BIG GROUP

[webberg]

Yes, Thats bad for his business and anyone else who is selling hope to desperate clueless individuals

Maybe the rest of use would like sharing information without suffering paranoia of conspiracy theories

Not sure how this is relevant to Big Group?

[luxCon]

... and thats bad for the business

Just heard back from my tax advisor, he thinks you are an HMRC stooge.

He told me to stay away from internet forums

Yes, Thats bad for his business and anyone else who is selling hope to desperate clueless individuals

Maybe the rest of use would like sharing information without suffering paranoia of conspiracy theories

[webberg]

So you are ignoring your tax advisor.....

Sometimes, also very sensible.

[PokemonStay]

Just heard back from my tax advisor. He told me to stay away from internet forums

So you are ignoring your tax advisor.....

[webberg]

Just heard back from my tax advisor, he thinks you are an HMRC stooge.

He told me to stay away from internet forums

Very sensible.

[vern19]

OK. When you talk to you tax specialist, ask her what she thinks about the "payment condition" in s554Z5(4) ITEPA [the current version, not the one in their "red" or "yellow" book].

Just heard back from my tax advisor, he thinks you are an HMRC stooge.

He told me to stay away from internet forums

[Iliketax]

would it not make sense to just ask HMRC

That would make sense. I'd expect that they will tell you that if you've not paid tax for the closed year then you will have to pay the April 2019 loan charge. That's certainly been their policy since March 2016. But for you to be able rely on whatever they say you'd have to give them your name and describe what the settlement agreement says (basically, you need to put your cards face up on the table). Obviously, it's up to you if you want to do that. The main difficulty will be finding the right person at HMRC to talk to who understand the nuances of what this legislation says. There are not many of them around just yet. And if you find the right person and they agree that you don't have to pay tax on the closed years, well there's still a couple of Finance Bills to change the rules before April 2019.

as its going to come down to their interpretation at the end of the day ?

Realistically, you may be right. But I'd like to think that they will only do what the legislation (when read purposively, etc) them allows them to do. From my experience, HMRC do that. People on this forum have other views.

[webberg]

We are seeking clarification on this point (and others) as there is a disparity between:

• What the original "policy" for this charge suggested
• What the words suggest
• What statute shows

The original policy said that where a year was "implicitly" closed as part of a settlement, then it would not be subject to the DR charge.

The latest words in the settlement agreement seem to suggest that because a closed year was not an explicit part of the previous settlement, then it remains a viable target for the DR charge.

That is a potential conflict that so far has gone unanswered by HMRC.

Clearly, it's an uncertain aspect which makes recommending (or otherwise) a settlement very difficult for advisers who like to know, understand and explain the position to clients.

[jbeer]

Previous settlement

Thanks, it does sound rather complicated. I guess, possibly naively, I thought where it said…

“For any settlement entered into after 16 March 2016, or any settlement in relation to a scheme which operated after 5 April 2011, the amounts in respect of which relief from a DR charge can be claimed will be restricted to those specified in the settlement agreement."

then this would imply the opposite is true for pre 16 March 2016 agreements, i.e. the settlement agreement would not necessarily have to specify the closed years for the relief to be given.

However, I wasn’t aware of all the Finance Act clauses.

I agree not to take what some random stranger states as gospel, but in this case, rather than pay for professional advice to get their interpretation - which may also be wrong - would it not make sense to just ask HMRC as its going to come down to their interpretation at the end of the day ?

[Iliketax]

This sounds to me that if you entered CLSO 1, then there should be no loan charge applicable (even for closed years) ?? Otherwise why differentiate between pre 16 March 16 and post ?


https://www.gov.uk/government/public...ttlement-terms

I see what you are getting at but I'm not sure that your conclusion is right.

I think that this comes from the way paragraph 59 Schedule 2 Finance Act 2011 applies. This was originally designed to say (i) ok. so you did some fancy planning pre-April 2011, (ii) you've now agreed that you should pay income tax when you did that fancy planning, so (iii) don't worry about the disguised remuneration rules on those amounts again because you paid the tax at the start. This was really helpful where money was put in an EBT and then not all of it loaned back again.

It was a bit generous and so the scope of the para 59 agreement got reduced.

The last Finance Act made changes to para 59 to make it clear that it can apply to the deemed "relevant step" on 5 April 2019. So if the various conditions in para 59 are satisfied then the April 2019 loan charge is disapplied (i.e. you are home and dry). This is where it then gets a bit complicated. Two of the conditions are:

(d) before the [April 2019 deemed] chargeable step is taken—

(i) an agreement was made between Her Majesty's Revenue and Customs and either A or B (or both) under which it was agreed that the pre-6 April 2011 step was to be treated as giving rise to earnings of A from A's employment with B within Chapter 1 of Part 3 of ITEPA 2003 for the pre-6 April 2011 tax year, or
(ii) the tax payable by A for the pre-6 April 2011 tax year was otherwise decided on the basis that the pre-6 April 2011 step was to be treated as giving rise to earnings of A from A's employment with B within Chapter 1 of Part 3 of ITEPA 2003 for that tax year,

(e) before the chargeable step is taken, A or B has paid, or otherwise accounted for, any tax which A or B is required to pay or otherwise account for as a consequence of—

(i) the agreement mentioned in paragraph (d)(i), or
(ii) the tax payable by A for the pre-6 April 2011 tax year having otherwise been decided on the basis mentioned in paragraph (d)(ii), and

So assuming you went down the agreement with HMRC route, to fall within para 59 you need both a settlement with HMRC (para 59(1)(d)) and the tax to have been paid (para 59(1)(e)). So if a closed year was not in the agreement then you fail (d). If it was in the agreement and paid the tax set out in the agreement then (e) is clearly met. So you'd be fine from the April 2019 loan charge perspective.

The question then is what happens if (i) the closed year loan was, say, £100,000, (ii) HMRC agreed that £0 of tax should paid on it (rather than £40,000), and (iii) that agreement was within the scope of para 59?

I'll start by saying that I don't negotiate settlements with HMRC so don't have sufficient range of experience to know everything that they might have agreed back in the good old days. If they explicitly said that and its included in the agreement you might have a case that you don't have to pay the April 2019 charge. But there have been tax cases that say that "0" is not an amount and so having £0 to pay means that you've not paid anything (see McQuillan).

At the end of the day this is new stuff. It is complicated. I'm sure that HMRC have not thought of all the various circumstances and decided what to do. What ever you do, don't rely on what some random stranger on an internet forum says. Take proper professional advice based on your own circumstances (including what your settlement agreement actually says rather than what you think it says). And be aware that these provisions will be something that most people who deal with tax for a living will have absolutely no clue about. It's not in the books that they use. There are few sensible discussions on it in the professional press. You will be paying them to learn.

If you do get some advice, post it here and include (i) the facts that they are advising on, (ii) what they said, and (iii) why they said it. Without all three bits, it will be no help to others.