What is the 2019 Loan Charge?

[Iliketax]

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.

Tax is paid like this:

1. If your employer is still alive and well (unlikely for contractors with schemes): The employer pays HMRC but the employer will chase you for reimbursement of the PAYE and employee's NIC.

2. Your employer no longer exists (e.g. struck off): You have to pay HMRC the income tax through self-assessment (no NIC)

3. Your employer is the walking dead (e.g. no funds): The employer should pay HMRC but as it has no funds, HMRC will require you to pay it

4. You are self-employed: You have to pay HMRC the income tax through self-assessment, with self-employed NIC.

[starstruck]

Tax is paid like this:

1. If your employer is still alive and well (unlikely for contractors with schemes): The employer pays HMRC but the employer will chase you for reimbursement of the PAYE and employee's NIC.

2. Your employer no longer exists (e.g. struck off): You have to pay HMRC the income tax through self-assessment (no NIC)

3. Your employer is the walking dead (e.g. no funds): The employer should pay HMRC but as it has no funds, HMRC will require you to pay it

4. You are self-employed: You have to pay HMRC the income tax through self-assessment, with self-employed NIC.

Thanks again. So do you think it fair to say that what the loan charge considers "outstanding" is in contradiction to what most people would assume to be the case and in other parts of the law. By this I mean if the loan provider has been wound up, or the loan provider has explicitly told you they have waived the debt and no repayment is required etc.. then a reasonable person would assume nothing is outstanding and in law I think the debt would be unenforceable.

However, the loan charge still considers the loan "outstanding". Would a better wording (in terms of helping my understanding) not be "outstanding" but "ever having existed (and not been repaid by March 16 in GBP)"?

[Iliketax]

Would a better wording (in terms of helping my understanding) not be "outstanding" but "ever having existed (and not been repaid by March 16 in GBP)"?

No, repayment before March 2016 reduce the amount outstanding, as do repayments made after March 2016 in money.

My way of thinking is that it is a tax charge on an amount that is calculated as:

The amount initially borrowed + any extra amounts have been borrowed - any amounts that were repaid before 16 March 2016 - any amount that was repaid with money on or after 16 March 2016?

So this means that the following is ignored:

Interest that has been capitalised
Amounts that have been waived
Amounts repaid on or after 16 March 2016 otherwise than in money (like using a house to repay a loan)
Whether the statute of limitations applies
Whether the repayment of the loan is actually enforceable

But then there are extra provisions where (i) the loan is in a depreciating currency, (ii) the amount repaid is passed back to someone (directly or indirectly or earmarked for them) unless all the taxed on it, (iii) if someone else repays the loan, (iv) if the repayment is part of a scheme to avoid tax.

Caveat: it's my day off today and so this is just from memory and is just a summary - the legislation is about six or seven pages long so there are lots of subtleties.

[webberg]

The forms we have seen are not limited to claiming postponement due to the loan being or becoming "qualifying".

Rather they include the above and the rather bizarre circumstance where the value of the APN paid in respect of any one year is higher than the loan value for that year.

Yes - correct - there is an exemption if your APN (calculated as tax due on a loan) is HIGHER than the loan.

I suppose it could happen but unless there has been some catastrophic error of calculation that was allowed to stand, I struggle to think of circumstances where this is of any use.

However the form asks those completing it to start with the amount of loan outstanding at the time the form is completed. It does not reference the legislation or the legislative definition and is almost certain to lead to considerable confusion.

As I reported, we have now asked 4 different HMRC officers to clarify this for us and have 5 different answers.

[ChimpMaster]

The forms we have seen are not limited to claiming postponement due to the loan being or becoming "qualifying".

Rather they include the above and the rather bizarre circumstance where the value of the APN paid in respect of any one year is higher than the loan value for that year.

Yes - correct - there is an exemption if your APN (calculated as tax due on a loan) is HIGHER than the loan.

I suppose it could happen but unless there has been some catastrophic error of calculation that was allowed to stand, I struggle to think of circumstances where this is of any use.

However the form asks those completing it to start with the amount of loan outstanding at the time the form is completed. It does not reference the legislation or the legislative definition and is almost certain to lead to considerable confusion.

As I reported, we have now asked 4 different HMRC officers to clarify this for us and have 5 different answers.

There is going to be huge confusion over this. There already is.

According to the point in bold, in my case I will be putting down 0 as the amount of loan outstanding.

[Iliketax]

TYes - correct - there is an exemption if your APN (calculated as tax due on a loan) is HIGHER than the loan.

I suppose it could happen but unless there has been some catastrophic error of calculation that was allowed to stand, I struggle to think of circumstances where this is of any use.

Part of the loan has been repaid?

However the form asks those completing it to start with the amount of loan outstanding at the time the form is completed. It does not reference the legislation or the legislative definition and is almost certain to lead to considerable confusion.

Where the form is relevant, I don't understand the confusion. For me, the confusion is as to why this form is relevant at all. So, to be clear, this is not the form that you report loans on (by end of September 2019). It is the form use use to postpone the date of the April 2019 loan charge in incredibly narrow circumstances.

For those (incredibly rare) loans that meet the qualifying payment or commercial terms condition, the outstanding amount is just not relevant. The approval is for the loan. HMRC may well ask for the current outstanding amount to get an idea of the quantum of the loans question (e.g. so that they can properly risk assess things). But there is nothing in the legislation requiring it.

For the (even more incredibly) 'APN greater than loan' deferral to apply, the quantum is relevant in that the loan must be no more than the APN paid. But as the form has to be filled in in 2018, you are not going to sure what the 5 April 2019 amount will be. So as the amount outstanding can't go up after the form is filled in and so as long as the APN is not repaid, HMRC can get comfortable by asking for the current amount outstanding.

For completeness, the definition used in the APN paragraph uses the same definition of "outstanding" as the rest of the Schedule and is measured on 5 April 2019 (or the repayment date if the loan happens to be an approved fixed term loan). So next time you get to speak to one of those guys at HMRC, point them here.

[webberg]

I remain unconvinced.

True, we have not wasted much time with the form which we regard as more a box ticking exercise from HMRC who can claim that they tried to identify exempted loans, and we will not waste time applying for any of our clients. I do however think it is either dangerously reckless to have a form in circulation that officers don't understand (two of them didn't even know it had been issued).

However as demonstrated above there will be potentially thousands who will not study the terms and analyse them but who could claim a postponement regardless of chances of success. Why would taxpayers without special knowledge or training understand that a definition used in one part of the legislation differ from that used elsewhere?

Do I care if HMRC create themselves a problem? As I'm paying their salaries and trying to get them to focus on real issues rather than waste resources pandering to this sort of nonsense, yes.

I care more about the time I'm going to waste explaining that this is just another example of HMRC not thinking it through.

Most of my clients are convinced that HMRC has not only contributed hugely to the mess here but are responsible for it. Some even consider that HMRC has done this deliberately so that the politicians will be unable to unravel the complexity and just put it through on the nod.

I was sceptical about parts of that analysis but having witnessed the farce that happened on 9th January when comments and views expressly requested were simply ditched into the nearest bin on the grounds that there were too many to summarise, I'm beginning to wonder if this is not part of a deliberate policy.

[stonehenge]

I predict an omnishambles.

[BrilloPad]

As I reported, we have now asked 4 different HMRC officers to clarify this for us and have 5 different answers.

Don't worry. It will be retrospectively clarified. To 15 different answers....

[BrilloPad]

I predict an omnishambles.

I just hope the OP did not have it on their tax return and HMRC never find out....