BIG GROUP

[Iliketax]

I am just intrigued

Fair enough.

[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.

[Theythinkitsallover]

Loan repayments to avoid LC

Fair enough.

You do make me laugh - I look forward to reading the "alumnae" forum after the event.

[Theythinkitsallover]

Loan repayments to avoid LC

2) litigate against the original disguised remuneration (loans)

Loan Ranger - I would imagine that is exactly what HMRC would never want to do and ironically it is what most out there who are impacted by this right now actually want them to do.

But that would involve actual work and not just sitting behind policy makers doing bog all.

[Iliketax]

I certainly am not looking for you to make me happy

You do make me laugh

Soz

[webberg]

This is a BG thread so I hope nobody minds that I pitch in.

If I understand the position correctly, a loan drawn whilst in the UK and from a trust connected to an employer is to be repaid in cash.

In itself, provided this is not part of a tax avoidance scheme, then the DR charge in 2019 will not apply.

The distribution of funds from the trust will be subject to the rules relating to transactions between trusts and beneficiaries.

A non UK trust paying an amount to a non UK resident beneficiary should not attract tax.

If the trust is deemed to be in the UK, then any growth on the repaid loan funds, may be subject to income tax.

It's possible that - if the trust is deemed to be in the UK and/or the distribution might be deemed to be a relevant step in Part 7A - that a charge applies. However that would be probably on the employer (presumably long gone) and I think there is almost no scope to transfer that to a non resident individual.

So apologies if I've stepped on toes, but in the circumstances described I think it would be difficult for a non resident individual to have a liability to UK tax on the DR charge or anything else.

(You will notice that those with any HMRC experience tend to use words like "difficult, unlikely, almost impossible" rather than "definitely not". This is unfortunately not because we don't want to be decisive but rather because we're used to our overly complex tax code throwing up odd answers from time to time and HMRC often have their own interpretation which seems often to come from their preferred answer, i.e. pay tax - now let's think of a reason why).

My personal view is that you have no liability.

[Theythinkitsallover]

Loan repayments to avoid LC

Thank you webberg

Your professional opinion and response to what I have been saying is a real plausible and legitimate repayment option for some is welcome.

I will tell those that are doing this to stock up on their rum !

[Loan Ranger]

My personal view is that you have no liability.

But HMRC will almost certainly disagree. As they always do. Even if they haven't got much of a leg to stand on.

I expect anyone who claims they are outwith LC19, because they've repaid their loans, will find themselves firmly in HMRC's sights.

[me206et]

This is a BG thread so I hope nobody minds that I pitch in.

If I understand the position correctly, a loan drawn whilst in the UK and from a trust connected to an employer is to be repaid in cash.

In itself, provided this is not part of a tax avoidance scheme, then the DR charge in 2019 will not apply.

The distribution of funds from the trust will be subject to the rules relating to transactions between trusts and beneficiaries.

A non UK trust paying an amount to a non UK resident beneficiary should not attract tax.


If the trust is deemed to be in the UK, then any growth on the repaid loan funds, may be subject to income tax.

It's possible that - if the trust is deemed to be in the UK and/or the distribution might be deemed to be a relevant step in Part 7A - that a charge applies. However that would be probably on the employer (presumably long gone) and I think there is almost no scope to transfer that to a non resident individual.

So apologies if I've stepped on toes, but in the circumstances described I think it would be difficult for a non resident individual to have a liability to UK tax on the DR charge or anything else.

(You will notice that those with any HMRC experience tend to use words like "difficult, unlikely, almost impossible" rather than "definitely not". This is unfortunately not because we don't want to be decisive but rather because we're used to our overly complex tax code throwing up odd answers from time to time and HMRC often have their own interpretation which seems often to come from their preferred answer, i.e. pay tax - now let's think of a reason why).

My personal view is that you have no liability.

So If the loan has been written off, by whatever means, it is just HRMC who say it is not. So if you can find someone to pay the cash back to then no LC. Then the cash you gave in is just an investment by you, so the trust can just give it back as it is and always was your cash. If you are not UK resident you should not need to declare it to anyone.

If the loan was Not written off then there would have to be a redistribution, but again if you are non resident when would the tax point be, when the money was first payed or in the current year? Making a large difference for anyone not in a 0% tax country.

[webberg]

So If the loan has been written off, by whatever means, it is just HRMC who say it is not. So if you can find someone to pay the cash back to then no LC. Then the cash you gave in is just an investment by you, so the trust can just give it back as it is and always was your cash. If you are not UK resident you should not need to declare it to anyone.

If the loan was Not written off then there would have to be a redistribution, but again if you are non resident when would the tax point be, when the money was first payed or in the current year? Making a large difference for anyone not in a 0% tax country.

I think this demonstrates some of the problems here.

The poster asked what his/her situation might be if they repaid the loan in cash from their own resources and the trust made a distribution to them whilst they were not in the UK. A discrete and dare I suggest, unusual set of circumstances.

Then we have this scenario which is very different.

A loan that has been repaid does not need to be written off. A write off is usually removing the obligation to repay the loan without cash moving. If that happens, then HMRC will almost certainly claim that the loan has not been repaid.

Having some other party pay the loan back so that you are then obligated to that third party is also unlikely to work. There are extensive provisions about "replacement loans".

If you repay the loan and make arrangements such that you are certain the money comes back to you, taxable or otherwise, then HMRC will claim that you have not repaid.

Be very clear.

The only way in which the DR charge can be avoided, according to HMRC, is to repay in cash.

Then you need to consider the trust distribution.

Any preplanned link is going to being questions.