BIG GROUP

[Iliketax]

(firstly apologies to BG as this is in their thread - the previous post led me here).

Understood, ILikeTax. I am quite certain that there is no further debt for me with anyone. The loan was repaid in full, not in any depreciated manner.

Some more details:
Employee works and capital is settled into a Trust.
The original loan is made from Trust to Employee.
2 years go by and the above cycle repeats every few weeks or so.
Employee then asks the (recommended) 3rd Party Company for loan to repay Trust loan in 2008, in full. Employee pays small fee for this service.
The Trust loan is therefore cleared in full.
The Trust then makes a distribution to another Trust, and this Trust makes a distribution to the 3rd Party Company.
This last cycle of events pays back the 3rd Party loan.
As a final note, the 3rd Party Company liquidated in 2011.

Like I admitted, I don't understand the internal mechanics of how this was carried out but I am certain I don't have any outstanding liability.

And, as this is a very confusing situation, I don't know if I have anything to report in the 2019LC.

I don't have any open enquiries and am well beyond the 6 year window.

You're going to have to take your own personal advice on this with whatever documents you have. For me the key issues are:

1. Whether, viewed realistically, the first and second loans were actually repaid. That will depend on what actually happened as well as what the documents said.

2. Whether you failed to report anything that you needed to have reported. I'm guessing that some of these things happened offshore so when you take your independent professional advice ask about "requirement to correct" and "failure to correct".

[Iliketax]

So, basically, unless you personally repaid the loan, it doesn't count as repaid for the purposes of LC19?

If your mum and dad repaid it, it wouldn't count either?

It depends on who borrowed it? When they repaid it? How they repaid it? Why they repaid it? What has happened to the money since? What is going to happen to the money they used to repay it between now and 5 April 2019.

[Finalwhistle]

the latest crop of schemes in the market which use loans but they are loans from employers - i.e. no third party and therefore, the argument goes, no disguised renumeration and therefore no Part 7A with its definitions.

Here we might be looking at the definitions in what might be called the "benefit in kind" rules which are different from both the Part 7A rules and the guidance from the Courts.

The BIK rules say that a loan granted by an employer might mean you have a tax benefit from interest "saved". That is easy to avoid. However, repayment or write off is still required at some point in the future (probably after the employer/promoter/lender has disappeared) and certainly write off is a taxable event in which the borrower can easily and legally be required to pay the tax.

.

I have been part of two loan arrangements. Disguised (DR) and non-DR (as you mention above). This is why I thought I may be able to treat the loans differently with regards to CLSO2 and/ or the LC. Does the LC as it currently stands apply to the non-DR loans i.e. loans direct from employer with no 3rd party? If not, then there is no need for me to declare the non-DR loan come April 19?

You have made it clear that CLSO is a 'declare all' so I would be forced to mention both loans and ultimately pay PAYE and NIC on both. fine.

The non-DR loan is the larger of the two loans so lets say I choose to ignore CLSO2 and decide to go BG. BG are representing the disgusted DR loan, are they also looking at the non-DR loan? or is this a totally separate line of enquiry?

Just standing back from it all it is difficult to comprehend how HMRC can justify penalising all and any loans from employers to employees.

[Theythinkitsallover]

Loan repayments to avoid LC

From a different thread but relevant to this discussion. Below is an example you quoted as being acceptable circumstances in repaying the loan


[QUOTE]It depends on who borrowed it? A rich partner in a hedge fund
When they repaid it? Between now and April 2019
How they repaid it? Money they borrowed from their favourite bank
Why they repaid it? To avoid the 2019 loan charge
What has happened to the money since? They intend to take the money as an actual profit share in due course
What is going to happen to the money they used to repay it between now and 5 April 2019. - Profit share in due course

Below is Contractors possible situation :

I

t depends on who borrowed it? The contractor
When they repaid it? Before April 2019
How they repaid it? From their own funds or monies they borrowed from their favourite bank
Why they repaid it? To avoid the Loan Charge
What has happened to the money since? It is currently sitting with the trust
What is going to happen to the money they used to repay it between now and 5 April 2019.? - It is going to redistributed to the contractor in the 18/19 tax year as a non-resident sitting in Bermuda or Barbados drinking rum cocktails. They pay the relevant tax on this redistribution according to the rules of the country they now reside (tax is paid). Approx 0% on trust income and they are non resident for UK tax purposes when this is done.

Iliketax - I have heard of a few doing this. Should they be worried or should I tell them to be worried more to the point.

[Loan Ranger]

Iliketax - I have heard of a few doing this. Should they be worried or should I tell them to be worried more to the point.

I hope they weren't in the M********r scheme, because it's more likely to be the "trustees" living it up in Bermuda or Barbados on their money.

[Iliketax]

From a different thread but relevant to this discussion. Below is an example you quoted as being acceptable circumstances in repaying the loan

How they repaid it? Money they borrowed from their favourite bank
What has happened to the money since? They intend to take the money as an actual profit share in due course

Hmmm. Maybe I'be misunderstood how banks work. How do I get a profit share from my favourite bank?

Below is Contractors possible situation :

What is going to happen to the money they used to repay it between now and 5 April 2019.? - ... sitting in Bermuda or Barbados drinking rum cocktails.

Should they be worried

Not until they run out of rum.

[Theythinkitsallover]

How to Avoid the LC

There you go guys and gals. Even Iliketax agrees.

Your legitimate way out of this sorry mess. Sell your houses/ repay your trustees
and move to Bermuda or Barbados for the next few tax years to ensure being a non resident whilst they redistribute the funds back to you

Oh and probably best just for good measure never ever bring those monies back into the UK either.

If only I hear you all say...

[Iliketax]

Even Iliketax agrees.

Just to be absolutely clear. I don't.

[webberg]

My thanks to Iliketax for holding the fort here.

I've been in a meeting with HMRC in which many of the above points were discussed. I'm using one of my inexhaustible supply of tea towels to reduce the output to something meaningful and am obliged to report this to my clients first.

In general however, I would agree with most of his analysis.

The arrangement whereby a third party repays a loan for a nominal fee we have seen before. I remain baffled as to why a third party - with no connections to employer, promoter, trust - would repay a loan. Where do they get the money from? How are they servicing the money they need to repay the loan?

I suspect that the "third party" and the promoter/employer/lender are in some manner connected and that a lot of the transactions are on paper and not real.

I will say that HMRC this afternoon were very keen on saying that "depreciation" is not "repayment" and therefore "does not count" towards reducing the amount subject to DR charge. I think we perhaps knew this but just for clarity.

[Theythinkitsallover]

Loan repayments to avoid LC

The arrangement whereby a third party repays a loan for a nominal fee we have seen before. I remain baffled as to why a third party - with no connections to employer, promoter, trust - would repay a loan. Where do they get the money from? How are they servicing the money they need to repay the loan?

So what you are saying is that someone with 100k in their own bank account cant repay their loan ? Not sure I understand your point

I will say that HMRC this afternoon were very keen on saying that "depreciation" is not "repayment" and therefore "does not count" towards reducing the amount subject to DR charge. I think we perhaps knew this but just for clarity.

Who mentioned depreciation ?

Just to be absolutely clear. I don't.

Sorry Iliketax didnt mean to presume you agreed. That was wrong.

However, if you could point me to the legislation or section in the legislation that says you cant do this it would be appreciated. I would say I know of about 6 people impacted by this. All very wealthy/ not contractors all moving for a stint to sunnier climes to do exactly this/ all using their own funds not financed by anyone.

Tell me are they missing something ??