Montpelier & Newquay 10% loan repayment demands

[webberg]

HMRC do not do anything in relation to the loans if you settle (which would be far too efficient and tidy for them). They still remain a legal agreement and a real debt.

What could they do?

They're not party to the loan and do not have any powers to change legal agreements unilaterally.

[lastManStanding]

What could they do?

They're not party to the loan and do not have any powers to change legal agreements unilaterally.

Agreed however it is a frustrating situation. Allow me to summarise and forgive any errors in my understanding.

Loans are not loans they are income so settle the alleged tax due and nothing will happen to change the status of the loan which could then be subsequently recalled thus in fact proving it is a real loan but we already have your money so bad luck. And if the trust redistributes the repaid monies in another form back to you, that will be taxable as well presumably?

Or you wait until 2019 and if you have not repaid the loan there is a tax charge. But as the nature of the loan is unchanged then it could be recalled after that tax charge event.

Given that some schemes have requested part repayments to loans, it makes it very difficult to make any sort of decision to settle unless you have some strategy for changing the status of the loan ie. having it written off

[webberg]

With you 100% on the frustration and evident double thinking in some places.

Under one scenario, you received 100 and then agreed to make a contribution to a trust of 90. That trust agreed to lend you 90.

The fact that you received 100 means that 100 is taxable and what you choose to do with your money after that is up to you.

In that scenario, would 90 be taxable on 5/4/19? I don't know.

Under a different scenario, you received 10 + 90 and the 90 was never yours but always belonged to another. However a judge has decided that applying substance over form, that 90 should be treated as being taxable income. That decision for TAX PURPOSES does not impact the legal status of the loan. Therefore 100 is taxable even if 90 is legally a loan.

In that scenario, would 90 be taxable on 5/4/19? I don't know.

Under a different scenario, you earned 100 from the client but you choose to transfer an asset (your ability to earn in the UK) to an offshore entity so that the offshore entity had the income which flowed to you afterwards, 90 of which was legally a loan.

There, the specific rules in Transfer of Assets Abroad rules say that you are taxable on 90 + 10.

In that scenario, would 90 be taxable on 5/4/19? I don't know.

In each of the above scenarios the implication is that the 90 has already been taxed and as such the 5/4/19 charge should not apply. However if the tax position has not been resolved by 5/4/19, what then?

Sorry - clear as mud but the loan can be taxable income (when defined for tax purposes) and a loan for legal purposes.

If you really want to mess the above analysis up, add in another tax personality in the trust, and another tax in IHT.

I've also been pondering recently the VAT position, but that's for another day.

[Loan Ranger]

A bit of background

I am in a group of about 50 ex-Montpelier and Newquay loan schemers. We found each other through CUK, and word of mouth, back in the early days and have kept in occasional contact ever since.

The repayment demands from Montpelier have spurred us into doing something. Most of us can't afford to pay.

A few of us are already in BIG GROUP and we're now in discussions with webberg about all of us joining.

[meanttobeworking]

What reason do they give for recalling the loans?

[Loan Ranger]

What reason do they give for recalling the loans?

They say it's to counter HMRC's argument that the loans are not bona fide because, in reality, they would never be repaid.

[NotAllThere]

They say it's to counter HMRC's argument that the loans are not bona fide because, in reality, they would never be repaid.

I'm not convinced it will be that easy. (I am not a QC, but like a QC I don't really suffer any damage if my opinion in law is incorrect when tested by a judge).

HMRC say "it's a repayment to avoid tax. The argument remains valid that the loan was a device to avoid tax, so doesn't count" and (if you're lucky) they tax you only on the 90%. An unsympathetic judge might well buy that argument. Especially if hoping for a knighthood.

Although I'm entirely unaffected by these shenanigans, as a disinterested party, I'd strongly support anyone who said "be very careful before paying anything back".

[LandRover]

They say it's to counter HMRC's argument that the loans are not bona fide because, in reality, they would never be repaid.

1. How can they know this approach is correct when the legislation is not yet law?

2. Isn't it outstanding loans, so unless all repaid then still stuffed?

3. Receipt of loans is disguised remuneration according to HMRC?

[meanttobeworking]

They say it's to counter HMRC's argument that the loans are not bona fide because, in reality, they would never be repaid.

I thought this argument had long been dismissed - they're loans from a legal point of view but income from a tax point of view. If that is the widely held view from all the respected and highly involved people on here, it seems odd that they a) seem to have a very different opinion and b) have just gone right ahead and acted on it. It's certainly not in the best interests of any that might have settled with HMRC.

[Loan Ranger]

I thought this argument had long been dismissed - they're loans from a legal point of view but income from a tax point of view. If that is the widely held view from all the respected and highly involved people on here, it seems odd that they a) seem to have a very different opinion and b) have just gone right ahead and acted on it. It's certainly not in the best interests of any that might have settled with HMRC.

Indeed, which is why we are suspicious. That coupled with the fact that, allegedly, the company is in financial difficulty.

In a perverse way, we envy those of you whose promoter has disappeared.