What is the 2019 Loan Charge?

[starstruck]

It also doesn't help that they are re-issuing their offer letter. Why not get that right before announcing CLSO2 as they must have known that people wouldn't have been happy with the terms

Once you get an offer letter, do you have to accept it within a certain timescale? Just wondering what happens to people that signed the previous version and whether there may be a further one later.

[webberg]

Once you get an offer letter, do you have to accept it within a certain timescale? Just wondering what happens to people that signed the previous version and whether there may be a further one later.

Usually 30 days from issue, the offer has to be signed and returned.

If you think that your letter prejudices you when compared with a later letter, I think HMRC may be forced to accept that your letter should be amended or more likely a separate amending document is issued.

[starstruck]

Nobody has said this but I assume the new wording explicitly states that the loan charge will not apply; anyone know for sure?

[webberg]

Nobody has said this but I assume the new wording explicitly states that the loan charge will not apply; anyone know for sure?

The versions we have seen so far definitely DO NOT say that.

When we ask HMRC to include it, they claim that the "comprehensive protection against double taxation rules" mean it's not necessary.

However it seems to me that those rules start with how much tax is due in 2019, deduct tax paid in respect of the same income in earlier years, if any difference, then pay/refund.

For example.

You have a loan in say 11/12. The loan is £100,000 and the tax due if it was taxed in that year is £30,000. (Approx. £10k tax free, £30k @ 20% and £60k @ 40%)

The loan becomes taxable in 2018/19 and because of other income attracts a charge of £40,000.

The original DR charge assessment (if that is what we get) is therefore for £40,000. If you have settled for £30,000, then under the rules, a further £10,000 could be due.

This is why we want (and in some cases have achieved) an agreement to exempt the GROSS loan value and not go with the tax v tax method in the legislation.

I'm told that HMRC as a new version of the CLSO contract. I'm just got a copy and will spend some time now, studying it.

I'd be delighted if a categoric, clear, irrevocable statement that loan values settled cannot be included in DR charge was included.

If one of the other specialists here thinks the above is incorrect and can prove it by reference to the legislation, then again I'd be happy to be shown to be wrong.

[Safe]

The versions we have seen so far definitely DO NOT say that.

When we ask HMRC to include it, they claim that the "comprehensive protection against double taxation rules" mean it's not necessary.

However it seems to me that those rules start with how much tax is due in 2019, deduct tax paid in respect of the same income in earlier years, if any difference, then pay/refund.

For example.

You have a loan in say 11/12. The loan is £100,000 and the tax due if it was taxed in that year is £30,000. (Approx. £10k tax free, £30k @ 20% and £60k @ 40%)

The loan becomes taxable in 2018/19 and because of other income attracts a charge of £40,000.

The original DR charge assessment (if that is what we get) is therefore for £40,000. If you have settled for £30,000, then under the rules, a further £10,000 could be due.

This is why we want (and in some cases have achieved) an agreement to exempt the GROSS loan value and not go with the tax v tax method in the legislation.

I'm told that HMRC as a new version of the CLSO contract. I'm just got a copy and will spend some time now, studying it.

I'd be delighted if a categoric, clear, irrevocable statement that loan values settled cannot be included in DR charge was included.

If one of the other specialists here thinks the above is incorrect and can prove it by reference to the legislation, then again I'd be happy to be shown to be wrong.

I'm not a tax specialist but from common sense point of view, this is incorrect. If you agreed to settle prior to loan charge then that's it. If they (HMRC) still going to tax you for whole loan as part of loan charge and ask for the difference in tax then why are we bothered with settlement? How about this:

If we settled as part of CLSO 2 and say paid £30K in tax but HMRC calculate the tax say £28K as part of 2018-2019 loan charge, are they going to repay the £2K?

[webberg]

I'm not a tax specialist but from common sense point of view, this is incorrect. If you agreed to settle prior to loan charge then that's it. If they (HMRC) still going to tax you for whole loan as part of loan charge and ask for the difference in tax then why are we bothered with settlement? How about this:

If we settled as part of CLSO 2 and say paid £30K in tax but HMRC calculate the tax say £28K as part of 2018-2019 loan charge, are they going to repay the £2K?

So if you go into CLSO 2 and have a written contract, how far are you prepared to back "this is incorrect" when you have nothing in writing?

If the rules of the DR charge said that a loan subject to CLSO would not be taxed again, I'd completely agree with you.

I can't see that they do.

Remember that the CLSO 2 is outside the legislation. It's a concession offered by HMRC. So ultimately you're looking to have a statutory charge, defined in legislation, removed by application of a non statutory payment. I want any of my clients in this situation to have a written statement that they will not be taxed twice because I think HMRC have proven themselves unworthy of trust here.

If you want to rely on common sense, I admire your capacity to trust HMRC.

[Iliketax]

However it seems to me that those rules start with how much tax is due in 2019, deduct tax paid in respect of the same income in earlier years, if any difference, then pay/refund.

If one of the other specialists here thinks the above is incorrect and can prove it by reference to the legislation, then again I'd be happy to be shown to be wrong.

If you have paid the tax under the settlement, or have agreed time to pay, then you are wrong. Have a read of s554Z5 ITEPA 2003. Make sure you look at the current version. If you have not paid the tax and have not agree time to pay, then you are right (in terms of paying extra tax, you won't get a refund).

[phil@pmtc]

If you have paid the tax under the settlement, or have agreed time to pay, then you are wrong. Have a read of s554Z5 ITEPA 2003. Make sure you look at the current version. If you have not paid the tax and have not agree time to pay, then you are right (in terms of paying extra tax, you won't get a refund).

I absolutely agree with Iliketax on this matter.

[demby]

Bill stages — Finance (No.2) Bill 2017-19

This bill is still progressing and has not yet been made law. I'm wondering, could any further delay push back the deadline from 2019?

At the moment it's at a "Reporting Stage" date to be confirmed, then there is the 3rd Reading, date to be confirmed.

Then it has to go through the House of Lords, then considered for amendments and finally give the Royal Assent

[Iliketax]

This bill is still progressing and has not yet been made law. I'm wondering, could any further delay push back the deadline from 2019?

At the moment it's at a "Reporting Stage" date to be confirmed, then there is the 3rd Reading, date to be confirmed.

Then it has to go through the House of Lords, then considered for amendments and finally give the Royal Assent

No. You are looking at the wrong bill. Have a look at this: Finance (No. 2) Act 2017 and this Finance (No. 2) Act 2017

The current bill has disguised remuneration stuff on the close companies' gateway (normally nothing to do with contractors) and reporting loans (a lot to do with contractors). The committee stage is where most amendments happen. That's been done on the current bill and the Labour Part amendments to increase penalties for not reporting loans properly did not get through. There's a chance of amendments at the report stage (but incredibly unlikely, no amendments have been proposed for the DR changes yet and none were promised). The House of Lords does not change Finance Bills. So basically, the current bill is incredibly unlikely to change. But the April 2019 loan charge is already law and does not depend on the current bill.