What is the 2019 Loan Charge?

[Socialsarah73]

It means you probably owe IHT...

Join Big Group, get an accountant or get advice from WTT - they'll chat with you on the phone...

Even if I have already declared loans in my SA as income and paid tax due. Sorry should have been clearer does this mean the loans have been written off

[ConfusedEasily]

Even if I have already declared loans in my SA as income and paid tax due. Sorry should have been clearer does this mean the loans have been written off

Ah. Well. Your loans can be income and loans from a trust. The former you pay tax on and the latter maybe attracts IHT, you really need to speak to a specialist.

[starstruck]

What are people's thoughts on the following?

Loan made from offshore ebt trust (early 2000s)
Loan depreciates over a few years to close to nothing due to ccy movements
Trustees waive deprecated loan (mid-2000s)
Trust later wound up (mid 2000s)

Trust deeds and Trust deed of termination all available, both stamped by trustees.

Where do these loans stand with regards to the loan charge?
Understand that Loan Charge ignores ccy depreciation.
Does loan charge also ignore waived loans and also the trust being formally wound up?
I guess I am wondering how there can be anything outstanding when the entity owed no longer exists.

[BrilloPad]

What are people's thoughts on the following?

Loan made from offshore ebt trust (early 2000s)
Loan depreciates over a few years to close to nothing due to ccy movements
Trustees waive deprecated loan (mid-2000s)
Trust later wound up (mid 2000s)

Trust deeds and Trust deed of termination all available, both stamped by trustees.

Where do these loans stand with regards to the loan charge?
Understand that Loan Charge ignores ccy depreciation.
Does loan charge also ignore waived loans and also the trust being formally wound up?
I guess I am wondering how there can be anything outstanding when the entity owed no longer exists.

Only outstanding loans have to be declared.

[ChimpMaster]

Only outstanding loans have to be declared.

Ah - but what will no doubt count is HMRC's view of what they consider to be an outstanding loan.

My loan was closed off by another company, not affiliated to the trust but arranged by the scheme promoters. There was a 1% fee for this arrangement. That company folded a couple of years later. So I have no loan outstanding and haven't had for some 8 years.

But still, as I see it this is still something I need to report on the 2019LC. Of course, it's not at all clear how this should be done though.

[BrilloPad]

Ah - but what will no doubt count is HMRC's view of what they consider to be an outstanding loan.

My loan was closed off by another company, not affiliated to the trust but arranged by the scheme promoters. There was a 1% fee for this arrangement. That company folded a couple of years later. So I have no loan outstanding and haven't had for some 8 years.

But still, as I see it this is still something I need to report on the 2019LC. Of course, it's not at all clear how this should be done though.

You hit the nail on the head there.

So this may well require professional advice.....

[Iliketax]

What are people's thoughts on the following?

Loan made from offshore ebt trust (early 2000s)
Loan depreciates over a few years to close to nothing due to ccy movements
Trustees waive deprecated loan (mid-2000s)
Trust later wound up (mid 2000s)

Trust deeds and Trust deed of termination all available, both stamped by trustees.

Where do these loans stand with regards to the loan charge?
Understand that Loan Charge ignores ccy depreciation.
Does loan charge also ignore waived loans and also the trust being formally wound up?
I guess I am wondering how there can be anything outstanding when the entity owed no longer exists.

From what you have written, they are all "outstanding" for the purposes of the April 2019 loan charge. This is because the legislation defined "outstanding" in a mechanical way (have a look at para 3 onwards of Schedule 1 Finance (No 2) Act 2017 if you are interested).

[webberg]

From what you have written, they are all "outstanding" for the purposes of the April 2019 loan charge.

There is an apparent difference between what the legislation might be interpreted as meaning by outstanding debt and what the forms presently circulating that are for claiming a postponement of the charge.

The forms are certainly clear that they want a value for an "outstanding debt". No amount outstanding seems to point to an ability to postpone the charge. (I'm sure that HMRC will permit this only in the rarest of circumstances).

We have seen some interpretations from HMRC that are also seemingly at odds with how the legislation might be written. I suspect that the only conclusion from that evidence is that the average HMRC Counter Avoidance officer is clueless as to the legislation and what it means, but unless this is resolved, we will again fall into inconsistency, arbitrary and individual decisions and more confusion.

We have a meeting coming up with CA and will raise the above (and more) but I then expect HMRC to go into a huddle and produce a set of answers in a few months that will seek to say "tell us everything".

Whether that is a legally sustainable position might be more questionable.

[Iliketax]

There is an apparent difference between what the legislation might be interpreted as meaning by outstanding debt and what the forms presently circulating that are for claiming a postponement of the charge.

Those forms are for approval of qualifying loan. In the contractor world, those qualifying loans will be like organic rocking horse poo that has received unanimous five star ratings by a gross of unicorns. If anything 'funny' has happened to one of those loans then it won't qualify. So outstanding in real life is presumed to equal outstanding in legislation (and I guess the extra information about tax avoidance schemes, alterations, etc that need to be provided will allow HMRC to verify that). As far as the APN deferral one, those will be like unobtainium-plated unicorn poo.

I've no idea what a particular individual at HMRC is saying about what "outstanding" means, but the actual legislation is, to me, clear and HMRC's published guidance on what "outstanding" means is clear and, as far as I can see, is consistent with the legislation. I do believe it could do with some examples though.

[starstruck]

From what you have written, they are all "outstanding" for the purposes of the April 2019 loan charge. This is because the legislation defined "outstanding" in a mechanical way (have a look at para 3 onwards of Schedule 1 Finance (No 2) Act 2017 if you are interested).

Thanks. And presumably tax is calculated on the amount and the debt is ultimately transferred from the employer to the employee. I've asked this before, but that was before I knew of the trust being wound up, just wondered if that had any impact at all. Sounds like not.