BIG GROUP

[Boodog]

That's not how it works.

Let's assume that a loan was made in 12/13 of £50,000. Other income that year was £30,000. Income in 18/19 is nil.

(By the way this is a very unusual pattern).

Tax in 12/13 - no loan is approx £4,200.
Tax in 12/13 with the loan is approx £22,000

Tax in 18/19 - loan only is £8,360.

Loan charge is paid.

Later 12/13 is agreed.

You will owe £22,000-£4,200-£8,360 = £9440 plus interest

I don’t agree. Can you point me to an official HMRC calculation that verifies this? What you are saying is that calculations are based on the tax year in which the loan is charged, regardless. Sorry, makes no sense.

[webberg]

Please go and look at section 554Z5 and 554Z11.

The problem with the loan charge is that it breaks a fundamental "rule" that income can be taxed only once.

In theory therefore if the loan charge arises before the liability for the year the loan was paid, is finalised, then a subsequent agreement of that earlier year, should mean that the loan charge cannto apply (as the income has already been taxed).

To "solve" this problem, the loan charge, once made is not altered (except if it is found to have been not applicable) and the tax (non refundable) is not repaid.

Instead, because the income is taxed twice, the tax paid is credited twice.

I agree that it's very strange and I refer you to some excellent posts from Iliketax who has covered this in some detail.

You may disagree - that is your prerogative, and you may even be correct, but having spoken with a number of tax people and HMRC, I prefer my analysis.

[Caveat Lector]

Big Group still taking on members

@webberg apologies for cutting across the thread - I don't have PM, is WTT BG still taking on members? I have spoken to Rhys and was awaiting an indicative calc of my tax bill, but the deadline is approaching...

[Boodog]

Please go and look at section 554Z5 and 554Z11.

You may disagree - that is your prerogative, and you may even be correct, but having spoken with a number of tax people and HMRC, I prefer my analysis.

Thanks for this, I very much appreciate your explanation and for pointing me to the relevant sections.

If this is the case, then yes, settlement is the better option (being based on net value of the loans). Having read these sections, I can appreciate now that paying the loan charge can be considered as a ‘payment on account’ to be offset against the earlier years’ charge. Tho have to say it isn’t crystal clear....

[Finalwhistle]

Interest due (Inconsistency)

Gents,
probably the wrong thread so apologies...however

I've looked at 2 peoples settlement letters and all are different in how the unprotected years are treated.

Case 1 - 3 years affected: 2012/13, 2013/14, 2014/15. No enquiries. Settlement figures include interest payable on all years.
Case 2 - 6 years affected: as above with 2015/16, 16/17, 17/18. Open enquiry on 2015/16 onwards. Settlement figures include interest payable on all open years (fine), but include one closed year (2014/15) on the basis that it would have been within the enquiry window.

So the guy with all closed years is having to pay interest on all his years.. and the guy with open years is only paying interest on 1 in 3 of his closed years.

Is this just luck of the draw?

[webberg]

Gents,
probably the wrong thread so apologies...however

I've looked at 2 peoples settlement letters and all are different in how the unprotected years are treated.

Case 1 - 3 years affected: 2012/13, 2013/14, 2014/15. No enquiries. Settlement figures include interest payable on all years.
Case 2 - 6 years affected: as above with 2015/16, 16/17, 17/18. Open enquiry on 2015/16 onwards. Settlement figures include interest payable on all open years (fine), but include one closed year (2014/15) on the basis that it would have been within the enquiry window.

So the guy with all closed years is having to pay interest on all his years.. and the guy with open years is only paying interest on 1 in 3 of his closed years.

Is this just luck of the draw?

With the proviso that your sample population is not statistically significant, in Case 1, HMRC should be able to charge interest ONLY on 2014/15 (because as you say, it is technically still in time for enquiry although the grounds for opening that are now weak). If interest is being charged on earlier periods - challenge it.

In Case 2, 14/15 is technically still in time for enquiry and should have interest applied. The later years the same.

This is just HMRC cock up and you should push back.

[Finalwhistle]

HMRC should be able to charge interest ONLY on 2014/15 (because as you say, it is technically still in time for enquiry although the grounds for opening that are now weak).

In Case 2, 14/15 is technically still in time for enquiry and should have interest applied. The later years the same.

thanks.

How is "technically in time for enquiry" defined by HMRC please?

[webberg]

thanks.

How is "technically in time for enquiry" defined by HMRC please?

It's not defined by HMRC, it's defined in Taxes Management Act 1970.

The "normal" time limit is that an enquiry has to be raised within 12 months of a return being submitted.

If the return is requested and submitted late, that extends to a year and a quarter.

Discovery assessments can be raised with variously 4 years, 6 years or 20 years of a tax year end depending on the severity of the behaviour that "caused" the late realisation of a potential liability ir under assessment.

Normally we see the 4 year applied.

An enquiry notice has to be delivered within the time limit.

A discovery assessment has to be made (by appearing on HMRC's internal and never to be seen in house record system) before the end of the period. The notice can arrive after the last date.

[Finalwhistle]

It's not defined by HMRC, it's defined in Taxes Management Act 1970.

The "normal" time limit is that an enquiry has to be raised within 12 months of a return being submitted.

If the return is requested and submitted late, that extends to a year and a quarter.

Discovery assessments can be raised with variously 4 years, 6 years or 20 years of a tax year end depending on the severity of the behaviour that "caused" the late realisation of a potential liability ir under assessment.

Normally we see the 4 year applied.

An enquiry notice has to be delivered within the time limit.

A discovery assessment has to be made (by appearing on HMRC's internal and never to be seen in house record system) before the end of the period. The notice can arrive after the last date.

I just came off the phone with HMRC. They said that any closed (unprotected) years should not have interest added unless it is the year 2014/2015 (or later) which they are including as within the enquiry window (it appears this is being applied generically rather than to specific individuals). I asked them to justify why 2014/2015 is within the (generic) enquiry window and they couldn't give me an answer. They are phoning me back tomorrow to confirm.

[webberg]

I'd be interested in their answer.

Once we go over this Friday then 2014/15 falls out of the "normal" 4 year discovery window.