Settlement Opportunity

[AlCapone]

Example

HMRC assess you for £10,000 tax for ebt scheme you used back in 2005/6

Normally the due date for the paying the tax would have been January 2007.

However, HMRC are saying you should have made earlier payments on account of £5,000 in January 2006 and £5,000 in July 2006.

Hence there are several more months interest accrued.

Ok thanks, I get it. So if what you say is correct HMRC's calculator makes no sense at all.

[DonkeyRhubarb]

Ok thanks, I get it. So if what you say is correct HMRC's calculator makes no sense at all.

It's not intuitive that's for sure!

The way I got it to work is as follows.

Example 2005/6

(1) Select previous tax year 2004/5

(2) Enter £10000 in the 2005 tax box

Interest for 2006 is £3,705, reflecting the payments on account.

(If you repeat selecting 2005/6 in (1), and enter £10000 in the 2006 box, then it shows interest of £3,176)

£3,176 is the interest if it was calculated using the normal due date; £3,705 is the interest taking into account that tax should have been paid earlier on account

Hence, £529 more interest.

Who said tax doesn't have to be taxing !!!

[AlCapone]

It's not intuitive that's for sure!

The way I got it to work is as follows.

Example 2005/6

(1) Select previous tax year 2004/5

(2) Enter £10000 in the 2005 tax box

Interest for 2006 is £3,705, reflecting the payments on account.

(If you repeat selecting 2005/6 in (1), and enter £10000 in the 2006 box, then it shows interest of £3,176)

£3,176 is the interest if it was calculated using the normal due date; £3,705 is the interest taking into account that tax should have been paid earlier on account

Hence, £529 more interest.

Who said tax doesn't have to be taxing !!!

Wow. It's almost like they're trying to confuse us . Thanks for deciphering it!

[jbryce]

IHT

Hi,
anyone understand the IHT implications (if any) with EBT schemes?

[creativity]

There was some talk of this but no firm conclusion in that can we claim for expenses in the settlement offers?
So after summing up the salary and loans received can we negate our expenses (most significantly mileage) before calculating our 'tax' owed?
I can't see why not, this will help reduce the numbers considerably for some.
Any views?

[Rob79]

Hi,
anyone understand the IHT implications (if any) with EBT schemes?

An EBT is a trust.

Placing money into a trust is an occasion of potential charge to IHT.

Assuming that the trust meets certain rules, that charge may be exempt or deferred 10 years.

Extracting cash from a trust may also be an occasion of charge.

It's possible that HMRC see the "loans" as being a permanent withdrawal of funds from the trust and therefore a trigger for an IHT charge.

Until HMRC explain their reasoning, this is speculation. Looking at other threads it's clear that even a direct question to HMRC fails to get a straight answer so we must wait and see.

[Rob79]

Negligent adviser or negligent taxpayer?

http://www.financeandtaxtribunals.go...05/TC04030.pdf

see para 69 et seq.

[jbryce]

An EBT is a trust.

Placing money into a trust is an occasion of potential charge to IHT.

Assuming that the trust meets certain rules, that charge may be exempt or deferred 10 years.

Extracting cash from a trust may also be an occasion of charge.

It's possible that HMRC see the "loans" as being a permanent withdrawal of funds from the trust and therefore a trigger for an IHT charge.

Until HMRC explain their reasoning, this is speculation. Looking at other threads it's clear that even a direct question to HMRC fails to get a straight answer so we must wait and see.

Indeed, HMRC are not supplying a straight answer and, as a result, my accountant is advising against settling as a settlement will not guard against imposition of IHT in the future. He thinks the lack of straight answer is because HMRC have not decided if IHT would damage their case.

They really are taking the p1ss.

[LadyPenelope]

Indeed, HMRC are not supplying a straight answer and, as a result, my accountant is advising against settling as a settlement will not guard against imposition of IHT in the future. He thinks the lack of straight answer is because HMRC have not decided if IHT would damage their case.

They really are taking the p1ss.

I received my settlement calculation today and confirm that there is IHT.

Loans (06/07) = £60,390 (not sure why as I told them £63k - maybe a timing diff.)
Income Tax = £19,383
IHT = £4,548
Interest = £4661
Total = £28592

The interest charges start from 29th Sept 2009, although I'm not sure why this is.

The initial letter arrived late July. Settlement calculation letter arrived 1st Oct, from a letter dated 25th September. Seems as though they like to work your last nerve on the matter.

I hope this provides a little clarity.

[Boobetty]

Loans (06/07) = £60,390 (not sure why as I told them £63k - maybe timing diff

This may be the benefit in kind declared on the loans originally. On my discovery assessments they had adjusted my loans amounts in this way.

This leads me to another question: if they are indeed giving us back the benefit we originally declared on our SA returns, then surely they are acknowledging that the loans no longer accrue any benefit to us. If so, why then add IHT?

Does anyone in HMRC have a f**king clue what they are doing?