Probably I missed this somewhere, but in simple summary can someone please explain what a Loan Charge 2019 is? It would also be nice to know the difference between CLSO2 and LC2019 so one make a judgement call as what to do next. Is there any association/advisor(s) challenging LC2019? If so, than is it reasonable to assume that this challenge will not be concluded by next year and hence LC2019 will kick in anyway (so what's the use of challenging)? Any comments and suggestions will be really helpful.
-
-
That's exactly what I would like to know as well, and to be honest something that I would have expected HMRC Compliance to inform us of when sending us investigation letters, however none of the letters I have received have even mentioned the Loan Charge or CLS02. This to me is incompetence from HMRC, why are they not telling us about this things and explaining to us the impact of them?Originally posted by freddythefrog View PostComment
-
I agree that HMRC should have written to everyone about CLSO2. For CLSO1 they wrote to everyone who had an open enquiry to let contractors know about this 'opportunity' to settle. (which was a result of Boyle!) They launched CLSO2 back in November and there has been nothing but I get the feeling with CLSO1 they were just trying their luck as they used a very iffy First Tier Tribunal case to influence people to settle their loans. They didn't have the LC to fall back on so why would they care if people don't know about CLSO2. Even in this letter back then said that only 1% of contractors had used loan schemes which is about 60,000 letters to send out. This for HMRC is nothing.Originally posted by burnside View Post
Maybe their thinking is that we are 'lucky' to even give you this 'opportunity' to settle as we will get the money in 19/20 anyway so why bother sending letters out to these low-life individuals who participated in tax avoidance schemes.
Sad state of affairs.Comment
-
The basics
Hi Freddythefrog,Originally posted by freddythefrog View Post
This is a minefield, the basics are.
CLSO2 - You settle in the years in which you took the loans - Pay the tax which HMRC say is due.
or
2019LC - Any unsettled loans are all taxed as income in this one year - Pay the tax with HMRC say is due.
or
Litigate - Unknown outcome
There are 101 considerations for each of the above, many unknowns related to both the Scheme you used, whether you were employed or self-employed, what has happened to the loans, can they still be called in by the trustee, IHT? Added to that you have HMRC's woolly definitions of the new loan charge!
Whichever way you go you need to get everything included, make it as "final" as possible, so do your own research and get professional advice. One thing for sure is that this is a personal choice related to your individual circumstances - There will be large numbers of people taking each route above.
MLeggsyComment
-
CLSO2
Loans are taxed in the years they were received.
Works out better for closed years, where there is no late payment interest.
For open years, the older the loans are, the more interest you'll have to pay.
Approximate interest on open years:
Tax Year __ Interest
2001/2 _____ 71.8%
2002/3 _____ 65.3%
2003/4 _____ 59.2%
2004/5 _____ 51.8%
2005/6 _____ 45.2%
2006/7 _____ 37.8%
2007/8 _____ 29.8%
2008/9 _____ 25.0%
2009/10 ____ 21.0%
2010/11 ____ 18.0%
2011/12 ____ 15.0%
2012/13 ____ 12.0%
2013/14 ____ 9.0%
LC19
All the loans are treated as taxable earnings in 2018/19.
Unlike CLSO2, there's no interest on open years.
The tax can be reduced by minimizing your other income in 2018/19, so that more of the loans fall into the nil or basic rate bands.
You can make pension contributions and get tax relief on the charge.Last edited by Loan Ranger; 19 February 2018, 09:08.Comment
-
Excuse my ignorance but I thought that no interest was payable under CLS02, and this was one of the main benefits of going down this route rather than LC19, or have I completely misunderstood that?
Late payment interest is due for protected years. No late payment interest will be payable on voluntary restitution.
What is the definition of protected years?Last edited by burnside; 19 February 2018, 11:28.Comment
-
-
Ok, that changes my high level calculations then. So if you agree to settle under CLS02 you get interest added but you don’t under the Loan Charge, but could pay higher rate of tax (40 and 45% as opposed to 20 and 40%) is that right?
I guess there will be a fine line between the 2 on what our total liability is then?Comment
-
Yes.Originally posted by burnside View Post
There is another difference between CLSO2 and LC19. CLSO2 is a final settlement, bringing closure. Theoretically, LC19 doesn't. You would still have open enquiries after paying LC19.
Maybe phil@dswtres has a view on this but, personally, I'd be surprised if HMRC did anything further after someone paid LC19.Comment
-
But even final may not be final as they could still impose IHT. Is it too much to ask just for a final figure that closes this mess?Comment
Comment