Belfast Telegraph

Saturday 23 August 2014

HMRC sets November deadline for offshore loan trust admissions

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co

BMST sounds like a rather nasty disease. Indeed contact with it has produced some very nasty side effects and it can be expensive to cure. In fact the full title is the Bridgham Managed Service Trust.

This BMST is an example of an Employee Benefit Trust.

Essentially these work for someone who wants to reduce their UK tax bill. They typify the sort of ‘aggressive tax avoidance’ that the Government says it wants to cut out.

This particular scheme was promoted by Fred Robertson – now deceased. The taxpayer’s remuneration is paid to some offshore entity.  Then a different offshore entity ‘lends’ the person some money back.

Now that might sound a bit odd, so let me explain it further.

If I work directly for ABC Ltd in London earning £100K I will pay a fortune in tax.

Say I decide to sign up for one of these schemes. My contract of employment becomes with JKL in Jersey. My former employer now pays £100K to JKL.  No UK tax deducted.

Then PQR in Switzerland lends me £98K.  The loan is repayable on demand (but I understand they will never actually seek repayment.)

End result – I have £98K in my hand, have paid a few thousand in fees, and have paid no UK tax.

These arrangements have come under a lot of HMRC scrutiny in the last couple of years, and for them to pass muster all the paperwork needs to be spot on.

In the BMST case I understand from my HMRC contacts that this was a very sloppy example. HMRC would doubtless win if this went to Court.  As a result hundreds of people now face a big tax bill.

HMRC has written to these hundreds of people enquiring into a recent tax return they submitted.  This does NOT mean the enquiry is limited to one year.  It’s just a technical process of opening a door onto your tax affairs.  The Revenue can then go back to previous years as well if something is wrong, which it is if you used BMST.

HMRC is offering the carrot to people who worked though BMST to pay up their tax bills smoothly and simply.

30 November 2013 is an important deadline here.  By this date people must tell HMRC if they want to settle their tax bills due to involvement in this BMST scheme.  They can then tell HMRC in a simplified way how much they owe and arrange to pay it. This is much better than the alternative which is a wider HMRC enquiry which would last a long time and expose them to penalties etc.

There are so many of these BMST people that the caseload is being spread around 4 offices in the UK.

Once the taxpayer or their agent rings the helpline 03000 545 987 the details will be passed to one of these four.  Then that office will write out and start up the dialogue.

You can read more about this subject at www.huston.co.uk/blog

There is also a video at www.youtube.com

Our own firm is a specialist in matters of residency and overseas work, and thankfully some of the people caught by HMRC can rely on non-residency tests to reduce the tax bills. For the rest they need to get their skates on and contact either a tax specialist or HMRC directly.

November is too important a deadline to miss.

 

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co. Visit www.huston.co.uk or call 028 9080 6080.

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