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April 2020 Tax Investigation Round Up

April's round up of the latest tax investigation news and cases:

  • Director fined £10k over failure to provide pensions information
  • Five arrested in relation to loan charge fraud
  • Eamonn Holmes loses First-Tier Tribunal

Director fined £10k over failure to provide pensions information

Michael Wooley director and shareholder of Southbank Capital Ltd and director of PIM Trustees Ltd failed to appear before Brighton Magistrates' Court after claiming he would be in Cuba for a diving holiday.

Wooley was required to provide information to The Pensions Regulator (TPR) in respect to an ongoing investigation about investments relating to money and assets from 16 pension schemes.

The money was invested in Southbank Capital Ltd. The information was originally requested by the TPR on 22nd January 2019 with a deadline of 12 February 2019. Wooley continually failed to meet deadlines for the information without reasonable excuse.

The court heard that one of the main reasons for failing to hand over the requested information and documents was that Wooley had claimed he was busy qualifying for a sailing competition - the Fastnet Race.

District Judge Tessa Szagun stated that as the sole director there was no reason that Wooley could not have accessed the required information and that his failure wasted time and resources of the TPR. Wooley was fined £10,000 and ordered to pay £2,800 in costs within 28 days.

Erica Caroll, TPR's director of enforcement, stated “The use of our information gathering powers is essential in our work to safeguard people's pensions. Anyone refusing to comply with our requests without good reason should take note - they could find themselves in court with a criminal record.”

Five arrested in relation to load charge fraud

Recently HMRC officers have been more actively investigating numerous offences including conspiracy to cheat the public revenue; conspiracy to evade income tax and national insurance contributions; fraud by abuse of position and conspiracy to transfer, disguise and/or convert criminal property.

Most recently, over 100 HMRC officers searched business premises in Birmingham, Coventry, Worcestershire, Northumberland, Buckinghamshire and Northern Ireland. Digital devices, computers and personal records were seized during the raids.

Five individuals were arrested on suspicion of fraud in connection with promoting arrangements designed to avoid paying the loan charge. They will be interviewed under caution by HMRC officers while a sixth individual from Birmingham will be interviewed voluntarily under caution.

Disguised remuneration schemes are arrangements that pay loans in place of an ordinary remuneration. These are usually through an offshore trust and are done in a way to avoid income tax and NICs. They are therefore not repaid in practice. These interventions are the latest investigations into fraud offences by the HMRC in relation to disguised remuneration tax avoidance schemes.

This investigation is ongoing and further information will be released in due course.

In relation to this, a spokesperson from HMRC’s fraud investigation service stated “Those that enable, promote or facilitate tax fraud are firmly in our sights and we currently have more than 200 such suspected enablers under criminal investigation.

“We are keen to protect the public from those who devise and market fraudulent schemes which at best do not work and at worse mean that people could end up being involved in fraud.

“People need to think extremely carefully before they enter into any scheme that claims to significantly lower your tax bill. If something looks too good to be true, then it almost certainly is. HMRC’s advice is firmly to steer clear.”

Eamonn Holmes loses First-Tier Tribunal

TV presenter Eamonn Holmes has worked in journalism for four decades and regards himself as a freelance journalist and broadcaster and as a 'gun for hire on my terms.' The case involved Holmes' personal services company (PSC) called Red White and Green Ltd (RWG) which was first established in 2001. Within this company he did freelance presenting work on ITV's This Morning over a timescale of 15 years.

The IR35 tribunal was told that there were four contracts between the broadcaster and RWG during this period and heard the details around them. Within these contracts, there were gaps during which Holmes continued to work for This Morning but under another company - Holmes and Away Ltd.

However, under the IR35 rules, the judge determined that his contract with ITV's This Morning amounted to that of employment. Holmes argued against this stating that his work with Sky News between 2011 and 2015 took up more of his time than his work on This Morning. Over this period, he also claimed to do other broadcasting jobs and other work on a self-employed basis.

Nonetheless, the tribunal heard that for the tax years 2011/12 and 2012/13 his main income was from the work he did on This Morning. Holmes told the tribunal he was “in total control of what needs to happen” when on air and that he was hired because he could engage an audience with his specialist role of the 'anchorman.' RWG was required to provide Holmes on an 'exclusive basis' however, there was a list of dates including Fridays (with some inconsistencies in July and August) and Monday to Thursday dates in other weeks.

Holmes' lawyer Robert Maas argued that he did not receive any benefits that employed individuals would have such as holiday pay or sick pay and there was no provision regarding pension or training. Holmes did, however, receive a full payment if ITV cancelled any dates and could not reschedule them. He also received a fixed fee for each programme, a clothing allowance of £5,000 and expenses and accommodation paid for as well as the provision of a car for travel.

Judge Morgan in reaction to this stated “I cannot see that, under the principles set out in case law, the provision of any additional enhanced benefits, in excess of the statutory minimum, is an integral part of an employment relationship.

“In my view, the fact that a putative employer has chosen not to provide such benefits does not of itself indicate that a relationship is not one of employment where the other substantive legal rights and obligations of the parties evidence the contrary.”

For the periods ending on 30 April 2013, 30 Aril 2014 and 30 April 2015, RWG's accounts is shown as having turnover from business activities of £267,862, £634,762 and £1,025,348 respectively.

In conclusion to Holmes' case, the FTT said there was enough mutuality and a sufficient framework of control to suggest that Holmes showed signs of the employment factors with ITV. Stating “On that basis and, having regard to all other relevant factors, my view is that overall, throughout all relevant tax years, the assumed relationship between ITV and Mr Holmes was one of an employment rather than self-employment.”

In reaction to this a HMRC spokesperson exclaimed “HMRC welcomes the judgement, which confirms that we took the right approach. The tax rules require that employment taxes are paid even where a person works through their own company. HMRC ensures that tax is paid in accordance with those rules.”

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