING ON DSS/INLAND REVENUE PRESUMPTIONS 
    • Hovis on his magic carpet
      Hovis
      Hovis, the Incumbent at No 10 Downing Street has now admitted that he is trying to collect National Insurance Contributions that he is legally not entitled to. December 2nd 2004 Pre-Budget speech. We have now had two members of Parliament write to  Rt. Hon Dawn Primarolo, the Paymaster General at the Treasury about the Inland Revenue's actions in this matter. They are David Laws, MP for South Somerset and Rt. Hon Oliver Letwin, MP for West Dorset. We have also noted Mr Harnett of the Treasury's answer to Question 109 to the Select Committee on Economic Affairs in House of Lords on June 20th 2005. What a way to try & include oriental carpets by comparing them to platinum sponges used for catalytic converters on cars. He should realise that he will get splinters in his foot without carpets on his floor or does he think oriental carpets are a mode of transport.
    Oliver Letwin
    Open Letter to Oliver Letwin MP, Shadow Chancellor - November 2004
    FOR THE ATTENTION OF OLIVER LETWIN MP 
    Please excuse us for taking the liberty of writing to you in the next door constituency but we felt as Shadow Chancellor that there is a ridiculous state of affairs happening within the Inland Revenue.
    As you are aware the Inland Revenue over the last few years has been collecting National Insurance Contributions. We have 49 client companies who, as a result of Mrs Thatcher's admirable Social Security Act 1979, paid their staff bonuses in "Benefits in Kind".

    Of the 1200 cases written by one of our sister companies paying in Oriental Carpets the Inland Revenue belatedly started to demand payment of NIC on 5% of them. The basis under which they were written was no different than the remaining 95%, which have not been challenged.

    The last case was written in November 1996 and the Inland Revenue have never been able to get any Legal Judgement on these transactions. However they held up any determination in the hope of getting a Judgement. What the Inland Revenue did not realise was that under Section 9(I) of the Statute of Limitation 1980 they had to inaugurate Legal Proceedings on NIC payment "within 6 years of the date of causation".

    In most cases they failed to do this. Because of this they are "time barred" from collecting the NIC's if they were ever deemed to be due. They are still demanding that those 49 companies submit an "appeal" to Commissioners to ascertain whether they could have demanded those NIC's.

    On their own admission lawyers representing each of those appeals would cost the Revenue ( and therefore the taxpayer) £5,000 that is without the other costs and time involved. In some cases they are trying to ascertain collections of as little as £1100.

    With no legal means of collection they are willing to spend £245,000 on lawyers. The overall costs would be in excess of £500,000. This they are doing in the name of procedure. Maybe they are advertising for more staff to lighten their heavy workload.

    We are requesting that they prove to the Courts that they are not "time barred" before running up ridiculous costs on this matter. They refuse. As a large desperate appeal we are writing to you as these actions are the direct result of the Chancellor giving £6 million in last year's budget (2003) to try and collect money from tax avoidance.

    We run a website on this matter on www.ukinformedinvestor.co.uk/page8.html where the situation is explained in full Trusting you may assist in this matter.

    Response from Rt. Hon Oliver Letwin MP on 29th December 2004
    Thank you for your email of 29th November. I am sorry to be so late in replying. I must say that the tale you have to tell is a very extraordinary one and I have written the attached letter to Dawn Primarolo about it, in the hope this may lead to her calling off the dogs of war.

    Letter from Rt. Hon Oliver Letwin MP to  Rt. Hon Dawn Primarolo, Paymaster General, Treasury Chambers, Parliament Street, London, SW1P 3AG
    I attach a copy of an email I have received from Drummond & Co, 16 High Street, Chard, Somerset TA20 1QB.
    As you will see, it tells a rather extraordinary tale in relation to the Inland Revenue.
    I should be most grateful if you could let me know whether it is really the intention of Ministers that such matters should be pursued in this way.



    taxmen
     The Dogs of War
     David Laws
    Letter from David Laws MP for South Somerset to  Rt.Hon. Dawn Primarolo, Paymaster General, HM Treasury , 1 Horseguards Road, London, SW1A 2HQ
    16th December 2004
    I am writing to you on behalf of my constituent.

    He came to see me at my advice centre in Chard on 11th December 2004, to raise a number of concerns that he has about recent actions by the Inland Revenue.

     I should explain that Drummond & Co are tax advisers with many years experience and have advised a number of companies about issues relating to National Insurance Contributions on benefits in kind, going back to the 1980s and 1990s.

    They tell me that in spite of the fact that National Insurance Contributions are covered by the Statute of Limitations, the Inland Revenue is pursuing many cases across the country prior to 1998 - and going back as far as 1991, where they are trying to penalize people for tax structures that sought to minimize National Insurance obligations, which I understand were perfectly legal at that time.

    They point out that this is not only causing a lot of distress to people who run businesses including small businesses as well as large businesses, but it appears to be running up a huge volume of legal costs in spit of the fact that there would appear to be a time bar which does not allow the Inland Revenue to go back over these cases.

    I would be grateful if you could let me know what your views are on this matter, and whether it is sensible for the Inland Revenue to commit a great deal of resources to these types of cases when it may not be possible, under the law, to retrieve  any National Insurance Contributions which were legally avoided.

    Gordon & dawn
    Dawn & Hovis
    Response from Dawn Primarolo MP, Paymaster General to David Laws
    18th January 2005

    Dear David,
    Thank you for your letter of 16 December on behalf of your constituent Drummond & Co of 16 High Street, Chard regarding benefits in kind and the collection of National Insurance Contributions (NICs).

    I understand that the Inland Revenue (HMRC) has for some time been looking at the use of payment/reward schemes promoted by Drummond & Co.

    Drummond & Co has suggested to you that the HMRC are pursuing cases which are subject to a "time bar". In England and Wales, collection of NICs is subject to the Limitation Act 1980. This means that action to recover NICs debts must be brought within 6 years of the cause of action (e.g. failure to pay on the relevant due date).

    Where we consider that it will not be possible to conclude a case within the limitation period, perhaps because of an appeal likely to take more than 6 years, the HMRC protects the debt by starting proceedings in the county court ( known as issuing a protective claim) and immediately seeking an adjournment until the outcome of the appeal is determined. Thus, while the HMRC would not seek to collect NIC debts subject to the 6 year time bar, they are able to collect debts more than 6 years after the due date where these debts have been protected.

     

     Drummond & Co has also alleged that the HMRC are seeking to penalise people for tax structures which sought legitimately to minimise payment of NIC's. Under Regulation 19(1) (d) of the Social Security (Contributions) Regulations 1979 a "payment in kind" was, with certain exceptions, exempt from liability for NICs.
    However, it is the view of the HMRC that some advisors have stretched the definition of payment in kind beyond its limit - it is not accepted that all schemes successfully avoided NICs. The HMRC has a duty to protect public revenues and to collect duties that are legally due. It is therefore the aim of the HMRC to test schemes, each of which has its own individual features, through the relevant processes.

    Various schemes have so far been tested before the General or Special Commissioners and in some cases before the Courts.

    I am afraid that I am not able to comment in any more detail because Drummond & co has only described concerns in very broad terms. However, with assistance from Drummond & Co, it would be possible for the HMRC to bring matters to a close more quickly. I hope that Drummond & co will find this helpful.
    Yours,
    Dawn
    Dawn Primarolo MP


    Further Letter to David Laws MP From Drummond & Co


    Dear David,
    Re HCM/Misc Cases 0
     
    Thank you for your letter and copy of letter received from the
    Paymaster-General received this am .
     
    I am sure that you will agree that your letter has not been answered. We know what the law is in regard to the Statute of Limitations and it is our
    contention that the Inland Revenue are wasting tax payers money by pursuing cases where they have either not even applied for a protective writ ( An example Ki-Hara Chemicals Ltd) or have applied for the
    Protective writ out of time (Excalibur Plastics Ltd). In those example cases and 49 others they have failed to prove that they instigated
    proceedings within six years from the "date of causation" as proscribed by the Statute of Limitations 1980.
     
    I have mentioned 2 cases as example specifics. It is also interesting to note the statement "stretched the definition of payment in kind beyond its limit".

    We can not understand why these small businesses ( mainly in a corridor between Wolverhampton and Manchester) have been singled out as being any different to the other 95% of Croxton Ltd's clients, who did exactly the same.
    Especially as most of these businesses are family run and the controlling directors
    used the benefits in kind system to enhance their final pensions. As controlling Directors they could have taken dividends and still not pay National Insurance Contributions. Many cases of "benefits in kind" in the
    £millions using the carpets have not been challenged. But some as little as £10,000 ( final NIC bill approx. £1100) have been.
     
    These cases are obviously selective and in specific areas. We have no cases in the South ,or South East. In the case of Excalibur Plastics Ltd the Judge asked the Inland Revenue to prove that they were not "time barred" before the case could proceed. The onus of proof is on the plaintiffs (Inland Revenue) - this they have failed to do but still continue with the costly business of an appeal.
     
    The case of Ki-Hara Chemicals Ltd and several others is more blatant as there has never
    been even an outdated protective writ.
     
    These are 2 specifics as an example- we have 49 others of similar nature.
    Thanking you for your assistance
     
    Drummond & Co,
    16 High Str
    eet, CHARD,
    Somerset TA20 1QB
    Tel : 0870 794 2180
    www.ukinformedinvestor.co.uk

    THE POLITICAL PRESSURE SHOWN ABOVE HAS CREATED A RESULT. BELOW YOU CAN READ THE TYPE OF LETTER BEING RECEIVED BY INTERESTED COMPANIES. THANK YOU
     DAVID LAWS MP & RT.HON. OLIVER LETWIN


    HM REVENUE
    & CUSTOMS

    Anti-Avoidance Group (Intelligence)
    Risk Longbenton
    SF7201 (S) Norham House
    Benton Park View
    Newcastle Upon Tyne
    NE98 1ZZ
    Tel 0191 2247460
    Monday - Thursday 8:30am until 4:30pm
    Friday 8:30am until 4:00pm
    Fax 0191 2254972
    www.hmrc.gov.uk
    4 October 2O05
     
    Dear Sir

    Payment of remuneration by Oriental Carpets
    Year 1995(1996, Section 8 Decision Issued 14 June 2000


    I refer to the open appeal against the National Insurance Contributions (“NIC's”) decision under section 8 of the Social Security Contributions (Transfer of Functions etc.) Act 1999 (“the Transfer Act”).

    As you will be aware. all of the liabilities determined by the above decision arose more than six years ago and have not been paid. Her Majesty's Revenue and customs (“HMRc”) takes the VIEW that these liabilities were correctly determined and that payment is still due. However, unlike the position with regard to the recovery of taxes or duties, the recovery of unpaid NICs is subject to the operation of the Limitation Act 1980. Section 9(1) of the 1980 Act provides a complete defence to the recovery of statutory debts that have been due for over six years, and provides as follows;

    “An action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued’.

    Consequently, the basic rule is that no action may be brought to recover unpaid NiCs more than six years after the date on which the cause of action accrued, which in the view of HIMRC is the date on which they first became payable. The position is of course different If a protective court claim has been issued within the six year period, or If one of the recognised exceptions to the operation of the 1980 Act applies, such as an acknowledgement or part payment of the debt within section 29(5). it is also possible for the parties to agree that no limitation defence will be asserted, for example in a so-called ‘standstill agreement”. However, HMRC accepts that none of these exceptions applies in the present case. Accordingly, even if the open appeal listed above was to be determined In HMRC favour, HMRC would be unable to collect the NiCs if a lImitation defence were subsequently raised.
     
    In these circumstances, HMRC has concluded that in general It would be wasteful of resources (on both sides) and of court time to continue to litigate the question of liability for periods In respect of which a limitation defence could be expected to be raised if liability were established. The above appeal fails within this general category, and HMRC therefore seeks your co-operation in disposing of the appeal in a convenient and expeditious manner which will not Involve any admission of liability one way or the other.

    What we would propose i.e. that we agree that, In consideration of your agreement to withdraw your appeal, HMRC undertakes not to take any further steps to seek to establish liability to NICs pursuant to the decision under appeal, and also undertake not to commence or prosecute any proceedings for the recovery of any such liabilities. HMRC has been advised by Leading Counsel that an agreement in this form Is one into which it may properly enter In exercise of the powers of collection and management of NiCs conferred on it by s. 3 of the Transfer Act. (as amended by s. 51(3) Commissioners for Revenue and Customs Act) and that any such agreement would be legally binding on both sides.

    Yours faithfully
    Duncan Rowlands
    Compliance Advisor



    Now we have to ascertain the situation in regards so called Protective writs which we believe were not applied for within the six years as stipulated by S.9 (1) of the Statute of Limitations 1980. We shall continue to fight cases and get the  Revenue to prove they are not "time barred".

    news Accountancy Age Page 2  January 20th 2005
    OUTRAGE OVER NI ON BENEFITS IN KIND

    The Inland Revenue is seeking payments from scores of companies it feels have avoided national insurance by paying their employment bonuses through benefits in kind, such as expensive rugs and fine wines, writes David Rae.

    Tax advisers representing the companies claim the Revenue's efforts are pointless because the bonuses were paid more than six years ago, and are therefore outside the six-year statutory time limit.
    "despite this, the Revenue is demanding that all 51 companies go through the appeal process which will cost them both time and money and the tax payer at least £500,000 for a debt they cannot legally collect." said Michael Davey of Drummond & Co tax advisers.

    Davey initially established many of the benefits-in-kind schemes in the eighties and nineties, when he was chairman of tax consultant Croxtons.

    In a letter to Shadow Chancellor Oliver Letwin, Davey said: " We are requesting that (the Revenue) prove to the courts that they are not "time barred" before running up ridiculous costs on this matter."
    Letwin - together with Davey's constituent MP, Liberal Democrat David Laws - has since written to Paymaster-General Dawn Primarolo in the hope that it "may lead to her calling off the dogs of war!"

    The Revenue was unable to comment


    • October 2004
  • The Inland Revenue continue to try & force companies to appeal against their outdated decisions. We are replying to all letters as follows:

      • CROXTONS “Director’s Cut “ORIENTAL CARPET SCHEME
          NIC Mitigation

        Thank you for your letter dated  October 2004 addressed to our clients, which has been received by us today.
        Whilst we appreciate that the Inland Revenue has procedures we are most perturbed in regards the inconstancy of their actions in regards Oriental Carpets.

          The facts in this case are so simple that even a first year law student would understand it.

        A)    All cases written utilizing the use of Oriental Carpets as a “Benefit In Kind” were completed over six years ago and are now time banned under the 1980 Statute of Limitation. Even in cases where the Inland Revenue applied for protective writs they failed to have them issued in time or to renew them in time. In a recent case in regards to Excalibur Plastics Ltd (Claim No: 4SQ01947 in the Stoke on Trent County Court) the judge stated for the matter to go ahead the Revenue must prove that it is not time barred before the case can be heard. The Revenue has failed to prove this.
        B)    Ms Nicky Potts (In your Newcastle office)
        informed us in April that the cost to the Revenue for barristers to attend an appeal is in excess of £5000. As the amounts being sought are minimal (In one case £1100) the Revenue is wasting Taxpayers money on these farces of appeals, as there is no means of collection.
        C)    Under the case of Furniss v Dawson (19840 55 TC 324.) Justice Wilberforce stated that presumption of intent could not be utilized in such cases. Therefore unless you have definite proof that the Oriental Carpet Scheme was set up for the purpose of avoiding NIC you can not proceed.. If you have such proof then you will have to show it to a Court of Law. The burden of proof is on the Inland Revenue not for our client to appeal against. Therefore the appeal is an irrelevance.
        D)    We consider that the actions by the Revenue are no more than common harassments on our clients and we are advising our clients to report the individuals who sign letters or make phone calls to be reported for harassment under S.40 of the Administration of Justices Act 1970.


          We shall not waste taxpayer’s money by answering these ridiculous epistles about appeal procedures. They are time barred and irrelevant and the threat of fines which can not be collected outside a Court of Law are laughable. We are only interested in proceedings in a Court of Law, which are commenced within six years of date of causation. Otherwise our clients do not wish to discuss this matter further.
        So far we have written to the following employees of The Inland Revenue with the above letter warning them about harassment::
        D.J.Alcock
        Employer Compliance Manager
         Worcester and Hereford Area Compliance, Block A, Governmant Buildfings, Whittington Road, Worcester, WR5 2LE
        B.R.Bartlett
        Employer Compliance Officer

          NW Midlands & Shropshire Area Compliance, Pattison House, Midland Road, Walsall, WS1 3TX
        Mrs.G.Handley  Employer Compliance Officer
         Staffordshire Area Compliance, Blackburn House, Old Hall Street, Hanley, Stoke On Trent, ST1 3BS
        A.Kirkup  Employer Compliance Manager
        Notts & Derbyshire Area Compliance, Mowbray House, Castle Meadow Road, Nottingham, NG2 1BQ

        Nick Macartney
        Employer Compliance Officer

        Norfolk Area Compliance, St Cuthbert's House,7 Upper Street, Norwich, NR3 1UX
        A.Mitchell
        Employer Compliance Officer

        East Lancashire Area Compliance, Stone Cross House, 21-27 Churchgate, Bolton, BL1 1YA
        D.J.Reader
        Manchester Area Office Compliance, Albert Bridge House, 1 Bridge Street, Manchester, M60 9AF   

        Neil Shepherd, Compliance Executive
        Bradford Midland Compliance, Centenary Court, 1 Blaise Way, Bradford, BD1 4XY


      • May 24th 2003- 

      Good News for all NIC Schemes


    • Oriental Carpet Scheme
    • We have received a copy of the "Notice of Allocation to
      the Fast Track" in regards the case of "Inland Revenue Ni Contributions Office-v-Duvine Developments Ltd."( Claim Number CB300566 in the CambridgeCounty Court) in which the Inland Revenue are claiming NIC Contributions on an Oriental Carpet "benefit" paid to employees of the company.

      The notice  reads that it is ordered "...............
      3. Defendant to file and serve a fully pleaded defence relating to limitation act arguments as well as any other points, no later than 4.00pm 12th June 2003.....................
      11. The matter be listed for final hearing before a District Judge or Circuit Judge with a time estimate of one day in the trial window commencing 6th October 2003 and ending on 27th October 2003."................................"

      We believe that this case opens the way for the Inland Revenue Ni Contributions Office to prove their case before the Courts . This places the onus of proof on the plaintiffs. We further believe that the existence of this case makes any appeals in regards to Oriental carpets as "benefits in kind" unnecessary and we   recommend  that all pending appeals be adjourned on the outcome of this case. We shall be notifying all clients, and inspectors of taxes concerned 



      We also believe that we can show the courts the fundermental differences between the existing cases they are quoting where trusts and platinum sponges were utilised. Oriental carpets,coins, jewelery,antique clocks and wines are a completely different matter. Our fighting fund team are prepared to act for any company who utilised any of the above.


      Call us on 0845 868 2810 for up to date information on the Oriental Carpet Scheme or 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 or an appeal as their hearings are more like inquisitions. Just refuse to pay and take the cases to law.  Recently Drummond & Co have been acting for several companies who participated. The cost to each company is £250. So far over £100,000 has been saved in potential NIC payments the Inland Revenue were demanding. Most of the local Inland Revenue Officers dealing on these cases have little clue to what they are writing. They are just topping & tailing letters from some anonymous so-called lawyer. These demands are little short of harassment as no Class 1 NIC liability exists.
         
      • If you have recently received a letter in regards to the six year limitation Act do NOT agree.   Instead defend the case stating that the moneys are not owed and the plaintiffs have had six years to produce documentation. Ask for the action to be dismissed. These actions are County Court actions and are a cheap way to defend. Further we have learnt that where a company paid on a without prejudice basis , the Revenue forgot to invoke a protective writ under the Limitation Act. Now in breach of the common law they are refusing to return the money. If any other company has had such dealings please contact us.

      •  
      • In regards the provisions of the Limitation Act 1980 we have found that many of these protective writs were applied for out of time. The Act states in section 9(1) that the time limit shall be "six years from the date on which the cause of action accrued". Obviously the "cause of action" in the Oriental Carpet scheme was caused when the participating company GAVE THE ORIENTAL CARPETS AS "BENEFIT IN KIND" TO THE RECIPIENTS. Most of the protective writs have been taken out to co-incide with the end of the tax year or the Inland Revenue's accounting period. Both of those dates are inapplicable.  So carefully check the date of the protective writ. If you have not had a protective writ put on the claim then the Revenue are out of time anyway.

      •  
      • The recent cases on which the DSS got a result was based on platinum sponges. There is no relevance to these cases to oriental carpets despite what the DSS says. The DSS has had in excess of 8 years to try and produce an even reasonable case against the Oriental Carpet Scheme. This they have failed to do. The Limitation Act 1980 was put into place to protect the public against these long running non substantive claims. The last Oriental CaRPET scheme WAS WRITTEN IN NOVEMBER 1996. tHE 6 YEAR PERIOD IS UP.   However to confuse the select committee on Economic Affairs on June 20th 2005 Mr.Harnett of the Treasury continued to mislead by combining Oriental Carpets with revisionary interests in trusts, shares and platinum sponges. We presume he lives on bare boards- he should watch out for the splinters they can be very painful. Would you send him out to post a letter? (ref: Question 109).  Maybe he does keep jars of platinum sponges in his larder!

      •  
      • If you have an appeal pending drop it and then refuse to pay the NIC. The proof that Class 1 NIC liability debt exists in a court of law is a matter for the plaintiff. If the DSS are foolish enough to take the participating company to court for the NIC then the onus of proof is on the DSS.As things stand if there is an appeal then this administrative tribunal asks that the participating company prove that Class 1 NIC NIC liability does not exist. Also remember there is no obligation for companies to retain paperwork for more than seven years. This means that they can no longer answer questions on matters written more than seven years ago. It may also be that the section (49) that the appeals have been placed under only applies to Income Tax and not NIC.


    THE REVENUE's ARGUMENT

    • Recent copycat letters from the Inland Revenue have stated they are relying on judgements reached in the NMB Holdings Ltd and Westmoreland Investments cases and the use of the Ramsay argument. The Inland Revenue takes the view that the Ramsay  principle  applies to what they call "off the shelf" avoidance schemes where non cash assets are provided. They say that they consider the Oriental Carpet Scheme is similar to the platinum sponge scheme in so far as the provision of the asset was simply a means to reward employees in cash. However the reason they are giving has no relevance to the Oriental carpet scheme. 

    •  
    • They state that Lord Hoffman in the Westmoreland case says: "I have no doubt that Langley.J. was right when he recently decided in NMR Holdings Ltd v Secretary of State for Social Security that a payment of bonuses to directors in the form of platinum sponge held in a bank, accompanied by arrangements under which they could immediately sell it for cash to the bank, was not a payment in kind which fell to be disregarded for the purposes of NICs. In commercial terms the directors were paid in money. It is obvious that such a transaction was not what the Social Security Regulations contemplated as a payment in kind"

    •  
    • They go on to state that they view the Oriental Carpet Scheme as a series of paper transactions, which had no business purpose other than the avoidance of NICs.


     THE REAL FACTS

    1. In response it is our opinion that the Oriental carpets were bought by many companies as were other products like wines by companies who took possession of them. They then decided to give those carpets/wines to employees and directors as proscribed by law. Those carpets/wines were those to give, not paper transactions. Title then passed to the recipients who accepted them without reservation. There was never any agreement between the providers and the recipients to sell them back. In fact the providers of the carpets/wines had the option to utilise the carpets/wines, keep them as an investment or sell them to any purchaser including the original provider at the going market value.

    2.  
    3. There was no bank or third party holding the carpets/wines. They were just stored in a bonded warehouse in the name of the recipient or actually held by the recipient. Therefore in no way can Lord Hoffman's statement be relevant.

    4.  
    5. Secondly if the directors were also shareholders they could not be seen to be avoiding NICs they would not have had to pay if they had opted to take as dividends. One can not avoid a "tax" that they did not have to pay in the first place. On this basis the revenue would be unsuccessful in trying to utilise the  "Ramsey" principle. In fact as  shown in our brochure "The Directors Cut" (See below) there never was an "arrangement" for the Oriental Carpet Scheme. It was utilised to benefit pension rights or other reasons. Nowhere in our folders did we set out the scheme to avoid NIC, in fact by utilising the scheme it would have meant better pension rights and less eventual cost to the DSS.

    6.  
    7.  Croxtons can show the real intention thus  DSS & Revenue's presumption can not be utilised as stated by Justice Wilberforce in Furniss v Dawson {1984}STC 153.  
    8. If one takes Justice Wilberforce's decision one step further it appears to us that the DSS/Revenue are presuming tax avoidance. If this is so then it can not be utilised.

    9.  
    10. The DSS accepted many hundreds of the Oriental Carpet purchases. They only contested a few that were transacted in 1995/6 and 1996/7. In some cases the same companies gave carpets more than once (as recipients were so pleased to receive them). The original "carpet benefits in kind" were accepted by the DSS and subsequent ones were not. The DSS and the Inland Revenue have failed to explain why there are such discrepancies in their decisions.

    11.  
    12. As stated before there is no substance to the Revenue's argument. Read on for earlier points of law and opinions.
    13. As shown the Revenue are now sending out the same letter regardless of the case. One client had golden jewellery mentioned as the "benefit in kind" when they had in fact bought oriental carpets. 

    14.  
    15. Remember UNITED WE STAND.


    Croxtons Ltd.
    March 6th 2003

    UK Fax No : 
    0870 831 9011






    Please note that Drummond & Co are now writing both NIC & Income
    Tax mitigation plans. The present scheme is written in such a way that neither
    the Inland Revenue or DSS can actually realise the scheme exists.
    It just appears as a normal trading act.
    Fuller details can be seen on Tax Mitigation (Click Here)
     
    CONTENTS/Click on relevant parts if you do not wish to read through
    The Basic Legislation
    The Latest Developments
    Croxtons NIC Suggestions
    Subsequent Actions by the DSS
    Subsequent Action by the Inland Revenue
    The Documentation
    Counsel's Original Opinion
    Further Opinion
    Extra Opinion
    Press Comment

    THE BASIC LEGISLATION

    As is the custom in the United Kingdom certain statutes are passed by Parliament. These statutes become the law of Britain and citizens are expected to oblige by such statutes.

    In the Social Security ( Contributions) Regulations 1979 Regulation 19(1) was enacted. It provided:
    "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 insofar as it is ..... (d) any payment in kind".

    This legislation was in place throughout the period that Croxtons Ltd. were recommending their plans.
     
     

    CROXTONS LTD's NIC SUGGESTIONS

    Since 1991 the Croxtons Ltd.  promoted two separate ” Benefit in Kind” schemes to assist clients mitigate National Insurance Contributions. The First was the “Grapevine Scheme” which used fine wines. All the schemes were successful and the scheme ran until legislation stopped the use of wines where excise duty had not been paid in August 1994. Thereafter “The Oriental Carpet Scheme ” replaced it until we withdrew it in November 1996.

    Both 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.

    "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"


    In consequence the following was printed in the explanation folder.

    "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 " seeking evidence" 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


    We have recently been advised that a Company had asked the Secretary of State for Social Security whether the conferment of interests in oriental carpets are earnings for the purposes of liability for National Insurance Contributions.

    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:

    1. Was this scheme set up for the purpose of avoidance?
    My Comment:

    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) 

    2. By selling the carpets within a short time of the purchase that it must be presumed that the Directors of the Company and the Recipients had intended to do so all along.
    My Comment:

     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. 

    3. Did your firm or any other person provide a set of draft documents to XYZ company to be used in the transaction for the payment of a bonus
    My Comment:

    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 

    4. Did you physically inspect all carpets utilised?
    My Comment:

    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

    Gripes are commonplace in the financial world. But the circumstances surrounding the situation of Croxtons Ltd and the Inland Revenue's Special compliance Unit in the North West should be looked into deeper. Croxtons Ltd has since 1991 been advising on NIC mitigation schemes.

    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".
    They took away papers and computers pertaining to Croxtons Ltd.

    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.
    When asked if they knew the result of their damaging raids the representatives of the Inland Revenue apologized. End of Story?
    Or are there any bright lawyers out there who feel they can get recompense for Croxtons Ltd ?
    We shall be pleased to publish any reply by the Inland Revenue on this matter.

     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 Documentation
    Croxtons' Brochure On THE DIRECTORS CUT
    THE DIRECTOR'S CUT
    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
    The reasons for this are listed herein:
    1.) DIVIDENDS MORE COSTLY
    Many Controlling Directors may be paying more than 40% tax because
    of the way the Inland Revenue treats the taxation of dividend payments.
    (See comparisons herein).

    2.) CORPORATION TAX REFUNDS
    Losses created by a payment of "A Benefit in Kind" may be carried
    back up to three years and Corporation Tax refunds may be received.

    3.) MAY BE PAID IN DIFFERENT PROPORTIONS.
    "Benefits in Kind" may be paid in different proportions to Shareholdings.

    4.) MAY BE PAID IN DIFFERENT YEARS
    For Income Tax purposes recipients may wish to receive "Benefits inKind" in different tax years. If Dividends are taken they must beboth proportional with the shareholdings and at the same time.

     

    A Controlling Director who takes extra out of his company as " Benefitsin Kind" through THE ORIENTAL CARPET SCHEME should only be taxed at40% ( If a Higher Rate Tax payer ) and will not be liable for National
    5.) PENSIONS CONTRIBUTIONS
    The value of the Carpets when received by the Recipient will be "
    relevant earnings" for pensions purposes. This is because they are
    emoluments chargeable to Income Tax under schedule E. This is not
    the case if the Recipient selects the dividend route.

    6.) CORPORATION TAX
    The Company will obtain a deduction for their expenditure upon the Carpets since it will be incurred in order to provide remuneration to the Recipient. This is, of course, subject to the normal restrictions that the remuneration must be justified as being wholly and exclusively for the purposes of the employer's trade.
     

    ADVANCED CORPORATION TAX EFFECTS
    Since 5th April 1994 a majority shareholder in a private company wishing to pay himself a dividend will receive £56.25 net for every £100 distributed - making an effective tax rate of 43.75%. The effective tax rate assumes that the company pays the smaller companies tax rate of 25%. For companies in the marginal rate (35%), the effective rate of tax when paying dividends to a high rate tax-payer has risen to 51.25%

    By paying via a benefit in kind the effective Tax Rate will be lower:.

    COMPARISON

    The following comparison is based on a Company wishing to restrict it's total bonus payment including costs and payment of the recipient's tax to £100,000

    BONUS   DIVIDEND  BENEFIT
    Payment   £ 90745   £75000 £1000000
    NIC Suffered  £90750  nil   nil 
    Cross up for Taxation 
    ACT  nil  £18750  nil 
    MCT  nil    £62500  nil 
    TOTAL COST TO 
    COMPANY
      £100000 
    £100000 
      £100000 
    EFFECTIVE TAX RELIEF FOR
    EMPLOYER
     £25000  £18750  £25000 
    NET COST FOR 
    EMPLOYER 
     £75000 £81250  £75000
    HIGHER RATE 
    TAX 
     £36296  £18750  £40000
    NET  RECEIVED BY 
    RECIPIENT 
    £54,447 £56250 £60000
    % DEDUCTION FROM EMPLOYER'S 
    CROSS COST
     45.55%  43.75%    40%

    The above information is based on our interpretation of the regulations. Croxtons Ltd, and M.Shokri & Associates Ltd. cannot accept responsibility for the information contained herein. 01/10/95

    CROXTONS ORIENTAL CARPET SCHEME
    Regulation 19 (1) of the Social
    Security (Contributions) 1979
    provides:
    "For the purposes of earnings-
    related contributions, there shall be excluded from the computation of a person's earnings in respect ofany employed earner's employmentany payment is so far as it is ........(d)any payment in kind....."

    Oriental Carpets in Bond are a
    "benefit in kind" within Regulation
    19(1)(d). This has been confirmed by Tax Counsel who states : " In
    my opinion, the transfer of Oriental Carpets under the scheme as outlined,would be a "payment in kind" for the purposes of this Regulation."
    -David Ewart, Pump Court Tax Chambers. 27th September 1994.

    The position has not been altered
    by Regulation 3(a) of the Social
    Security (Contributions) 
    Amendment No.4 Regulations 1995. 
    Tax counsel states that " the 
    Persian Rug Scheme does not
    involve " trading arrangements"
    .......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". 
    David Ewart-Pump Court Chambers, 16 Bedford Row, London - 2nd May 1995

    Therefore, any payment of bonuses etc. made by an Employer to an Employee(In this case a Controlling Director)  in the form of Oriental Carpetsin Bond should provide the following benefits:
     

  • NOT BEAR THE EMPLOYER’S NATIONAL INSURANCE CONTRIBUTION OF UP TO 10.2%

  •  
  • NOT BEAR THE EMPLOYEE’S CONTRIBUTION

  •  
  • CORPORATION TAX 
  • DEDUCTABLE

  •  
  • TREATED AS RELEVANT EARNINGS FOR PENSIONS
  • An Employer wishing to remunerate an Employee with Oriental Carpets
    in Bond should find it preferable
    to purchase the Oriental Carpets
    in Bond from renowned experts in
    this field.

    For this reason CROXTONS LIMITED are pleased to have the co-operation of M.SHOKRI & ASSOCIATES LTD. The world renowned specialists in Antique& Contemporary  Oriental Carpets and Rugs. 

    In order to acquire Oriental carpets on this basis, we would recommend the following process:

    DOCUMENT  1
    1) The Company purchases Some Oriental Carpets in Bond. These transactions will be arranged by M.SHOKRI & ASSOCIATES LTD. 
    To ensure the security of the
    payments M.SHOKRI & ASSOCIATES LTD.HAVE AGREED THAT THE MONIES ARE HELD IN A SPECIAL INDEPENDENT CLIENT'S ACCOUNT HELD BY :
    DICKINSONS  of  Enterprise House, 135 High Street,
    Rickmansworth, Herts WD3 1AR. 

    DOCUMENT 2
    2) At a later date the Company 
    holds a Board meeting whereby the Board Directors resolve to remunerate the Employee(s) by way of Oriental Carpets.

    DOCUMENT  3
    3) The Employer writes to the 
    Employee stating that the Directors
    have decided to remunerate the Employee by giving him/her Oriental Carpets, informing him/her or the options available and requesting instructions as  to their disposal.

    DOCUMENT  4
    4) The Employee sends a letter to 
    the Employer asking for ownership of the Oriental Carpets to be transferred into the Employee’s name.
    DOCUMENT  5
    5) On receipt of this letter the
    Employer should complete an instruction to 

    transfer ownership form authorising the transfer of ownership to the
    Employee.

    DOCUMENT  6 ( Optional)

    6) Recipients may wish to keep some or all of their Oriental Carpets as an investment and may do so.  On payment of the relevant taxesan d duties they may have them delivered to themselves.They are also
    free to dispose of them as they so wish, They are transferred to the
    recipient to do as he/she wishes with them
     Should the Recipient wish to sell all or a number of his Oriental
    Carpets in Bond he/she is perfectly at liberty to do so. This sale may be to other individuals, auctioneers or traders in Oriental Carpets including M.SHOKRI & ASSOCIATES LTD. 
    Should he/she decide to sell to M.SHOKRI & ASSOCIATES LTD. then a form authorising the sale and giving instructions as to the paymentof the proceeds of sale should be signed.
    The Example Documents numbered 1 - 6 are attached. NB Documents 1 and 5, the instruction to purchase and transfer forms, require authorised
    signatories.
    INVOICES, CERTIFICATES OF OWNERSHIP AND BILLS OF SALE.
    Various documents covering the transactions will be issued by M.SHOKRI & ASSOCIATES LTD.  , any proceeds of sale will normally be sent by CHAPS to any authorised bank account in the UK, within 48 hours of the completions of the transaction.

    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. 

          E & OE 1/10/95

    DOCUMENT  1 
                      INSTRUCTIONS TO  PURCHASE 
     (tobe completed on Company Headed paper)
    To: M.Shokri & Associates Ltd.
    6 Mount Road
    LONDON, NW4 3PU

    From : ................................................................ 
                              (Company.Name)
    ......................................................................

    (Company.Address)
    ..................................................................... 
    ..................................................................... 

    Please purchase..........................Oriental Carpets

    For and on behalf of................................... 

              (Company Name)

    Signed..................... Signed........................... Authorised
    Signatory                Authorised Signatory

    Date...............................Date..........................
     

    DOCUMENT  2
    XYZ Trading Company Ltd
    Minutes of Board Meeting
    Held on Thursday 28th November 1991, 2.p.m.
    at Headquarters, Principal Avenue, Mainhead, Staffs.
    Those present: 
                                          - Director
                                                                      -
    Director

    - Director
                                                       - Company Secretary

    Having already bought a number of cases of Oriental
    Carpets in thename of the Company it was resolved to make the Oriental Carpets noted below, available to the following Employees as a benefit in kind.
    The benefit in kind is made available to the Employees on the understanding it may only be taken in Oriental Carpets.
    Employee                  No. of Oriental Carpets as detailed Name
                            on M.Shokri & Associates's Invoice 
    (a) Mat Ress                 .........................................
    (b) Mary Gin               ..........................................
    (c) Sarah Finlay            ........................................
    There being no further business, the meeting closed
    ..................................................................
    Chairman
    DOCUMENT  3
    (to be completed on Company Headed Paper)

    Date..................... 
    From: The Employer
    To : The Employee

    Dear ........................
    The board of Directors have decided to 
    make available to you

    .....................................................................
    Oriental Carpets
    on the ........... 199 ....., and we will need 
    to know in what name and address you would like the carpets registered. Once this has been completed, you will have three options
    1. You may arrange for the carpets to be delivered,
    2. You may keep the carpets as an investment.
    3. At any time you may sell the Oriental Carpets. This can be done through auctioneers such as Christie's or Sotherby's. Alternatively you may sell your carpets to another carpet dealer including M.Shokri & Associates Ltd.
    We would be pleased to provide you with further information should you require it.
     

    DOCUMENT  4
    (to be completed on plain paper , with the 
    Employee’s name and address)
    Date....................
     From : THE EMPLOYEE (Recipient)
        To : THE EMPLOYER 
    Dear ................................................. 
    Thank you for your recent letter informing me that you 
    will be holding
    :
    ....................................................Oriental Carpets

    Please transfer the total amount of Oriental Carpets to
    me, registered in the details shown below:

    Full name of Employee

    .............................................................

    Address : ...........................................................................

    ...........................................................................

    Yours faithfully,
    DOCUMENT   5 
    (To be completed on Company Headed paper)
       INSTRUCTIONS TO TRANSFER OWNERSHIP

    To: M.SHOKRI & ASSOCIATES LTD., 
    6 Mount Road, 
    LONDON, NW4 3PU
    From ........................................................ 

        (Employer)
    Please transfer ownership of the Oriental Carpets to the undermentioned persons
    listed below. In the amounts shown:
    Name of Recipient       Details as  Number of Carpets  -   per invoice as per invoice
    a) ........................................................... 
    b) ............................................................. 
    c) ............................................................ 
    d) .............................................................. 
    e) ................................................................ 
    For and on behalf of ...........................................................
               (Company Name)
    Signed. ...................   Signed ................. 
    Authorised Signature      Authorised Signature
    DOCUMENT   6( Optional) 
     (To be completed by the Recipient
    on plain paper, with the Recipient’s name and address) 

     INSTRUCTIONS TO SELL

    To : M.SHOKRI & ASSOCIATES LTD., 
     6 Mount Road, 
     LONDON, NW4 3PU                          Date:.................

    From ......................................................... 
    (Recipient’sName)

    a) Please sell all the Oriental Carpets owned by myself and send theproceeds of sale to : .................................................................... 
    ............................................................... .....
    or (b) I would like to retain the following Oriental Carpets which are held as detailed below - please sell the balance:

    Name of Oriental Carpet as per invoice 

    ................................................................... 
    ................................................................. 
    Full Name of Beneficiary..............................................
    Address where payment to be sent ............................................................... 
    .................... ............

    M.Shokri & Associates Ltd
    M.Shokri & Associates Ltd are one of the largest importers and Auctioneers
    in Antique and Contemporary Oriental 
    Carpets and Rugs. Only a company
    of their size and reputation could supply the needs for CROXTONS ORIENTAL
    CARPET SCHEME. They are members of I.F.F.A.I.C 
        6 Mount Road, London, NW4 
      Tel: 0171 275 0269 
    Fax : 0171 275 0259 

     BANK DETAILS 
       Dickinsons Client Account
    Re: M.Shokri
    & Associates Ltd
    National Westminster Bank Plc, 
    Bishopgate Branch, 
          15 Bishopsgate,London,EC2P  2AP
    Sort Code: 50 00 00 T 
    Account No: 97242071

    Croxtons Ltd
    Croxtons Ltd, who set up THE  ORIENTAL CARPET SCHEME, was started by an Chartered Accountant, an Investment & Tax Consultant and a Financial Consultant who had been involved with running Unit Trust and Fine Wine NIC mitigation schemes for many years.

    Enterprise  House, 
    Beesons Yard, Bury Lane, 
    Rickmansworth,
    Herts WD3 1AR
      Tel : 0181 445 1826 
    Fax : 0181 445 2456 
     Directors : D.Anderson,
    M.Davey,
    P.Rudman (France), 
    C.Sayer 


     

    COUNSEL'S OPINION

    DAVID EWART. Pump Court Chambers, 16 Bedford Row, London, WC1R 4EB
    27th September 1994.

    ORIENTAL CARPET AND RUG SCHEME (CROXTONS)

    1. My understanding of the proposed arrangements is as follows. An employer wishes to pay a bonus to an employee in Oriental Carpets rather than in cash. The employer purchases the Carpets from a dealer. The Carpets are in a bonded warehouse. The Board of Directors of the employer company then decide to transfer certain Carpets to certain employees by way of bonus. The employee is informed that he will receive his bonus in Oriental Carpets which he may have delivered, keep in bond or sell. The employer transfers ownership in the Oriental Carpets to the employee. The employee is then free to keep the carpets or sell them to anyone including, of course, the dealer from whom the Carpets were originally purchased.

    2. I shall deal with the various taxes under individual headings.
    National Insurance Contributions

    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........."
    Social Security Contributions and Benefits Act 1992 section 3 (1).

    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.
    Income Tax

    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


    15. The employer will obtain a deduction for his expenditure upon the Carpets since it will be incurred in order to provide remuneration to the employee. This is , of course, subject to the normal restrictions that the remuneration must be justifiable as being wholly and exclusively for the purpose of the employer's trade.

    Pension Contributions


    16. The value of the Carpets when received by the employee will be " relevant earnings" for pensions purposes. This is because they are emoluments chargeable to income tax under Schedule E ( see paragraph 7 above) : TA 1988 644 (2) (a).

    Value added Tax


    17 When the employer transfers the Oriental Carpets to the employee there will be a deemed supply of goods under VATA 1983 Schedule 2 paragraph 5 ( 1 ) as the Carpets will no longer form part of the assets of the employer's business. However, since the goods ( the Carpets ) are subject to a " warehousing regime " and the " duty point " has not been reached, the supply of those goods is treated as taking place outside the UK: VATA 1983 section 35 ( 1 ). therefore there is no UK VAT charge : VATA 1983 section 2 ( 1 ). There would only be a VAT charge if the employee were to remove the Carpets from the bonded warehouse.
     
     

    FURTHER OPINION

         DAVID EWART. Pump Court Chambers, 16 Bedford Row, London, WC1R 4EB
    Ist 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 OPINION

    DAVID EWART. Pump Court Chambers, 16 Bedford Row, London, WC1R 4EB
     2nd May 1995

    RE: CROXTONS ORIENTAL CARPET SCHEME

    1. 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".


     
     
     
    Press Comment

     
     

    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."

     

     

    PEMBROKE COLUMN 


    By Nigel Cope in the Independent- Pembroke Column. October 18th 1994

    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.

    Taxman targets 'fine wine' payment deals
    By Allson Steed
    (Filed: 2 2/04/2003 Daily Telegraph)
    City bankers, already suffering because of lower bonuses and job fears, are now the key targets of an Inland Revenue crackdown on tax avoidance schemes which have cost it more than £1 billion.

    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.
    'We are very sorry for people who have found themselves in this position. Usually they have been misled by heavy selling."

    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
    are not worth very much.
     

    "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.
     


    Open Letter to Dave Hartnett,
    Deputy Chairman of the Revenue.
    Wednesday, 30 April 2003

    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:
     

    • a) There has been no case where the courts have passed any judgment in regards the use of Oriental Carpets as a “Benefit in kind”.
    • b) Our client’s stand by the opinion of tax barrister, David Ewart, (who I believe also acts for the Inland Revenue) written on 1st & 2nd May 1995, in regards the meaning and interpretation of Regulation 3(a) of the Social Security (Contributions) Amendment (No.4) Regulations 1995 and which has been admirably made available on www.ukinformedinvestor.co.uk and on our website www.geocities.com/drummondco  site. This states that there were no “trading arrangement” in place.  The only contract was between the carpet supplier and the companies concerned and was for the purchase of carpets. There were no conditions whatsoever for the supplier to buy back the carpets. The Company never sold back any of the carpets they purchased.
    • c) Much has been written by your adviser in regards the application of Ramsay. However there are certain criteria that have to be met before that application can ever be considered. They are:
    • 1. There has to be a declared intention that the actions of the company were put into place for tax avoidance purposes. Justice Wilberforce stated this in Furniss- v- Dawson (1984) 55 TC 101 that presumption of intention could not be used. Secondly we fail to see how a controlling shareholder, who could have taken a dividend instead of a “benefit in kind” can be seen to be avoiding National Insurance Contributions he did not have to pay in the first place.
    • 2. In the “ Directors Cut” folder as shown on the aforementioned website you will find six other reasons as to why taking “benefit in kind” was more beneficial to controlling directors. One of them is better “final salary” pension right, which in turn is beneficial to the DSS. The recent cases on platinum sponges NMB holdings and MacNiven v Westmoreland Investments Ltd only went against the companies because there was no transference of funds and have no similarity whatsoever to the use of Oriental Carpets as a “benefit in kind”. In those cases it was realized that the transactions included the fact that the company never took possession of the “platinum sponges” and that the bank involved “lent” the money for the transactions. In the case of the Oriental Carpets there was a distinct purchase and transfer of a consideration for those carpets.
    • 3. The Company’s responsibilities as to the carpets ended with the transfer to the recipients as “benefits in kind”. Those carpets were given as a “benefit in kind” freely and without any future embargo on what the recipient could do with them. The actions of the recipients outside of office hours are not the responsibility of the company.


    Be assured Mr. Hartnett that we, at Drummond & Co, will act for all companies who approach us in regards this matter. As long as they have prepared their papers as was proscribed by the law we believe you have no case whatsoever. Any company can partake of our assistance by joining the “Fighting Fund” for £250.

    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, 
    The Editor - Informed Investor


    Croxtons Ltd
    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.
    USE OUR COMMUNITY TO DISCUSS IDEAS AND PROBLEMS WITH OTHERS
    OUR SERVICES ARE FREE RECOMMEND US TO A FRIEND

    24 hour Hotline  Tel: Hotline
    Fax : +44(0) 845 862 1954
    Emails(UK) :
    croxtons@
    informedinvestor.co.uk

    email
     

    Click below for details about Croxtons Grapevine Scheme and Opinion
    FOR DETAILS ABOUT THE GRAPEVINE SCHEME

     

    Tell A Friend about 
    the INFORMED INVESTOR
    Type In Your Name:

    Type In Your E-mail:

    Your Friend's E-mail:

    Your Comments:

    Receive copy:


     
     
     
    CONTENTS- CLICK ON TO READ THE ARTICLES .
    Go to THE EASY VIEW INDEX OR USE ONE BELOW
    Annuities Banking and Credit Cards Bordeaux Managed Wine Investment Plan
    Business Health Check up Business Search Capital Gains Tax Mitigation
    Capital Redemption Policies City Watchdog Corporate Future Profits Plan
    Computer Tips Computer Training Croxtons Carpet Scheme(NIC)
    Croxtons Grapevine Scheme(NIC) Day Trading Debt Problems & Bankruptcy
    Downloads Employee Benefit Trusts Film Investment
    Freeware Gizmos Good Deeds
    Heartrendering Income Tax Mitigation Inheritance Tax Mitigation
    The Language of the Wine Label The Brewery Net Page  Offshore Cyberspace for E-Commerce & Day Trading
    Offshore Tax Opportunity OY-VEY Jewish Jokes Patti's Fun page
    Pensions & Retirement READERS OWN PAGE Residential Property Investment
    Search Engines List Telecommunications Cost Reducer Truman Brewery media directory
    Useful Web Sites Wineline- Buy and sell wines on line Wine News
    The Informed Investor is prepared in the Netscape Navigator format and may look lopsided in Internet Explorer or Opera browsers. We apologise for any inconvenience
    The Informed Investor
    List of Interesting UK Sites
    Click on to the exact word
    Arts
    Automotive
    Business UK
    Computers
    Discovery
    Games
    Home
    Kids
    Legal
    News
    People/Chat
    Recreation
    Reference / Education
    Regional
    Shopping UK
    Sports
     Society
    Travel


    At £4.99 Go out & Buy Computer Active's Book on Websites-
    It's well worth the money


    Directoryfind
    is the UK financial services industry net directory. 

    It is an award-winning site which links directly to over  3000 UK financial services companies.
    http://www.find.co.uk

     A
     Click Me!
    Britain's foremost tax, financial opportunities & debt councelling Newsletter in 35th year Wessex Tourist Board
    Visit ukbanners.com
         
     

      Hotline
     
     
     www.ukinformedinvestor.co.uk
    HIT COUNTER
     


     

    email