Tag: LT4L

FAQS FOR SPOTLIGHT 63 VICTIMS (P118, LT4L, BAILEY GROUP)

Posted on by Ruby Keeler-Williams

Elysium Law have been approached by a number of individuals and professional advisers about what is rapidly becoming a serious issue for those who entered planning with Property 118, Less Tax For Landlords and Bailey Group.

In response to the mounting questions surrounding this issue, we’ve crafted this Frequently Asked Questions (FAQ) article, accompanied by our suggested answers.

Who are Elysium Law?

We’re a BSB Regulated Entity as a Direct Access Barrister firm with litigation privileges, which means that we can do the same work as a regular law firm but with the prestige and expertise of Barrister working directly on your matter, day to day.

We have successfully represented hundreds of people individually and in large groups in complex and high value group litigation.  We are here to help, so please get in touch with us if you’re worried about either of the above matters.

Are there any fees associated with initially getting in touch?

No. At this stage we are inviting potential victims of planning following HMRC’s Spotlight 63 to have an initial consultation with us where we’ll conduct a fact find and discuss the group litigation.

Following this, we’ll register your interest in the group litigation so we can keep you updated regarding our pursuit of the potential claims.

It is important that you appoint a professional tax advisor alongside pursuing any litigation. We are currently working alongside professional advisors.

Will HMRC know I have contacted you?

No. You are entitled to seek advice and we are qualified professional legal advisors and you have legal privilege in all our discussions with you. This means in simple terms that we cannot disclose anything discussed between us without your permission if the communication is kept confidential (apart from if a criminal activity is disclosed).

We’ll advise you further about legal privilege as part of the litigation.

What claims are you looking at?

We’re currently looking at claims in Breach of Contract and Professional Negligence in relation to the planning provided by firms Less Tax For Landlords, Property 118 and the Bailey Group.

Why should I get legal representation sooner rather than later?

There are legal limits as to when a claim can be made, known as limitation.

In Breach of Contract claims, it is 6 years from the date the contract (letter of engagement) was signed.

In Professional Negligence claims, it is 6 years from the date the loss arose. The date of loss will be different depending on the scheme you entered into. Examples here may include the of the tax return was submitted or the date when any tax liability arose.

We must progress through the pre-action protocols before we can issue a claim and ‘stop the clock’ on limitation. It is vital that there is sufficient time to fully assess the matter, fully advise you, issue a letter of claim on your behalf, allow 3 months for the other side to respond, deal with any letter of response and seek any pre-action disclosure necessary.

Additionally, you will need to mitigate (lessen) your loss, which in this case means settling with HMRC and reaching a tax compliant position. HMRC are aware of the planning and have issued Spotlight 63 and ‘One Too Many’ letters to notify taxpayers. You will need to appoint a professional advisor to liaise with HMRC and settle the matter, which will take time.

Is doing nothing an option if you have not received an HMRC nudge letter?

No . Registration with HMRC should be undertaken.

However we suggest that before doing so, you obtain advice from an experienced regulated tax advisory firm, who will assist you in regularising your tax affairs by advising you on the different tax payable, minimising interest and penalties if applicable and will help mitigate your losses in any claim we can assist with. Our advice is to get expert professional tax advice and subject to that advice attempt to settle with HMRC.

Why is it important to mitigate your loss

The rule of mitigation requires a claimant to take steps to minimise its loss and to avoid taking unreasonable steps that increase its loss. Whether arising from a breach of contract or breach of duty, the injured party cannot claim damages for losses that could have been prevented through reasonable measures.

Here, it will be essential to work in tandem with experienced professional advisors who can settle claims with HMRC.  This will assist us in calculating your losses and allow us to prove that you acted swiftly and responsibly.

What damages will you be seeking?

The damages will be carefully assessed for each client, but we anticipate claims including:

  • The Fees paid for implementing the planning
  • Tax Liabilities (potentially including CGT and SDLT)
  • Any loss relating to mortgage default due to the planning
  • Fees of any professional advisors to settle with HMRC and reach a tax complaint position
  • Accountancy fees regarding the two entities, cessations accounts
  • Legal Costs

What documents will be important?

We would like to see all documentation, but we’re specifically interested in these documents:

The Engagement Letter: The engagement letter is the contractual obligations of the advisor and we need to look at what they have expressly promised to do.

The Tax Advice: You should have been given solid advice that contain risk warnings. In some cases we are aware of, no advice was given. We will look at the content of the advice to see if it is legally sound and look for the risks warning which you should be made aware of. The absence of the latter will indicate whether there is a potential causation issue depending upon the strength of the warning.

Any Scheme Documentation: We need to see how the scheme has been implemented to see if it is technically correct. This includes any partnership documentation, any deeds of trust, any deeds of transfer, etc

Does it matter whether I have fully implemented the planning?

In a matter such as this, there will likely be different ‘classes’ of Claimant depending on the loss suffered.

This will likely be determined by how much of the planning has been implemented at each stage.

Currently, we envisage the following scenarios:

a.           Claimants who have paid fees but not implemented the planning;

b.           Claimants who have partially implemented the planning

c.           Claimants who have fully implemented the planning

How can I contact you?

You can contact us via telephone or email for a free initial consultation.

Elysium Law has an outstanding track record of bringing, defending and settling high-value and complex cases. With hundreds or even thousands likely affected following Spotlight 63, we are looking to advance a group claim. Contact us today for more information

Exiting Tax Avoidance Schemes following HMRC’s Spotlight 63

Posted on by Richard Gray

In this article, Richard Gray and Ruby Keeler-Williams of Elysium Law provide practical guidance for individuals navigating the exit process from tax planning schemes, notably those promoted by Less Tax For Landlords.

Let us start by thanking the CIOT for publishing the letter which is being sent by HMRC following Spotlight 63. This communication sheds light on the potential fallout from the tax planning schemes orchestrated by Less Tax For Landlords (LT4L) and other promoters.

To see this, you can access the article containing the posted letter on the CIOT website: HMRC One to Many letters concerning ‘Spotlight 63’ LLP property tax planning

Elysium Law have been approached by numerous victims of this particular mess and are looking at bringing claims in professional negligence, amongst other causes of action, against the perpetrators. Note, there are in fact a few providers presently in our sights.

One issue that we raised with the professional advisors with whom we work is the policy HMRC are adopting in relation to the recovery of the many specific tax liabilities this scheme will cause.

Following these discussions, we’ve put together this short practical guide for those affected.

Exit

Exiting a tax planning scheme such as those implemented by LT4L demands careful consideration and strategic planning, especially in the aftermath of HMRC’s Spotlight 63.

Reassessing the Declaration of Trust

The first crucial step in the exit strategy involves evaluating the effectiveness of the declaration of trust over the beneficial ownership of properties within the LLP. If deemed necessary, a change may be required to shift the beneficial interest back to the individual(s). However, it is essential to note that there are significant considerations in this regard, which we will address shortly.

Income Declaration and Section 24 Implications

Once the beneficial ownership is realigned, landlords must declare the income and expenses on the properties as they did before. This reinstatement to individual ownership brings Section 24 of the Finance Act 2015 into focus, particularly impacting the calculation of taxable profits for those with mortgages.

Liquidation of the LLP and Limited Company

In certain scenarios, the LLP and Limited Company member may need to be liquidated, but exercising caution is paramount. This step should only be taken post-settlement to avoid potential complications.

Potential Pitfalls of the ‘Transfer Back’

One of the critical issues in the ‘transfer back’ process involves the change in the corporate member’s entitlement to profits. The looming question is whether HMRC would perceive this transfer as triggering SDLT or CGT charges. While we remain hopeful that it wouldn’t, seeking professional advice before taking any action is essential. Waiting for HMRC’s confirmation or agreement on any arguments presented is equally crucial.

Filing Returns: Exercise Caution and Transparency

For those compelled to file returns before HMRC confirms their stance, it is advised to base your position on professional advice. Full transparency in filing, accompanied by a clear rationale for the chosen position, is vital. Acknowledge the possibility of amendments and be prepared to provide evidence if HMRC disagrees, as filing without proper advice poses the risk of penalties and additional taxes.

Settlement

Mixed Membership and Reallocation

In addressing the mixed membership issue, it is anticipated that HMRC may seek to reallocate profits back to individual members. Moreover, there’s a possibility that HMRC might go a step further and consider ignoring the LLP structure entirely, leading to the computation of tax on the individual(s) based on a ‘normal’ basis.

Corporate Income Tax Offset in Settlement

For corporates that have previously paid income tax on profits, there is a potential avenue to offset or include this in an overpayment claim. This can effectively reduce the ‘cash’ cost of settlement, subject to time limits. Similarly, income tax paid by individuals on dividends from the corporate may be repayable, further alleviating the financial impact of settlement.

Inheritance Tax Implications

While we hope that no participants in these arrangements have passed away, considerations must be made. If Business Property Relief has been claimed for Inheritance Tax (IHT), and it is deemed ineffective, HMRC would expect necessary amendments.

CGT and SDLT Liabilities

The transaction and reallocation of profits may have triggered liabilities in terms of Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). HMRC’s perception of the effectiveness of these events will determine the course of settlement. There’s a possibility (albeit a significant one) that HMRC may choose to ignore these issues. If not, computation and payment of SDLT and CGT become necessary, requiring careful consideration of available reliefs.

HMRC Registration and Policy Pause

While HMRC advises victims of this scheme to register, responsible professionals should encourage compliance. However, we recommend pausing a moment. As of now, HMRC has not disclosed its policy on these matters, making it crucial to stay informed and navigate the registration process with a clear understanding of potential implications.

Next Steps

In the initial phase, Elysium Law strongly advises seeking assistance from a professional adviser. Rushing into decisions without expert guidance may inadvertently lead to the creation of further tax liabilities. A professional adviser can provide invaluable insights, helping you make informed choices tailored to your unique circumstances.

It is highly likely that discussions with HMRC will be necessary to navigate the complexities of settlement and exit. Achieving a clear understanding of the precise terms for both settlement and exit is crucial. This ensures that you can leverage the benefit of any tax already paid, contributing to a smoother resolution of the situation.

Should you find yourself impacted by the aftermath of LT4L and the tax planning issues discussed in this article, Elysium Law is here to offer guidance and assistance. We recognise the complexity of the situation and the potential legal challenges involved, and our team stands ready to advise. Contact us today for advice on your personal circumstances.