Talent Resource Management

[ASB]

Thanks for the response.

At this stage, wouldn't any money that I deposited be speculative, given that there is no indication of my potential tax liability?

Also, isn't making a deposit tantamount to saying that I believe that I have a liability, thereby prejudicing any possible investigation?

1) Yes. It depends on whether you believe the scheme promoters etc. However ultimately if you are investigated then the revenue issue an assessment and it's up to you to appeal it. It's you call as to what you think the likely hood of this happening and you winning at the commissioner (if it goes that far) is.

2) No. You buy CTD's through the treasury (and the HMRC don't know you have done so - in theory). In any event they are quite widely used as a matter of course. Obviously of course the possibility exists that the treasury may say to HMRC "go investigate this bloke he's just bought a CTD".

[FreakedOut]

..

[u9k82]

Little Nugget of information

I apologise for the lengthy post , but just wanted to share some information!!

This is an extract from the Income Tax (Earnings and Pensions) Act 2003 on guidance around benefit from loan

Threshold for benefit of loan to be treated as earnings:

(1) The cash equivalent of the benefit of an employment-related loan is not to be treated as earnings of the employment for a tax year under section 175
(a) if the normal £5,000 threshold is not exceeded, or
(b) where the loan is a non-qualifying loan and that threshold is exceeded, if the £5,000 threshold for non-qualifying loans is not exceeded.

The question is what is a non qualifying loan ? - here is your answer !

Loans obtained by reason of employment
To determine whether a loan is made by reason of employment, it is necessary first to determine who is making the loan. Making the loan includes arranging,
guaranteeing or in any way facilitating the loan (ITEPA 2003, s 174(4)(b))

The person who makes the loan must be:

(a) the employer (ITEPA 2003, s 174(2)A);

(b) a company or partnership which the employer controls (ITEPA 2003, s 174(2)B);

(c) a company or partnership that controls the employer (ITEPA 2003, s 174(2)C);

(d) a company or partnership which is controlled by a person that controls the employer (ITEPA 2003, s 174(2)D); or

(e) a person who has a material interest in a close company, which is either the employer, controls the employer, or is controlled by the employer, or who has a material interest in a company that controls such a close company (ITEPA 2003, s 174(2)E).

The legislation also applies to a loan that was originally made to the employee by a third party, and then assumed or taken over, or continued by any such person (ITEPA 2003, s 174(4)(a)). References to the employer include references to a prospective employer (ITEPA 2003, s 174(3)).


SO IN SHORT IF WE CAN PROVE THAT THIS IS NON QUALIFYING LOAN (DOESN'T TICK ANY OF THE ABOVE) THEN THERE IS NO LAW BREAK


Cant help thinking they "facilitated" the loan and thats what HMRC will interpret , however if batchworth play no part in the redding loan , I.E - all communication is done through redding.

this does explain the "we know nothing" attitude of Batchworth


ON A SIMILAR THREAD

This was from the FAQ's distributed by Redding

Should I consider closing the loans?

We strongly recommend that you seek professional advice before doing so to establish what, if any liabilities you may incur. If you decide to close your loan with Redding Finance Capital Ltd you may do so. Write to us stating that this is your intention. We cannot accept verbal instruction.


SO WE CAN WRITE OFF THE LOAN

And here is a snippet of an article written about company loans (the same place i found the information above

http://www.taxationweb.co.uk/article...cle.php?id=432

Release or Write-off of the Loan

If the loan is released or written off, rather than being repaid, the borrower is treated as having received a distribution equal to the amount written off, grossed up at the dividend ordinary rate (ITTOIA 2005, s 416(2)).

The Dividend ordinary rate is 10 %

does this mean we owe 10% of loan

or

10% on top ? what does grossed up mean

HELP ?!

So two possible angles we can go at

1) a non qualifying loan - all is well just hope the law doesn't change and we can prove its a non qualifying loan

2) Write off the loan and pay what we have to pay (hopefully 10%)

The author of the all important article is a PWC consultant , maybe we should get together as a consultant and aquire his services for any HMRC submissions ?!

[ASB]

I apologise for the lengthy post , but just wanted to share some information!!

.....

Firstly assume it is employment related. I find it difficult to believe it's not; it would certainly seem to me that it would be intended to be. But by some magical structure it is possible this is escaped.

I think you are then caught by:-

If any part of the loan is released or written off, that amount will be taxable as earnings (ITEPA 2003, s 188). But if the loan was made by a close company and the employee was a participator, the amount written off will also be taxable under ITTOIA 2005, s 415. This charge has priority over the employment income charge (ITEPA 2003, s 189 and HMRC Manual EIM 21746).

http://www.hmrc.gov.uk/manuals/eimanual/EIM21746.htm

Seems to suggest that the write off will be chargeable either to the lender OR the borrower - but not both. I doubt the charge could be made on the lender...

And also:-

The notional loan interest charge is subject to Class 1A NIC. However, any release or write-off that is taxable as earnings is subject to Class 1 NIC (HMRC Booklet CWG5).

It seems to me fairly clear that the intention is that the loans should simply be treated as income if they are written off. Whether the scheme is constructed in such a way that these provisions do not apply (e.g. because the borrower is dead or no longer works for the company and that is effective) remains to be seen. There may also be questions as to whether the tax charge (if any) arises in the year it is written off or in the year in which the loan was drawn.

In order for the loan to be written off then it could be treated simply as a net dividend - if it hasn't been caught by anything else. At least that is how it seems to me.

[Lewis]

2) Write off the loan and pay what we have to pay (hopefully 10%)

If you were taxed as a dividend it would be 10% and then 32.5% if it takes you into the upper tax bracket. If you can get away with the loan being converted to a dividend that is an excellent result for you as it means it is the same return as if you have run a limited company from the start.

[DaveB]

If you were taxed as a dividend it would be 10% and then 32.5% if it takes you into the upper tax bracket. If you can get away with the loan being converted to a dividend that is an excellent result for you as it means it is the same return as if you have run a limited company from the start.

As long as you actually have the money available to pay the bill.....

[u9k82]

If you were taxed as a dividend it would be 10% and then 32.5% if it takes you into the upper tax bracket. If you can get away with the loan being converted to a dividend that is an excellent result for you as it means it is the same return as if you have run a limited company from the start.

Fingers crossed - I am in cosultation with a tax specialist as a result of my digging . I hope this is the case for everyone 10 % would be a bonus , but i think we would need legal representation to be able to interpret the law to the HMRC and hopefully agree on a settlement

The tax specialist used to be a regional tax investigator for HMRC so i'll pass on his details if he is any good.

I'll ask if he is interested in representing a group of us

[ram2609]

Trm

I've just joined this forum. I spoke to TRM to request P45 and mentioned on what would happen to the loan. The person mentioned that it would not be written off and it will just disappear??. The sounded a bit strange to me. Anyway, I'm up for joining you guys in getting the best result for us.

[Andy123]

If anyone else has anything to add please contact me via PM.

JonC, I have received a letter from TRM that I do want want to share publicly. I am unable to email you directly or PM you nor find a way to contact the moderator. Can you email me I wonder?

<mod note>You now have PM use</mod note>

[bharathi_raj]

Trm

I am in the situation as all o fyou guys - recevieng that loan letter scared me somewhat - I am up to joining you guys as I think this leaves us all vulnerable to having the loans pulled in - and I amm now semi retired due to kidney failure - really don't want to leave a massive liability overhanging should the worst happen! I thought the loan would be written off and was told this as well- though not in writing and as usuall took it on trust that TRM were acting in our best intrests - not so sure now though!
I think this has been thoroughly mishandled by TRM.