What is the 2019 Loan Charge?

[starstruck]

The calculation may be as simple as you suggest but there are some potentially complicating factors.

Ironically, you are actually the source of my information. That's not a dig btw; I respect your opinion.

http://forums.contractoruk.com/hmrc-...-charge-6.html
Post #55

"calculate the tax/NIC due for 2018/19 if closed years are taxed then. In other words, add the loans to income that year."

I'm just trying to work out if this is what the charge will be or if it might be something else, could you clarify where you got the above from, is it an educated guess or have you spoken to HMRC? How confident are you that it will be this calculation?

[webberg]

The calculation basis was taken from an earlier HMRC paper on the policy and principles.

The later legislation that is about to become law is not as descriptive and has thrown us into a bit of confusion.

I think though I will stand by the original for now but reserve the right to change it if the law changes.

[EBTContractor]

Their website states: "all loans or debts from a disguised remuneration scheme will be taxed as earnings if they haven’t already been fully taxed or repaid on or before 5 April 2019."

Does anyone have any technical notes that say whether interest will be added if you decide to go the 2019 loan charge as opposed to settling now?

[Iliketax]

Does anyone have any technical notes that say whether interest will be added if you decide to go the 2019 loan charge as opposed to settling now?

The March 2016 technical note says:

5.However, in some cases the amount due under the new charge will be less than the total amount due to be paid in respect of the earlier liability, for example where the liability has not been paid and a large amount of interest has accrued on it.

6.In such cases the user will still have to pay the difference between the new charge and the amount due in respect of the earlier liability.

But it's not quite as wide as point 6 suggests. If it is a closed year, no interest. If it is an open year and not much is happening, who knows whether HMRC will actually demand interest? I'm not aware of anything published that explains its view on that. If it is an open year and it's going / gone to the FTT, then HMRC will (in my view) demand interest.

[stonehenge]

Let's get real here.

Once they've collected the loan charge, does anyone seriously think that HMRC will go to the effort of taking cases to tribunal to recover any shortfall?

This is the same HMRC that sat on their big fat lazy arses for nearly 2 decades allowing these loan schemes to snowball out of control.

[ChimpMaster]

Is there any change in the Bill that gives clarity on whether it's better to settle under CLSO2, rather than pay the 2019 LC?

This is with reference to closed years only, and where the user is a higher rate tax payer throughout (including 2019).

For example, as I understand it, NICs are not charged on CLSO2 but might be under the LC.

[Iliketax]

Is there any change in the Bill

There is no change in the bill.

[stonehenge]

This is my understanding but I could be wrong.

CLSO2

Protected years: tax + nics + interest
Unprotected: tax

Loan Charge

Employee scheme: tax (no class 1 nics)
Self-employed: tax + class 4 nics*

(* I'm not sure how you would account for the class 4 nics through self-assessment, especially if you are not even self-employed in 2018/19.)

[ChimpMaster]

This is my understanding but I could be wrong.

CLSO2

Protected years: tax + nics + interest -- NICs only if you were self-employed
Unprotected: tax -- +NICs only if you were self-employed

Loan Charge

Employee scheme: tax (no class 1 nics)
Self-employed: tax + class 4 nics*

(* I'm not sure how you would account for the class 4 nics through self-assessment, especially if you are not even self-employed in 2018/19.)

Thanks, that is what I thought too but perhaps with the exception of the note in bold that I've entered above.

So if this is correct, then if you only have closed years (none open), the only difference between CLSO2 and the LC is your marginal rate of tax i.e. 40% for CLSO2 or 45% for LC, in my case.

So I might as well wait for the LC and pay that extra 5%. I guess. But then I'm not sure about the implications of doing that, or even how I will report anything.

[stonehenge]

Thanks, that is what I thought too but perhaps with the exception of the note in bold that I've entered above.

Who knows, when HMRC keep moving the goal posts.