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    Originally posted by webberg View Post
    The versions we have seen (all pre 7/11/17 announcement) include an IHT value based on an assumed write off within a period.

    We're expecting the post 7/11/17 versions to be the same.
    Ok ... and what about when the loans have already been written off? Have you ever seen a settlement involving someone whose loans were already written off before they settled?

    Comment


      Originally posted by Iliketax View Post

      I think that there is some confusion on here in that there are two IHT regimes:

      - One for individuals (I would have thought that this is not normally relevant unless your company makes the payment to a trust rather than the agent).

      - One for trusts (normally relevant).

      .
      This ties in with what people that used my particular EBT have been told.. IHT relies heavily on how the trust was set-up and how payments to and from the trust were made. The problem for my EBT is that the Trustee won't write-off the loan because they will be liable to IHT (or more correctly, they want assurances its not liable to IHT and HMRC's IHT team haven't been able to provide that assurance)

      Comment


        Originally posted by starstruck View Post
        Ok ... and what about when the loans have already been written off? Have you ever seen a settlement involving someone whose loans were already written off before they settled?
        No we have not encountered that scenario. To be fair however we have usually advised against settlement on the grounds of uncertainty and our research does not get this far.

        The closest we have come is where a loan was made in a foreign currency and subsequently claimed to have depreciated to a point where it disappeared.

        In that situation HMRC was adamant that there never was a loan and it was always income. They based that position on the Boyle case. The scheme there - Sandfield - was tested in Tribunal and the Judge came very close to saying that the whole arrangement was a sham or fraudulent.

        There the loans were said to be available in Neptunian xxols and would be sourced via an exchange broker. The broker was also charged with converting the xxols to £ and making a £ payment to Mr Boyle. The subsequent depreciation of the xxols were also via the broker. The Judge basically said that he had no evidence that the xxols ever existed, doubted that the transaction had happened and was dubious about why a broker would use an exchange rate at termination that was at odds with the rate being given on loans made at the same time.

        Consequently, in the absence of being able to prove a loan existed, little wonder that Mr Boyle lost.

        This was used by HMRC in a couple of settlements we looked at involving the same scheme.

        We are aware that other arrangements used foreign currency loans. There is some evidence that the above flaws were not repeated but hardly conclusive.

        So I think you need to consider first of all whether a loan actually existed and can you prove it?

        That is more than a document.

        Did you ever own xxols?
        How do you know?
        Can you prove you had the xxols?
        Did you sign and do you still have a contract converting the xxols to £?
        Can you verify the exchange rate from contemporary information?
        Were you given a spurious termination rate?

        Etc.
        Best Forum Adviser & Forum Personality of the Year 2018.

        (No, me neither).

        Comment


          Originally posted by CDJ View Post
          This ties in with what people that used my particular EBT have been told.. IHT relies heavily on how the trust was set-up and how payments to and from the trust were made. The problem for my EBT is that the Trustee won't write-off the loan because they will be liable to IHT (or more correctly, they want assurances its not liable to IHT and HMRC's IHT team haven't been able to provide that assurance)
          And therein lies another issue.

          If a trust has 100 beneficiaries and 10 want to have a loan written off but there is a danger that IHT arises, how is the trustee going to allow the 10 to go if the charge is on 100?
          Best Forum Adviser & Forum Personality of the Year 2018.

          (No, me neither).

          Comment


            IHT

            Originally posted by webberg View Post
            The versions we have seen (all pre 7/11/17 announcement) include an IHT value based on an assumed write off within a period.

            We're expecting the post 7/11/17 versions to be the same.
            Webberg, thanks for the clear explanation. How much IHT say for 100K loan which is outstanding from 2011-2012 we need to pay? I'm trying to settle with HMRC for couple of the years I have used loan scheme and non of them are included IHT charge although HMRC has stopped settling waiting for further guidance!!
            Thanks.

            Comment


              Originally posted by starstruck View Post
              Ok I get that, but you are talking about the loan not yet having been written off. I stated the "event" was in 2006 (when the loans were waived/written off) and nobody picked up on this "event" and all these years have passed. Is there an IHT liability that needs resolution here? Up until a week ago I wasn't aware of any of this IHT stuff, I'm trying to work out what a loan waived in 2006 means with regards to IHT, the loan charge and CLSO 2.
              It's fact specific about whether there is an IHT liability on a loan waiver or not. If tax was due then the time limit for HMRC assessing the tax is 20 years from the date that the tax should have been paid. If the IHT account was deliberately not sent to HMRC (or the loan waiver was deliberately not included) then there is no time limit.

              The liability to pay the IHT is the trustees and yours (basically, anyone for whose benefit any of the trust's property is applied).

              If the trust is offshore, google "requirement to correct" too as the penalty is up to 200% of the tax due (and must be at least 100%).

              Comment


                Originally posted by webberg View Post
                So I think you need to consider first of all whether a loan actually existed and can you prove it?

                That is more than a document.

                Did you ever own xxols?
                How do you know?
                Can you prove you had the xxols?
                Did you sign and do you still have a contract converting the xxols to £?
                Can you verify the exchange rate from contemporary information?
                Were you given a spurious termination rate?

                Etc.
                Well that's not going to be possible and I think it just muddies the waters to be honest.

                I'm trying to be realistic and pragmatic; these things are great theoretical discussions but I am not sure they help in anything other than litigation. Horizon formally waived a load of their depreciating currency loans. If someone in that situation went for CLSO2 and the loans had been waived a decade ago what might be reasonably expected to happen with regards to IHT as part of CLSO 2? As part of CLSO2 the loans are being acknowledged as existing.

                It sounds like they may claim (rightly or wrongly) 1% IHT per year on the loan principals between being taken out and waived and then apply interest to that sum from the waived date to the current day. Does that sound like a likely scenario?

                Comment


                  For IHT, I've just read this on the previous HMRC Settlement Opp:

                  https://www.gov.uk/government/public...re-information

                  The 10 year anniversary charge will apply to the value of the debts that you owe the trust. If the total value of the debts is less than the IHT nil-rate band (currently £325,000), it is unlikely that there will be any IHT to pay at the 10 year charge. An exit charge will only arise when money is paid out or the trustees take an action which reduces the value of the trust fund, for example writing off the debts they are owed. Again, if the total value of the trust fund is less than £325,000, it is unlikely that there will be any IHT to pay.


                  It sounds like IHT is not due unless the value of loans is > £325k. Is that still correct and true?


                  EDIT: I'm also trying to work out what this means, from the same link above:

                  No charge arises on any loan or loss of value to the trust where this occurred within 3 months of the date the money went into trust.

                  Does it mean that if your "earnings" enter the trust and are paid out as loans to you within 3 months, then no IHT charge is due on that payment?
                  Last edited by ChimpMaster; 17 November 2017, 15:42.

                  Comment


                    Originally posted by starstruck View Post
                    Well that's not going to be possible and I think it just muddies the waters to be honest.

                    I'm trying to be realistic and pragmatic; these things are great theoretical discussions but I am not sure they help in anything other than litigation. Horizon formally waived a load of their depreciating currency loans. If someone in that situation went for CLSO2 and the loans had been waived a decade ago what might be reasonably expected to happen with regards to IHT as part of CLSO 2? As part of CLSO2 the loans are being acknowledged as existing.

                    It sounds like they may claim (rightly or wrongly) 1% IHT per year on the loan principals between being taken out and waived and then apply interest to that sum from the waived date to the current day. Does that sound like a likely scenario?
                    It might be theoretical but it's where we are. The Boyle case is not a theory but a hard fact. I have described that.

                    Is the scheme you mention close to that?

                    It certainly has some elements that are and perhaps some that are not.

                    If it is the case that loans existed but have depreciated (and this is proven) then I suspect an IHT charge may have already been incurred on each depreciation event.

                    If it is the case that the loans did not exist, then there can be no IHT charge on them, but what about the funds in the trust?

                    Did the trust receive cash which it converted (twice) in making a loan to you or was the trust assigned a loan that had already been made by another party?

                    It makes a difference.

                    HMRC like to go for an IHT liability without actually bothering with the above. So far these bully boy tactics have worked.

                    I'm unsure if you are saying that CLSO 2 holds loans that have been written off years ago are part of the equation for IT or IHT purposes? My understanding is that the CLSO 2 terms fudges the point completely.

                    This whole debate is one example of why the terms issued are a travesty.

                    They have little correlation with statute (perhaps acceptable as they are meant to be outside the law) or the facts (which is frankly unacceptable).
                    Best Forum Adviser & Forum Personality of the Year 2018.

                    (No, me neither).

                    Comment


                      Originally posted by ChimpMaster View Post
                      For IHT, I've just read this on the previous HMRC Settlement Opp:

                      https://www.gov.uk/government/public...re-information

                      The 10 year anniversary charge will apply to the value of the debts that you owe the trust. If the total value of the debts is less than the IHT nil-rate band (currently £325,000), it is unlikely that there will be any IHT to pay at the 10 year charge. An exit charge will only arise when money is paid out or the trustees take an action which reduces the value of the trust fund, for example writing off the debts they are owed. Again, if the total value of the trust fund is less than £325,000, it is unlikely that there will be any IHT to pay.


                      It sounds like IHT is not due unless the value of loans is > £325k. Is that still correct and true?


                      EDIT: I'm also trying to work out what this means, from the same link above:

                      No charge arises on any loan or loss of value to the trust where this occurred within 3 months of the date the money went into trust.

                      Does it mean that if your "earnings" enter the trust and are paid out as loans to you within 3 months, then no IHT charge is due on that payment?
                      It's confusing isn't it.

                      The availability of the nil rate band depends on the type of trust, what it contains, how it was formed.

                      The three month rule is perhaps more useful.
                      Best Forum Adviser & Forum Personality of the Year 2018.

                      (No, me neither).

                      Comment

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