What is the 2019 Loan Charge?

[webberg]

Could you give a breakdown of that example? What calculation are you basing that on? Where does a 60% tax bill come in to it especially when one has already paid the tax via CLSO/APN?

My current understanding is as follows.

Assume you drew a loan in 2008/09 of £50,000 and if that was taxed in that year, the tax bill would be £20,000.

You have settled (CLSO) and for whatever reason 2008/09 is not included, having not had a valid enquiry issued.

Come 2019, if that £50,000 loan is outstanding at 5th April 2019, a charge will arise.

That charge will be the higher of £50,000 x whatever rate the April 19 charge is decided to be, or £20,000 plus the interest that would have arisen on that £20,000 is paid in 2019.

Let's assume that interest is at 3% pa from 31/1/10 to 5/4/19, or 9 years and 2 months, or 30% (less a little bit).

£20,000 x 30% = £6,000. Total tax charge £26,000. That's an effective 52% on the loan.

Don't forget that the loan still exists and you might be asked to repay it.

As I said, lots of problems with this proposal but

UNLESS IT IS RESISTED

it will become law with all its problems.

Shameless plug.

Big Group is already mobilised and has attracted a coalition of diverse entities and people to fight this proposal (and to go beyond that and create a new settlement from it). That has been funded by Big Group members mainly. As with all things, it will be better delivered and received if it is better funded.

Think about it.

[needmorstuff]

doesn't the bill say that it will lead rise to a PAYE/Nic charge - to the EMPLOYER,?

"15.Since the new charge will be part of Part 7A the charge will fall on the relevant employer in the first instance."

but..

2.Many of the changes result in a charge being levied under Part 7A. In the majority of cases this means that the charge is collected through PAYE from the employer who was party to the avoidance scheme. NICs would also normally be collected from the employer.

3.However, the government will amend the PAYE regulations to allow, where appropriate, for the tax and NICs to be collected from the employee where it cannot reasonably be collected from the employer. A consultation on these amendments will form part of the wider consultation over the summer.

[webberg]

Again, more uncertainty.

If it falls on the employer (and I'm not sure how the interest charge would work there) then if that employer is missing (having already gone or having been given 2 years+ notice of charge) then will the alleged employer get a credit or will the liability be transferred?

Who knows?

[needmorstuff]

Again, more uncertainty.

If it falls on the employer (and I'm not sure how the interest charge would work there) then if that employer is missing (having already gone or having been given 2 years+ notice of charge) then will the alleged employer get a credit or will the liability be transferred?

Who knows?

well I am sure HMRC would love to transfer "it" but how on earth could that get passed law - that if an employer folds all its past employees have to pay the debt! be that paye or any other debt - think BHS etc...

I have a feeling that particular snippet "A consultation on these amendments will form part of the wider consultation over the summer." is just part of the scare tactics to force settlements. All the technical note points to the employer having to pay up with a little bit of scare tactic at the end.

[jonnieboy]

I am far from convinced that transfer of such liability from employer to employee will be as easy as HMRC seem to believe...

[needmorstuff]

I am far from convinced that transfer of such liability from employer to employee will be as easy as HMRC seem to believe...

They know its not going to be easy (or even happen) the rest of the wording is quite clear that they plan on doing things.. the bit about transfer to employee is less so.

[DotasScandal]

They know its not going to be easy (or even happen) the rest of the wording is quite clear that they plan on doing things.. the bit about transfer to employee is less so.

Again, a huge aspect of this operation is psychological warfare.

Keep in mind that your money pays for very expensive behavioural psychologists to devise methods to maniulate you into doing not what's good for you, but what's good for HMRC.

[needmorstuff]

Again, a huge aspect of this operation is psychological warfare.

Keep in mind that your money pays for very expensive behavioural psychologists to devise methods to maniulate you into doing not what's good for you, but what's good for HMRC.

The Behavioural Insights Team – also known as the "Nudge Unit" - fantastic.

[needmorstuff]

I foresee some very reasonable settlement terms on the horizon...

[webberg]

Transfer of a PAYE liability is already possible.

PAYE is an administrative system and as such is governed by secondary legislation (i.e. does not get Parliamentary oversight) usually in the form of "Regulations". (Hence a late PAYE determination is made under regulation 80).

Where the recipient of salary/payments is a director or otherwise controls the payer and is aware that the PAYE has not been paid or is likely to not be paid, then a transfer of liability is possible. I forget the regulation offhand (reg 74/75?)

However changing secondary legislation in retrospect is difficult. You'd need a constitutional lawyer to look at that (as we have at the moment).

This is just another issue with the new proposal