Talent Resource Management

[cfos118]

In the same ship as you all

JonC I can't PM you.

Please add me to your mail group pls. Can you PM me? cfos118 and I will let you have my email/contact details.

I have a £93 and £95k exposure so don't feel so gr8.

cheers, power to the ppl.

<mod note>I have upgraded your account so you can now use the PM system</mod note>

[malvolio]

1 is silly, the loan falls due from your estate when you die (or even right now if HMRC apply the Ramsay principle and say the whole thing is articifical and can be disregarded)

2 is sensible, and will cost you a lot of money; but you could argue you owe that money anyway so get it over and done with.

The old adage applies - to get there I wouldn't want to be starting from here. Sadly, you are starting from a bad place, and realistically your options are limited.

[gd87]

Fair point. In which case TRM don't have to act in the recipients best interest. So why on earth would someone give them their hard earned cash?

All very interesting and very much my train of thought. I not sure if anyone has mentioned anything about the fact I was issued a single share in this company as part of joining. I think this was to prevent the company not acting in our best interests...

[u9k82]

What happens if I ask for the loan to be forgiven? If you still work for the company at the time its forgiven then you pay lots of tax. If you DO NOT work for the company at the time then you DO NOT pay tax.

Steve, so your saying if we have left TRM and get the loans forgiven , we do not need to pay tax , how are you so sure ?!

[pan668]

The loans are legal. If you know nothing about the agreements and have signed one then see an accountant! If you have not signed an agreement but have questions then see an accountant. The people on this thread are really only making intelligent guesses.

Will the loans be recalled? 99.9% chance of No. If they are get a lawyer and quash it. If you’re not willing to take this risk then go permy.

Do I pay tax? If you pay 1% of interest on the loan then you need to declare a Benefit in Kind on your P11d. If you pay 6.25% then you don’t.

What happens if I ask for the loan to be forgiven? If you still work for the company at the time its forgiven then you pay lots of tax. If you DO NOT work for the company at the time then you DO NOT pay tax.

Hi SteveO,

I have heard the view above, do you have any links to the relevant tax legislation that states that you do not pay tax on the loan if it is forgiven when you are not working from them.

Cheers

Pan668

[ASB]

could someone come up with a simple calcuation so that people can get a rough estimate (minus fines) of how much they could own the tax man (26% of loan amount)

No, because it depends on various factors:-

- Your individual circumstances
- How the IR view it

But, I'll try to help with some possibilities.

1) HMRC view this as schedule E income. Up to about the first 36k (including any other income) then this will attract tax at 22%, above 40%. There are about a billion on line tax calculators out there. Put you income figures in and add the loan to it. Deduct the tax you paid and bobs your uncle.

2) HMRC view it as schedule E earned income (in my view this is more likely). This will be as above - but you will also have to add employees NI. So your figures are going to be 33% lower band and 41% when in the higher band. Employers national insurance also comes into it. This liability falls on the employer, however with a foreign employer I believe there are ways it can be transferred to the employee - again it is all on HMRC website.

Of course it may be that you were nominally self employed, in this case there relevant NI payments are different.

There is also the question of penalties and interest. In terms of interest HMRC current rate is I think 7.5% (you can find these on the website) This is however simple interest not compound.

Penalties start at 100% and get reduced to about 20% based on level of cooperation. I guess it is possible they will not seek penalties - but this would be fairly unusual. However assume they get full cooperation and you should get down to the 20%.

So, if you had a 30k loan and 15k salary 3 years you exposure will be very roughly:-

20k @ 33% (balance of basic rate band) = 6,600
10k @ 41% (higher rate) = 4,100

10,700 + 20% penalty = 12,840 + interest 3 x 7.5% = 15729.

Of course this is only a guess based on what little I know of the scheme.

If you think the scheme is doomed to failure (frankly I do) then you may want to consider some CTD's, this at least stops the interest clock ticking.

[Lewis]

So we all want to maximise our return from our contract rate and have engaged TRM to do this for us. In some ways we have been forced into doing this. Myself having been a contractor for 12+ years now endured the suffering of limited company status and the headache of IR35. But along came TRM offering what seems a very simple service - they get the money pay you a salary and using their tax consultants maximise the return and charge a % fee.

Can I just say that what they do behind the scenes changes all the time; pre 2004 they used EBT's until the government closed the loophole. Those with TRM at this time would have reaped the benefit of this tax initiative. They then moved on to loans on a projected dividend, we became shareholders within the umbrella company and then as I have found out moved to direct loans to an employee. Like a lot of you guys this is what I have been told via communication channels within the organisation

However because of the current investigation a specialist chartered tax advisors company has been hired to act as the intermediary between TRM and HMRC. This is where I feel the migration to Redding Finance has been initiated. So we get some paper work through with loan figures on them and yes it comes as a shock. What do we do - I'd make sure that these figures add up to the draw downs that you have received; if not query this with TRM. Seeking legal advice can also be another option but be careful there will be numerous points of view on this and isn't this forum full of them? - whether any of them have any standing will only be proven in a court of law and like TRM I'm sure that's what we are all trying to avoid. For those of you losing sleep over this and feel that TRM are a bunch of cowboys you've obviously lost the trust relationship with this company that these initiatives are founded on.

Very sensible words.

[Lewis]

I was just wondering... does anyone know of anyone who has been investigated while on these schemes ?? - I mean an individual contractor ?!

I know of two people who got investigated and they both settled with a bit of negotiation (neither scheme is still in operation). I think they had to pay tax as if all income was PAYE (which is pretty much IR35). Therefore I assume by that your worst case exposure is going to be 40% of loans + interest. I don't think either of them had penalties applied but potentially HMRC can charge 100% of tax owed. They had both kept the IR35 difference safe so when the time came to pay they considered it a gamble that didn't pay off. The problem comes when you've spent the extra cash obtained via scheme.

[ContractorSeven]

2) HMRC view it as schedule E earned income (in my view this is more likely). This will be as above - but you will also have to add employees NI. So your figures are going to be 33% lower band and 41% when in the higher band. Employers national insurance also comes into it. This liability falls on the employer, however with a foreign employer I believe there are ways it can be transferred to the employee - again it is all on HMRC website.

I don't understand why any NI or penalties would ever apply if the loan is forgiven. Let's say I take a loan out with any high street bank and for one reason or another they forgive it a few years later. I can see why I may need to pay income tax on this, but how on Earth would they say NI was due, or any penalties? The tax isn't 'late' if it is simply charged when the loan is written off!

For my outstanding 'loan' of 120k I can see how I would need to pay tax on that at 40% if the loan was written-off tomorrow. Personally I would be unhappy with this, especially since I've not heard from TRM since 2005, but that's the *most* I can see myself owing in tax. Can anyone even suggest why this would not be the case?

[Lewis]

I don't understand why any NI or penalties would ever apply if the loan is forgiven. Let's say I take a loan out with any high street bank and for one reason or another they forgive it a few years later. I can see why I may need to pay income tax on this, but how on Earth would they say NI was due, or any penalties? The tax isn't 'late' if it is simply charged when the loan is written off!

For my outstanding 'loan' of 120k I can see how I would need to pay tax on that at 40% if the loan was written-off tomorrow. Personally I would be unhappy with this, especially since I've not heard from TRM since 2005, but that's the *most* I can see myself owing in tax. Can anyone even suggest why this would not be the case?

I think ASB is talking about if the scheme is challenged by HMRC and they win. Then the whole thing is judged to be a sham and the meachanics of loans etc.. are just ignored. i.e. HMRC have proven the loans to be fake loans.