BIG GROUP

[Loan Ranger]

What we're talking about is:

Person (P) repays their loans to the value of £x. P then receives £x back.

Even if there are certain situations where this might work, you can be sure HMRC will pursue P through the courts. In fact, HMRC have got two options:
1) litigate against the above transactions
2) litigate against the original disguised remuneration (loans)

Bottom line, if you do the above, you are inviting a whole heap of trouble.

[Iliketax]

I am just intrigued

Fair enough.

[Theythinkitsallover]

Loan repayments to avoid LC

I am just intrigued as to what circumstances you do think does allows for a contractor to repay their loan and get the correct tax treatment on the redistribution wherever that may be. Same question, just as yet never really answered, and from what I read/understand from your posts is that you don't seem to think there are any.

[Iliketax]

Iliketax if you are trying to suggest 'earmarking' will catch them out - well I would hope for their sake that their advisors would have thought of that too.

Or are you trying to suggest that it is just purely and simply not an option for a contractor to repay their loans out of their own monies and pay the correct tax on the redistribution wherever that may be in the world UK or Bermuda?

Woudn't that then make it a retrospective tax ?

I'm not trying to suggest anything as I have no idea what facts you are thinking of.

[Theythinkitsallover]

Loan repayments to avoid LC

You'll still say I'm try to deflect that by asking more questions so I know I'm not going to succeed in making you happy.

I'm not sure I've asked you heaps of questions - just sticking with the same unanswered one for now. I certainly am not looking for you to make me happy in the information/guidance you provide. You are barking up the wrong tree with that thinking.

In fact I find the information you provide very interesting and intellectual. You clearly have an important role in all of this LC debacle/debate and the fact that you spend your time free of charge on here is of benefit to all of those who are affected and read this forum. It doesn't mean I agree with everything you say though.

1. When are you repaying the loan? - Certainly not as UK resident

2. What is the trustee (or whoever you are going to borrowed the money from) going to do with the money you paid them? Be specific about it. What are they doing with the cash? What are they going to do in their books and records? What are they going to do with it when you get to Bermuda? Can I ask to get some of it? If not, why not? It doesn't matter if its not been legally agreed or anything, but what's going to happen? Presumably, you've got a good inkling of that as otherwise you wouldn't go to the hassle of repaying the loan.

3. What do you mean "those loan monies never pass through the Part 7a gateway"? An individual repaying a loan is just an individual repaying a loan. So presumably you were thinking of something specific that is going to happen to the money once its been repaid? If so, what part of the gateway is it not going through?

Iliketax if you are trying to suggest 'earmarking' will catch them out - well I would hope for their sake that their advisors would have thought of that too.

Or are you trying to suggest that it is just purely and simply not an option for a contractor to repay their loans out of their own monies and pay the correct tax on the redistribution wherever that may be in the world UK or Bermuda?

Woudn't that then make it a retrospective tax ?

[Iliketax]

No I dont actually, I know it isnt.

Great

What I do think however, is that you are not answering the question I have asked you specifically regarding the loan repayment option I described and that you are simply trying to deflect it onto something else.

You'll still say I'm try to deflect that by asking more questions so I know I'm not going to succeed in making you happy.

Now if those loan monies never pass through the Part 7a gateway and on 5th April 2019 are paid back and no loan exists then how can any of the points you refer to be relevant to the individual. They have repaid the loan.

So let's assume you borrow from a bank to repay the loan and that's not part of a tax avoidance scheme, etc so the repayment counts as repayment.

1. When are you repaying the loan?

2. What is the trustee (or whoever you are going to borrowed the money from) going to do with the money you paid them? Be specific about it. What are they doing with the cash? What are they going to do in their books and records? What are they going to do with it when you get to Bermuda? Can I ask to get some of it? If not, why not? It doesn't matter if its not been legally agreed or anything, but what's going to happen? Presumably, you've got a good inkling of that as otherwise you wouldn't go to the hassle of repaying the loan.

3. What do you mean "those loan monies never pass through the Part 7a gateway"? An individual repaying a loan is just an individual repaying a loan. So presumably you were thinking of something specific that is going to happen to the money once its been repaid? If so, what part of the gateway is it not going through?

[ChimpMaster]

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".

1. HMRC have asked for proof that the repayments were made to the Trust and loans closed off by this 3rd party payment. The Trust is apparently getting this documentation together.
2. No, nothing was omitted and I am well aware of these fear-inducing phrases. There wasn't a DOTAS number for the scheme, and my tax return and P11D had all relevant information on it. BIK was paid while the loan was open.

So it hinges on proving that the Trust loan was repaid before 03/2016, and this is where evidence is needed.

[Loan Ranger]

The legislation covers most scenarios but I'm sure, like with all tax law, there will be loopholes.

One thing you can be sure of, though, is if you repay the loans, HMRC will assume it's avoidance motivated, and will be all over you like a rash.

I expect only a very tiny minority of people will repay loans, so HMRC can easily dedicate resources to give this special attention.

[Theythinkitsallover]

Loan repayments to avoid LC

It sound like you think that DR is just to do with loans

No I dont actually, I know it isnt.

What I do think however, is that you are not answering the question I have asked you specifically regarding the loan repayment option I described and that you are simply trying to deflect it onto something else.

I am certainly not saying that just because you repay the loan from your own funds legitimately and avoid the large the 2019 LC that it will all go away.

It just becomes a different tax argument and to be honest one that HMRC should've been bothered to investigate and have with these contractors and scheme providers years ago.

However, I am sure you can/will tell me the legitimate/real reasons why they didn't - perhaps the top brass at HMRC have explained these reasons to you in some of the meetings you have had with them on their policies.

Just make sure not to "sugarcoat' this explanation though.

[Iliketax]

These manuals you refer to from my understanding are all relating to DR rules and guidance for the officer to apply these rules. If DR isn't relevant as you have no loan on 5th April 2019 then I am not sure what you are saying

It sound like you think that DR is just to do with loans. If so, have a look at the earlier part of those manuals where they mention s554B, s554C and s554D.