2019 charge - reporting

[webberg]

We have had a number of questions recently about how and when various parties might be obliged to report unpaid disguised remuneration loans.

As a result we have had a study of the rules and our opinion is as follows.

Part 4 of the Finance Bill Schedule, para 36, discusses this.

The lender (P) and the employee (A) must ensure that information is supplied to the employer (B) within 10 days of 5th April 2019.

If "despite taking reasonable steps" A and P have failed to contact B, each of A and P have to tell HMRC that they have failed to inform B.

The notification has to be in such form as HMRC say (we have not seen that).

We therefore think that these is no obligation for lender or individual to tell HMRC what the loan balance is, just that they have not been able to tell the employer.

We suspect HMRC will think differently and their form will almost certainly include a space for a value.

As the law stands however, there is no legal obligation upon lender or employee to do that.

Interesting times will be had discussing that one.

As mentioned, just our opinion.

[starstruck]

I'm still really confused by all this, I wonder if someone could be so kind as to clarify the following for me:

1) If your EBT loan has been formally written off over a decade ago by the trust, with all years closed, is it still caught by the 2019 loan charge? My understanding is yes because the principal loan amount is caught and it doesn't matter what has happened since then with regards to depreciation and writing off etc. (unless it has been repaid in cash). Is this correct?

2) What actually is the loan "charge"? I think it is PAYE and Employees NI on the loans received as if earnt in the current tax year, is that correct? i.e. crucially it does not include employers NI, interest, penalties and any promoter fees.

3) If someone wants to settle a decade old closed year before the loan charge comes in, then it will be just "voluntary" PAYE on the loans calculated using your earnings in the relevant tax years, i.e. saves the NI element from (2) above and the amount is not all considered to be in one tax year. Is this correct? Does this end it, or could the loan charge come back for NI later?

Thanks.

[webberg]

I'm still really confused by all this, I wonder if someone could be so kind as to clarify the following for me:

1) If your EBT loan has been formally written off over a decade ago by the trust, with all years closed, is it still caught by the 2019 loan charge? My understanding is yes because the principal loan amount is caught and it doesn't matter what has happened since then with regards to depreciation and writing off etc. (unless it has been repaid in cash). Is this correct?

2) What actually is the loan "charge"? I think it is PAYE and Employees NI on the loans received as if earnt in the current tax year, is that correct? i.e. crucially it does not include employers NI, interest, penalties and any promoter fees.

3) If someone wants to settle a decade old closed year before the loan charge comes in, then it will be just "voluntary" PAYE on the loans calculated using your earnings in the relevant tax years, i.e. saves the NI element from (2) above and the amount is not all considered to be in one tax year. Is this correct? Does this end it, or could the loan charge come back for NI later?

Thanks.

1. Yes you are correct.
2. The charge certainly includes tax and Employees NIC. Interest definitely not. Penalties definitely not. Unclear what you mean by promoters fees. Give however that the charge is on unpaid loan balances, unless you were loaned the fees and paid them, hard to see that the unpaid balance would include them?
3. A voluntary settlement includes tax only. The charge though is based on the year the loan was made.

Probably no NI later.

However, to confuse you more, there might be IHT in due course as even after you've paid the tax etc, the loan still exists and whilst there is little evidence so far (with one exception) of loans being demanded, it's possible. Some lenders/promoters also seem to be suggesting that unless "something" is done, they may have "no choice" but to collect on the loan.

You need to set aside a few hours to read the threads here and I'm sure some clarity (unwelcome as it might be) will emerge.

[starstruck]

1. Yes you are correct.
2. The charge certainly includes tax and Employees NIC. Interest definitely not. Penalties definitely not. Unclear what you mean by promoters fees. Give however that the charge is on unpaid loan balances, unless you were loaned the fees and paid them, hard to see that the unpaid balance would include them?
3. A voluntary settlement includes tax only. The charge though is based on the year the loan was made.

Probably no NI later.

However, to confuse you more, there might be IHT in due course as even after you've paid the tax etc, the loan still exists and whilst there is little evidence so far (with one exception) of loans being demanded, it's possible. Some lenders/promoters also seem to be suggesting that unless "something" is done, they may have "no choice" but to collect on the loan.

You need to set aside a few hours to read the threads here and I'm sure some clarity (unwelcome as it might be) will emerge.

Thanks, it's a bit clearer now.

a) So no Employers NI in (2) above?
b) Yes, promoters fees = fees taken before loans made (so not in loan balance).
c) With regards to IHT - if the loans have been formally written off by trust over a decade ago then they exist only in the minds of HMRC now. Trust can't call in loans that it has already formally written off (I assume).

[lennie small]

No interest or Employers NIC

1. Yes you are correct.
2. The charge certainly includes tax and Employees NIC. Interest definitely not. Penalties definitely not. Unclear what you mean by promoters fees. Give however that the charge is on unpaid loan balances, unless you were loaned the fees and paid them, hard to see that the unpaid balance would include them?

You state no Interest. Where is this stated by HMRC? Similarly, Employers NIC? Presumably, the older the loan the more interest is saved so ( as in another thread) little point in settling early.

If use 2019 tax and NIC rates upon 2019 Loan, as suggested, if a person no longer pays NIC because of age then also better to wait until 2019 in that circumstance.

[AnotherContractor]

According to this scheme users will have to inform HMRC about outstanding loan balances..

https://www.cchdaily.co.uk/loan-char...d-remuneration

[Iliketax]

According to this scheme users will have to inform HMRC about outstanding loan balances..

https://www.cchdaily.co.uk/loan-char...d-remuneration

Yep - http://forums.contractoruk.com/hmrc-...ml#post2468937

[webberg]

According to this scheme users will have to inform HMRC about outstanding loan balances..

https://www.cchdaily.co.uk/loan-char...d-remuneration

Yes.

I now have the updated schedule, as amended, and a reporting requirement exists. I'll be looking at it later this weekend.

[ChimpMaster]

According to this scheme users will have to inform HMRC about outstanding loan balances..

https://www.cchdaily.co.uk/loan-char...d-remuneration

Interesting comment in the article:

HMRC intends to contact all individuals it is aware of to inform them of their duty to provide information, and the consequences for failing to do so.

which implies that HMRC will have a list of the apparent perpetrators they will be targeting with the loan charge.

[me206et]

According to this scheme users will have to inform HMRC about outstanding loan balances..

https://www.cchdaily.co.uk/loan-char...d-remuneration

So if the onus is on the employee to inform HRMC or there are fines etc. What happen if you do not have the information. I am sure a lot of people to not keep records for 20 years! I have odd bits of paper relating to things that were possibly loans, and some I know of, but cannot find anything online relating to some of them or any idea of any figures.

Some I think were written off/ paid off over 10 years ago.