New charge on outstanding disguised remuneration loans

[bstar1]

Presumably now HMRC have got this charge coming down the line in 2019, they don't need to do anything.

Not much point the taxpayer litigating either because, even if you win, you still lose in 2019.

Time to pack the suitcases?

Maybe we should set up a new thread titled "Insolvency Best Practices & Guides"....Progress..

[Iliketax]

Please could you clarify this point.
Are you trying to say that loans drawn in years that are not under enquiry or discovery and now out of time are not going to attract the loan charge ? If so thats not the impression I got from the webinar.

No, I'm not saying that. My understanding of HMRC's current view is that old loans still outstanding in April 2019 (and not already taxed or settled) will attract the new tax charge at 2018/19 tax and NIC rates. I was replying to: "HMRC still want to collect under the new charge at a rate based on the tax rates in the earlier year PLUS interest". If they are out of time to challenge the old loans when they were made then there would be no interest and old rates would not be used.

[DonkeyRhubarb]

Article about how former Rangers footballers may be screwed in 2019 even if BDO win the Supreme Court appeal.

Former Rangers stars face ruin as taxman gets tough following Budget crackdown on EBTs - Daily Record

Heads HMRC win; tails you lose.

[carling]

No, I'm not saying that. My understanding of HMRC's current view is that old loans still outstanding in April 2019 (and not already taxed or settled) will attract the new tax charge at 2018/19 tax and NIC rates. I was replying to: "HMRC still want to collect under the new charge at a rate based on the tax rates in the earlier year PLUS interest". If they are out of time to challenge the old loans when they were made then there would be no interest and old rates would not be used.

Not really a very novel reading then.
Just a difference of opinions about what that liability actually consists of. You agree the legislation still conjures up liabilities where there were none before due to enquiry or discovery issues/time barring. Surely that is the key point of this item of the legislation and in any other line of business would be termed extortion.

[carling]

But I am worried about the spin that some people are giving it. This change will have a huge impact for people who have loans. Many people will have to remortgage to pay the April 2019 charge and some may well go bankrupt. Discouraging people from settling, discouraging people from talking to HMRC about time to pay may work better in getting a group of people together to fight this. But a settlement with time to pay may well be substantially better for some individuals.

Not sure where you are getting the feeling that Webberg and Big Group are not for settling with HMRC. I assume that's who this point is aimed at.

Big Group stated Aim from their Website.

Objectives

The primary objective is to arrive at a tax analysis which can be regarded as fair and reasonable.
This is not limited to the tax position whilst engaged in the scheme but will extend to agreement in respect of any obligations or rights that still exist, such as loans from trusts. This is referred to as a “whole life” settlement.

[horrada]

I think you must have been listening to a different webinar. I did not hear anything on there that suggests that there were any doubts on the presenters' personal integrity. I know some of those who spoke and I am not aware of the slightest issues with their integrity. And just for the record, I don't work for HMRC.

No ,more pleased with himself by his smug little smile (that you could actually hear) and self-righteous remarks

[meanttobeworking]

Example 5 and 6 seem to indicate that if settlement is reached prior to 2019, no charge will be made:


Example 5
An employer ‘B’ directly placed £200,000 into an EBT ‘P’ prior to December 2010 in order to remunerate an employee ‘A’. Shortly afterwards P made a loan of £195,000 to A.

If that loan is outstanding on 5 April 2019 the new measure will charge the loan amount of £195,000 to income tax and NICs. The £5,000 not borrowed by A is not subject to the charge but may be caught by Part 7A at a later date.

If A repays the debt to the P before 5 April 2019 there is no charge under the new measure as there is no debt outstanding. However, the £200,000 now held by P may be caught by Part 7A at a later date, for example if it were distributed to A.

There could be an earnings charge on the contribution to P prior to December 2010. More detail is provided in Chapter 6.

Example 6
The facts are the same as in Example 5 above.

However, before 5 April 2019 a settlement is reached between B and HMRC on the basis that the £200,000 was earnings of A.

On the 5 April 2019 B does not have to pay the new charge as the same amount has already been taxed as earnings.

[webberg]

So what happens if you had a loan of £195,000 that would be chargeable to tax, but HMRC has missed the enquiry/discovery assessment window?

That's not likely for years 11/12 onwards, but increasingly likely for years prior to that.

In that case, for example, 2007/08, no tax has been paid on the loan because there was no enquiry and the time limit has lapsed.

I think that where "Iliketax" and I differ is that my interpretation says, HMRC can raise a charge at 5/4/19 if the loan drawn in 2007/08 remains unpaid, trampling all taxpayer protections to dust.

"Iliketax" has explained his position above and I'm sure can speak for himself.

I'm seeking clarification from HMRC as my notes from the webinar yesterday say I'm correct but I'm willing to admit error if required (and indeed I very much hope my interpretation is wrong).

[mulberryblue]

Sorry if I'm not understanding the technicalities of this discussion correctly. But since many people have been sent (and are in the process of paying) APN's, hasn't HMRC already decided that this money is not loans but in fact income, and taxed them accordingly.

The loans are outstanding because HMRC are not interested in getting the loans written off - although they dispute they are loans in the first place. The same money can't be both income and a loan.

[webberg]

Sorry if I'm not understanding the technicalities of this discussion correctly. But since many people have been sent (and are in the process of paying) APN's, hasn't HMRC already decided that this money is not loans but in fact income, and taxed them accordingly.

The loans are outstanding because HMRC are not interested in getting the loans written off - although they dispute they are loans in the first place. The same money can't be both income and a loan.

An APN says "this amount is in dispute, let me (HMRC) hold it whilst we agree the final result".

That decides nothing except who holds the money.

HMRC has no power to write the loans off. They are not a named party in the loan agreement and as such have no power to alter the terms.

Only the lender and borrower can agree to alter the loan terms.

And yes, the same money can be income and a loan. It can be income for tax purposes and a loan for legal purposes.