Tax

We represented individuals often working for an umbrella company or for their own personal service company. These individuals had been marketed a tax avoidance scheme which in short involved the payment of minimum wage and the remainder of earnings due were paid by way of a ‘loan’, which they were informed would never need to be repaid. In some cases they were told the scheme was a condition of joining the umbrella company.

Unusually, the purported ‘loans’ had been assigned out of the Trust and have either directly or via other companies ended up being assigned to a company who made demands for payment.

Elysium reviewed over 107,000 pages of documents disclosed in this matter and it was clear from the review of these documents, together with evidence from Our Clients, that the loans were ‘circular’ and were never intended to be repaid. This was clearly a tax avoidance arrangement, and the loans were, in our view, unenforceable.

Elysium Law facilitated a mediation in order to narrow the issues in dispute. Following that Mediation, Elysium Law subsequently served upon the company a comprehensive letter of response that rebutted the claims on the grounds of collateral contract, misrepresentation and breach of trust.

For more information please read our article on this topic.

We were instructed to defend claims made against loan charge contractors who entered into marketed tax avoidance schemes but were described as legitimate tax mitigation by way of loan payments.

The individuals we represented numbered over 150, and the loans were being called in by a third party.

Our technology has enabled us to take documents directly and securely from each client, saving time and money. 

We reviewed over 107,000 pages of documents disclosed in this matter, and it was clear from the review of these documents and evidence from our clients that this was clearly a tax avoidance arrangement, and the loans were, in our view, unenforceable.

We facilitated a mediation to narrow the issues in dispute. Following that mediation, we subsequently served the company a comprehensive letter of response that rebutted the claims on the grounds of collateral contract, misrepresentation, and breach of trust.

For more information, please read our article on this topic.

Elysium Law acted for the Appellant in Hexagon Properties Ltd v HMRC [2022] TC08468. 

The First Tier Tribunal (FTT) found that the write-off of a loan relationship debt was not subject to tax under the loan relationship code as the profit which arose related to a compensation claim brought by the taxpayer against their bank and not to the debt.

• Hexagon Properties Ltd (Hexagon) brought a claim against their bank for mis-selling an interest hedging product.
• As part of the settlement of that claim, the bank released a debt of £3.5m.
• Hexagon filed their corresponding tax return on the basis that the debt release represented a payment in settlement of the claim. It was therefore a capital receipt outside of a corporate tax charge under the loan relationship rules.
• HMRC enquired into the tax return claiming the amount of the debt release was taxable as a loan relationship profit.
• Hexagon Appealed

The FTT allowed the appeal, finding the write-off was not a profit from a loan relationship.

This was a case of great importance and had a significant impact on the loan relationship rules.