Norla EBT Loan Scheme

[SantaClaus]

Mal got "promoted" out of gthe bn66 thread - I still miss him/her.

I still miss him/her/it too!

[malvolio]

I still miss him/her/it too!

Never were a very good shot, were you?

[BrilloPad]

Never were a very good shot, were you?

Hi Mal

How are you?

You missed us - didn't you?

[Friendly Accountant]

Benefit in Kind

Coming back to your original question, I am not sure that it is correct that the benefit in kind is reportable and taxable in perpetuity.

The benefit in kind is only applicable to loans received further to your employment. If you are no longer employed, I don't believe that the BIK continues to apply. I have never reviewed the Norla offering, but am aware of other EBT loan based schemes where the interpretation is that the BIK ceases when employment ceases.

I'd suggest that you confirm this again with Norla.

Just to clarify- you are taxed on the amount of the Benefit in Kind, which is the cumulative loan amount multiplied by the statutory interest rate. You are then taxed on this amount. So the tax you pay will be - Loan amount * Interest rate * tax rate, NOT loan amount * interest rate.

[ASB]

Coming back to your original question, I am not sure that it is correct that the benefit in kind is reportable and taxable in perpetuity.

It doesn't seem to be; the HMRC website only seems to mention the BIK in the context of employee type loans. But it does seem odd, after all the loan was granted originally as a result of the employment. Why does the benefit stop on cessation of employment?

Another point is regarding the writing off of the loan. In terms of loans in general this is pretty well covered. The fact that one is no longer an employee at the point the loan is written off will still cause the recipient to attract a tax charge. http://www.hmrc.gov.uk/manuals/eimanual/EIM21743.htm

[Friendly Accountant]

It doesn't seem to be; the HMRC website only seems to mention the BIK in the context of employee type loans. But it does seem odd, after all the loan was granted originally as a result of the employment. Why does the benefit stop on cessation of employment?

Another point is regarding the writing off of the loan. In terms of loans in general this is pretty well covered. The fact that one is no longer an employee at the point the loan is written off will still cause the recipient to attract a tax charge. http://www.hmrc.gov.uk/manuals/eimanual/EIM21743.htm

Agreed that it seems odd. I imagine it is simply not a situation envisioned by HMRC. Probably somewhat unusual in practice that you would have a loan to an employee outstanding for a significant period of time after they cease to be an employee.

I think there would be a fairly easy work-around if the BIK didn't cease - stop employment - get a bridging loan to repay the original debt, wait a period of time, and get a new loan from the EBT to repay the bridging loan. As not employed, the new loan would not be further to employment so no BIK anyway.

Also agreed on the write-off of any loan - this will be taxable regardless of when it happens, which is why these loans are not intended to be written off.


Lastly - would you please let us know if Norla confirm their belief that the BIK continues after employment stops. I'd be curious to hear their reasoning.

[scott_free]

With regard to EBT's, want to declare the income derived via it on Self assessment for 6 months this year (don't want a huge tax bill a few years down the line). The scheme providers advice seems to be you don't need too, which I'm not happy with

Ideally I'll request that the loan be written off, what are the implications if the loan doesn't get written off and I still declare the EBT as self employment income. Will this count in my favor.

BTW the EBT (loan) has no formal paperwork that has been signed for, just fed up with the scheme provider

Any advice appreciated

[goldfish]

Another point is regarding the writing off of the loan. In terms of loans in general this is pretty well covered. The fact that one is no longer an employee at the point the loan is written off will still cause the recipient to attract a tax charge. http://www.hmrc.gov.uk/manuals/eimanual/EIM21743.htm

Okay, I'm trying to read the HMRC manual and taking out the extra words to make it clearer, I can see this:

The release or writing off of a loan made to an employee is still chargeable if it takes place after he has ceased to be in employment falling within the benefits code. Instances of an employment ceasing to be within the benefits code include the employee leaving the UK and ceasing to be within UK jurisdiction for the purposes of tax on employment income.

If I've left the UK and ceased to be within the UK tax jurisdiction, how can they enforce this?

And in a separate question... If I stay within the UK and have the loan written off, would it be taxable in:
- the year it was written off
- the year I ceased being an employee
- the year I declare it as income?

[goldfish]

Hey scott_free, any updates on your situation? I'm trying to get my loan written off (I would rather pay PAYE on it than have it hanging over my head) but the trust are refusing to do it. What is happening with you?

Does anyone else know whether the trust is able to do this, and if so how I can "declare" the income otherwise? I'm not sure that just putting it on my self assessment will work, unless the loan is cancelled too, otherwise I think I will just get a big tax bill and still have the loan outstanding.

[Gizza]

Did you get anywhere ?

Hi

I received notification from HMRC that I "Edge Consulting" (closely linked to Norla) are now being investigated "centrally". I know a few others that have received this too.

It's starting to stink to me.

Did you guys get any more information about EBT's and the Govt's ambition with them ?