“How this works is you would sign up to services as an employee through PNO Umbrella. Once you submit your timesheets, they would then raise an invoice to the employer/agency you’re contracting through and once they are in receipt of the funds from the employer/agency they will pay you the same day. First of all, you will receive a salary payment of£300 weekly/£1200 monthly of which your tax and national insurance will be deducted by PNO Umbrella as your employer. Then the remainder of your funds is remitted in the form of a commercial loan and with any genuine and legitimate loan it does have to be paid back, as otherwise it would not constitute a loan. To add comfort to you they hold a bonus pot for you & once the funds have been received the funds are then submitted to you, therefore meaning the loan has-been written off immediately. As with everything we do here to make your life as easy as possible, as well as all fees and taxes being deducted at source, as is the interest or additional charges associated with this indemnity, leaving you safe in the knowledge that when you receive your funds you have no further deductions to pay further down the line. To get set up on the employed service, we will just need an application form completing either over the phone, or the [ComparetheUmbrella.co.uk website] and if you could also send me pictures of your proof of ID and address over email that will speed up the registration process and you just need to tell your agency/end client that you are using PNO Umbrella as your payroll provider and they would follow up with the company information.”
“… the only thing you put in your self-assessment(s) is the salary amounts you receive”
“… constituted the receipt of up to 85% of the monies relating to the provision of the participants’ services in the form of a “loan” which the participants did not expect to repay and which was not expected to attract income tax (or national insurance contributions) on the basis that the monies did not comprise taxable earnings for those purposes (at least at the time of receipt).”
“199. While I accept that the legislation is penal and Parliament must therefore have intended the meaning of ‘tax advantage’ to be clear, I think that it is clear that Parliament intended to refer to economically similar contrast situations (as well as legally identical ones). A layman, including promoters and users of the scheme, when considering a scheme would consider its economic reality and not its legal form and should understand ‘tax advantage’ in the same way. 200. In conclusion, I find that the scheme gave, or was expected to give, rise to a tax advantage because it was intended to avoid or reduce the charge to tax on salary which would otherwise have been received by scheme users, had they not adopted the scheme and received equivalent sums in an economically similar, but legally distinct form, of small salary and large loans which were not expected to be repaid (at least not in their lifetime).”
“… I would find that the main benefit that might be expected to arise from the arrangements was the obtaining of that advantage. This is obvious from the evidence such as §§69-76: it was clear that the scheme was marketed and sold on the basis of its tax advantage (as described above). In any event, there is no other rational reason for why anyone would implement a convoluted and expensive set of arrangements which left them with a legal (if economically unreal) obligation to repay a sum that they would otherwise have received as salary, save for the expected tax advantage. It seems an obvious and logical inference that the scheme was implemented by scheme users because of the desire to obtain the tax advantage that was at the heart of the marketing of the scheme. Objectively speaking, the main benefit that might be expected to arise from the arrangements would be the tax advantage.”
“In determining the amount of the penalty, the Tribunal must take account of all relevant considerations (s 98C(2ZB) TMA). (1) “[The] usual considerations which apply when the imposition of a tax penalty is in question, include[e] such matters as the reasons for non-compliance, the extent to which the position has been remedied, the gravity and duration of the non-compliance, the presence of aggravating or mitigating factors, the availability of other methods for HMRC to recover the tax at risk (most obviously by making an assessment, if necessary on a best of judgment basis), and generally the need to achieve a fair and proportionate outcome, having regard to the interests of the public purse and the general body of taxpayers as well as the circumstances of the non-compliant taxpayer himself” (Revenue and Customs Commissioners v Tager[2018] EWCA Civ 1727 ,[2018] STC 1755 (“Tager”) at [88], [111], [112]). (2) When determining a penalty for non-compliance with s 308(3) FA 2004, the Tribunal is required by s 98C(2ZB) TMA to have regard also to “the desirability of its being set at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions”
“300. Mr McDonnell argued that the quantum of penalty should be relatively modest and that the penalty sought by HMRC was excessive not least because Hyrax was a relatively small company with a low income. That did not sit well with his arguments on the scale of the business in HRT. In our view the two must be considered conjunctly when looking at the question of penalty. It was those involved in Hyrax who decided to put almost all the income and expenditure through HRT. 301. As we have explained at paragraph 25, Judge Mosedale found that Hyrax retained 18.5% which was effectively them splitting the tax saving with the scheme user. HMRC have calculated that the gross receipts in the period were£37,608,000 which is approximately 18.26% which is broadly consistent with that finding. That means that the tax saving was a very significant figure. 302. We are not persuaded by Mr McDonnell’s unsupported assertion that HMRC should have been able to recover the tax that was at risk. Yes, they might be able to impose loan charges assessments etc on individual taxpayers but that would be time consuming, labour intensive and expensive. Although HMRC were aware, in very general terms, from the end of 2014 that Hyrax were involved in what they suspected was a tax avoidance scheme, because it was not notified and because HMRC had to have recourse to the Tribunal there was a considerable elapse of time. It would be disproportionate to have to pursue more than a thousand taxpayers (We note that at one point Joanne Macnamara misled HMRC by suggesting that there were only hundreds of taxpayers involved (see paragraph 161 above)). 303. We accept HMRC’s argument that the penalty imposed should act as a deterrent. It should certainly do so to deter others from deliberately setting up a company with a sole director who can at best be described as displaying Nelsonian acuity in regard to the company’s affairs. It should also act to deter those who rely only on the advice of the promoter of the tax avoidance scheme and a promoter who makes large sums of money from it. 304. We do not accept that the question as to whether the Hyrax arrangements were notifiable was extremely complex and therefore that was a reason for non-compliance. Sir Duncan Ouseley rightly described it as being a “rigmarole”. 305. The Hyrax arrangements had ceased to operate before the matter reached the Tribunal so no remedial action was possible. 306. We have considered all of the factors identified in Tager and weighed all relevant circumstances in the balance. We are particularly mindful of the fact that David Gill sought to hide behind Joanne Macnamara whilst at all times being actively involved. 307. We find that this was a very serious matter and the statutory maximum penalty is appropriate. The statutory maximum penalty for the period9 April 2014 to5 March 2019 , being 1,791 days at£600 per day totals£1,074,600 .”