Castlemaine Fiduciary Services Ltd – in liquidation

The above arrangement (“Castlemaine”) was in offered to Taxpayers in the 2014/15 and 2015/16 tax years.

Around February 2017 following a series of updates from the company, it went into liquidation with HMRC being the main creditor. James Cowper Kreston were appointed as liquidators. Public records of this, the liabilities and the creditors can be found here. In short, Castlemaine was unable to meet its liabilities to PAYE on behalf of its employees and was forced into liquidation.

Following this the liquidator issued a letter to former employees and alleged borrowers. This claimed that the former employees could settle an alleged liability with HMRC and if so, then the liquidator would not seek to collect the alleged loan made in 2015/16 tax year. This is also noted within the public record above.

The 2014/15 loans were beyond the reach of the liquidator, but former employees were encouraged to settle their position with HMRC for this year as well. A similar letter was issued by HMRC in February 2019 which had much the same message saying that HMRC would like to enter into contract settlements with the former employees. There was the implied threat in both communications that failure to reach settlement would see the liquidator seek repayment of the alleged loans. This is noted in the liquidators report above- “we continue to discuss with HMRC what enforcement action we might take against former employees who do not conclude their affairs“.

At that time WTT raised some substantive responses to assertions made, on behalf of its clients. Since 2019, the liquidator has remained silent on the matter.

We have become aware in the last few days that HMRC is preparing to contact former employees (presumably those who have not already reached a settlement) with much the same message, i.e. reach a settlement for the tax allegedly due or face repayment claims.

The view of WTT is that the money advanced to individuals was never a loan. Following the Rangers judgment, it was always remuneration for those acting as employees. Following a change of law and perhaps the Rangers case decided in the Supreme Court in 2017, the liability for deducting tax under the PAYE rules, fell upon Castlemaine.

HMRC by asking employees to settle their employer’s liability is acting wholly illogically, outside the various powers they have available and their actions in conjunction with that of the liquidators may well be without a lawful foundation.

If HMRC has raised PAYE assessments on the company, then they are the company’s liability. There is a legal mechanism by which HMRC can ask an employee to meet that liability, but this is subject to a number of terms and conditions which we believe have not been met.

Further the implied threat of the loans being recalled creates a number of practical and legal difficulties. First, HMRC believes that the payments were not loans so why would they be repayable? Second, the intention of the parties was clearly that the money was not a loan but remuneration. Why then would they be able to be recalled?

WTT believes that some 200+ individuals made use of the scheme and any who have not settled may well be contacted shortly.

We would be pleased to discuss with any recipients of such letters our position and how we are seeking to resist both the tax alleged due and any attempts to recall the alleged loans.