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  1. #1

    Nervous Newbie


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    Default 2019 Loan Charge - "interaction with settlements"

    Hi,

    I've scoured this forum and the internet for an answer to this question but have been unable to find it, I'm hoping someone here may be able to help.

    My situation briefly - had income from loans in 2005/6 from "scheme A" and income from loans in 2006/7 from "scheme A" and "scheme B", 2005/6 and 2006/7 were both open years. I also had income from scheme A loans from 2002/3 but those years were closed. I settled via the CLSO for 2005/6 and 2006/7.

    HMRC's letter inviting me to settle was slightly vague in places, some paragraphs implying that it was settling my tax affairs up to 2011....

    You can settle your affairs now. This will give you certainty about your tax liabilities, and save you and us costs. Reaching agreement now will mean that liabilities in relation to sums you have received under these arrangements for years up to and including 2010/11 are final
    And

    During this settlement opportunity we will restrict settlement to 2010/11, and earlier years for which we have open enquiries or assessments. In any future proceedings we will consider the conditions for all potential years of charge to 2010/11, which could include years where there is no current enquiry or assessment.
    The second quote could be interpreted a couple of ways, i.e. that you can settle and only have to pay for open years and it may not be so good in the future. Or that they're leaving themselves the option to get money for the closed years even though you've settled. But it certainly hinted at the forthcoming loan charge disregarding closed years.

    What I'm now slightly confused about is the wording in the "Tackling Disguised Renumeration" consultation document posted on 10th Aug 2016

    https://www.gov.uk/government/upload...tion-technical

    on page 21

    Interaction with settlements

    38.As also set out in chapter 5 of the technical note, the loan charge will not apply where income tax has been paid on a DR loan, or on the money from which the DR loan was made. This is provided for by the new double taxation provisions that are outlined in chapter 5 of this document. This includes cases where DR loans have been included in a settlement reached with HMRC.

    39.Generally, where a DR loan hasn’t been included in a settlement, and tax hasn’t been paid on it, the loan charge will apply.

    40.However, there are some cases where this does not apply due to the details of the terms on which those settlements were reached. For example, this is the case for those who settled on the terms offered as part of HMRC’s “Contractor Loans Settlement Opportunity”.

    41.This means that where one of those individuals has had an offer of settlement accepted by HMRC on one or more loans from a DR scheme on such terms, the loan charge will not apply to those loans, or to any earlier DR loans implicitly covered by that settlement as a result of those terms.
    Bulletpoint 41 seems to imply that earlier loans, and in my case from closed years that weren't included on the CLSO, are not affected by the loan charge.

    Can anyone confirm this?

    Apologies for the lengthy post and thanks in advance for any information.

    Regards,
    Dave

  2. #2

    Contractor Among Contractors

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    Default

    Incorrect.
    Unsettled "closed years" fall within the scope of the "2019 charge".
    I'd suggest you join Big Group, that's where these questions are being answered.

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    Nervous Newbie


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    Default

    An update (may be news to some of those that settled through the CLSO)......closed years were included in the settlement and are not subject to the 2019 loan charge. I have this in writing from HMRC.

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    CDJ
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    Default

    Quote Originally Posted by Ds1518 View Post
    An update (may be news to some of those that settled through the CLSO)......closed years were included in the settlement and are not subject to the 2019 loan charge. I have this in writing from HMRC.
    Hi DS1518 - This ties with what HMRC told my advisors and I have that in writing as well. This was essentially the "carrot" to get people to settle early.

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    Still gathering requirements...


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    Default

    So if you were in a scheme 5 years, had 2 open and CLSO'd them, then that's affairs settled up to 2011 and 2019 won't apply to those other 3 years? You have this in writing from HMRC?

    If true, that's quite something. I wonder why Big Group thinks otherwise (incorrectly, if the above is true).

  6. #6

    Contractor Among Contractors


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    Default

    Big Group does not think otherwise.

    Closed years inherently settled as part of the CLSO we expect to be excluded from the 2019 charge on the basis that the various technical and consultation notes promised this.

    (The fact that such treatment has limited support in the actual legislation troubles us but as you say there now appears to be precedent for excluding closed years which is nearly as good).

    The CLSO however closed in June 2015.

    Settlement post CLSO is possible and has been done. In such instances, will closed years "implicitly" included escape the 2019 charge? Additionally the CLSO runs only to 2010/11. If 2011/12 is a closed year but you reach a settlement now, will it be excluded from 2019?

    I have no evidence that is the case. I have therefore no precedent. I cannot find a clear legislative path to having such years excluded.

    Consequently we (WTT Consulting - not Big Group) say that we remain unclear on whether settlement now to include closed years will result in those years not attracting a charge in 2019.

    I have always tried in these forums to distinguish between hard facts and evidence that lead to certain conclusions and positions arrived at via hearsay and rumour. Can I suggest therefore that if you think WTT is saying or advising on something but you have no direct evidence of that, you pick up the phone and ask? We don't bite, are generous with our time and our number is on our website.

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