HMRC Enquiries for EBT Loans from Cascade London

 In HMRC Investigation, Penfolds Ltd

This post is taken from ContractorUK

If you used Cascade Management Solutions in the 08/09 tax year – and were issued interest free loans (EBT) by Penfolds Ltd – then most likely you have or will be receiving a discovery letter from HMRC. This letter says “Although described as loans, I believe that these sums relate to your professional work in the UK and are taxable income.”. Based on this HMRC are requesting that the tax which is outstanding be paid within 30 days or you can appeal.

This thread is for those who have received the letter or believe they are likely to receive it – please read the following carefully as it may answer some of your questions.

Firstly – we are forming a group of those affected by this – the group is there to share information, support each other and in the case that for any reason Cascade fail to support us then we are not alone. To join this group please see information at the bottom of this post.

FAQ’s – Please note this is not professional advice, this information comes from what has been discussed in the group and Cascade have advised – it is up to you to make your own decisions on how to deal with this.

Which tax year(s) have been affected?
HMRC have so far only issued 08/09 letters to Cascade, it is quite possible other tax years will be targeted although this could be determined by how successful appeals are. For those still using cascade, HMRC have already request more information for 10/11 tax returns though it was not a discovery letter

Who has been affected?
Anyone who was with Cascade during this tax year should expect a letter.

I have not got a letter or I have moved/I am away.
If you are receiving this letter it will also show on your HMRC self assessment portal and seeing if a request for payment is there. If it is suggest you contact Cascade Management Solutions ASAP for advice. You have 30 days to appeal or pay and it is highly unlikely HMRC will accept the excuse “I didn’t receive my letter”. It is very important not to miss the deadline.

I have received the letter what should I do?
You have 2 choices, either to pay or to appeal – if you wish to pay then you can follow instructions on the letter itself. However it is strongly believed that this could be a scare tactic by HMRC and they want a few quick wins. If you do pay then that may be seen as an admission of guilt and they could come asking for other tax years.

If I appeal what will happen?
Through appeal payment will be postponed until the matter is resolved. After KS has replied, HMRC might contact again. At this stage we don’t know what HMRC might come back with or even if they will come back. If they come back and keep pursuing this actively and we are unable to get in agreement with HMRC then this matter will go for an independent tribunal. At this stage we think tribunal would be HMRC against Penfolds or HMRC against all Penfolds Employees instead of it being HMRC against each individual. Generally HMRC only goes to Court if they have high chance of winning and it might also happen that nothing happens for a long time after we have appealed. HMRC might wait if they able to win a case against an EBT before following up this matter. May be this exercise from HMRC is to keep their options open based on Discovery window for 08/09 closing in Mar 13. So after appeal, it might go quite a few ways and we will have to wait for HMRC’s next move.

Then is it better to pay up then?
That is your personal choice, for many of us affected we have no choice. The amount that HMRC are demanding (and could demand if other tax years are looked into) would be much more than we could repay and thus bankruptcy would result. Therefore even if appeal was lodged and lost and fine was imposed we would be in no worse position but at least have fought against this injustice. Remember you own these loans to Penfolds EBT. By paying HMRC tax, loans do not become void. As far as we understand, these loans are 100% legal and recallable on demand by Penfolds. Take professional advice before paying HMRC as it might be by paying situation becomes worse.

Is the appeal likely to succeed?
There is no assurance that it will – we do not know if/what new information HMRC have got. However Cascade/Penfolds/Kingston Smiths believe that there are very good grounds to appeal. Particularly if you have the tax return for that year and that the loans were declared upon it.

I wish to appeal what should I do?
Cascade/Penfolds have instructed Kingstons Smith to appeal on those affected behalf, they know exactly how the scheme was configured and the general consensus is that they are best placed to appeal on our behalf. If you are planning on appealing please contact Sean at Cascade Management Solutions on 020 7562 7911. It is strongly advised that you find your tax return for the 08/09 tax year.

What will happen once I have spoken to Cascade?
Cascade will put you in touch with Kingstons Smith who will appeal on your behalf. This may take a few days while they prepare.

Should I appoint a tax specialist?
Again this is personal choice, however they are really not cheap and unless Penfolds/Cascade fail us they are still best placed to help appeal. The opinion of the group is in the first instance go through Cascade/Penfolds.

Does Cascade/Penfolds have a contingency plan in case the appeal fails?
This was asked of Cascade by a few of our members and the answer was :~

“At this stage, Kingston Smith have been appointed to coordinate the responses to these letters. If (and it is still a big IF at this stage) HMRC request further information, I expect that Penfolds would engage Kingston Smith for the next stage of the process, but as yet I haven’t heard that that has been confirmed.”

What if Penfolds/Cascade stop supporting us?
This is the reason why we are forming a group of those affected, whilst now Penfolds are doing a great job in defending their scheme, there is the concern that at some point this stops being financially viable or they feel they will loose. If this is the case and they were to liquidate this would leave us as individuals vulnerable. Whilst it is not believe this will happen it is better to prepare for the worst and hope for the best. If the worst does come to the worst we will have a much higher chance of success if we act as a unified group. We do not wish to sidetrack Penfolds/Kingston Smith at this point but in the future we would like to ensure we have access to any documents Penfolds hold which we may need to defend ourselves in the future. We have been unable to find a case where HMRC has taken individuals to tribunal. This is not to say that has been the case but we have only been able to find HMRC against EBTs instead of HMRC against individuals using an EBT.

Please be mindful of what is discussed on this thread – HMRC WILL be keeping an eye on it

How do I join?

This is a private group created to help each other and share information and ONLY available to those which

1) Were part of Cascade/Penfolds
2) Have (or suspect0 they have the 08/09 Discovery Letter

We have created a private community where those affected can share information, advice and support and therefore we are only allowing people to join who are willing to verify they are who they say they are (and not HMRC). If this is too much to ask then please do not request to join – we take this very seriously.

If you do meet the criteria and are willing to be verified to join the group – please email this “spamacus” email (which I have stup to protect my own identity) cascaders.20.costo@spamgourmet.com with the subject “Cascade ContractUK”. Please note admins know who I am and have agreed for me to do this. On receiving the email I will send you details on how to verify yourself.

Click here to see the origional post.

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