Settling is more expensive that paying the 2019 loan charge

[Loan Ranger]

Presumably one of the obvious concerns for older loans would be accrued interest

No kidding. The interest will be excruciating for early years.

For example, for 2001/2 you are talking 70%! On a tax liability of £30,000 that would be another £21,000 on top.

http://forums.contractoruk.com/hmrc-...ml#post2384292

[rcgeorge23]

Also can someone give clarity on what open v closed years refers to and which years these are please?

Open = a year for which HMRC have sent you an enquiry or discovery assessment
Closed = HMRC haven't enquired within 1 year of receiving your self assessment and the year is now beyond the 4 year discovery window

If you don't know which years are open or closed, you can find out by submitting a SAR (subject access request) here: https://online.hmrc.gov.uk/shortforms/form/DPU_SAR

[flamel]

....or even consider speaking with HMRC directly at one of the following offices.

EBT IHT Team
HMRC Trusts and Estates
Meldrum House
15 Drumsheugh Gardens
Edinburgh
EH3 7UQ

HMRC Trusts & Estates
Non-Resident Trusts
Ferrers House
PO Box 38
Castle Meadow Road
Nottingham
NG2 1BB

In all the years I have been working in finance, I have never heard of an advisor who would suggest speaking directly with HMRC. I would suggest that the general advice is to NEVER deal directly with HMRC, NEVER trust or rely on what they say and NEVER agree to anything with them. HMRC will NOT treat you with respect or courtesy and will assume you are guilty. They do NOT have a duty of care and will actively try to catch you out. There are thousands of court cases where the Judge has criticised HMRC for acting in the most shoddy manner but there is no action taken.

[flamel]

HMRC shill?

Yes - obvs

[webberg]

There is no real magic in the numbers.

HMRC seek to confuse matters by saying that if you settle now, including closed years, you get the "concession" of no NIC or interest on that volunteered year. Some advisers claim the same. It's not a concession. If the year is closed there can be no liability and therefore no interest. The amount volunteered in settlement is probably not even legally "tax".

If you want to do it though, anybody with a set of tables and some basic competence in spreadsheets can do this in perhaps 30 minutes.

First calculate the tax/NIC position for the open years assuming interest will be applied from the due date (31st January following year end) to the date of settlement. Call this X

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

Third, calculate the tax due on closed years if you volunteer the tax in the year the loan was drawn. Call this Z

If X + Y is more than X + Z, then consider settling now.

If X + Y is less than X + Z, then settle open years now and closed years in 2018/19.

If you want to get clever and add in the time value of money/opportunity cost/ lost investment appreciation, that will bring some sophistication to the model.

[webberg]

[QUOTE=Redcode;2400910]I have been watching and reading this forum for many years now

The important thing to bear in mind in all this, is you will still have a loan outstanding with the Employee Benefit Trust and/or Discretionary Trust who granted the loan to you in the first instance. Whilst I am sure if you do settle, you wont want this hanging over your head for fear the Trustees will at some point in the future call in these loans. The reality is they wont call them in because i am sure there will be a clause in each Trust Deed that says they have to work in the best interest of the Beneficiaries and such a action would be against the principle of this. However, there are some unscrupluous providers who may see this as an opportunity to line there own pockets.

All that said, I would expect all Trusts to write off any loan balances which are outstanding as at the 6th April 2019 because they will want to give closure to the trusts and not run the risk of a 10 year Anniversary Charge which could be the case if loans are left outstanding because they will still deemed to be property of this Trust. This would be normal practice for the Trustees.

Well a bit of curate's egg?

I wish I could be as confident that the trusts would write off the loans. I'm certainly not confident that a write off (whatever is meant by that) would not trigger a tax charge under Part 7A if this was AFTER the 2019 charge arose.

My opinion is that a write off (if that actually means a release of the repayment obligation) pre 2019 would create a tax charge and would ONLY avoid the 2019 charge if HMRC was satisfied that "tax had been settled on the loan".

A write off post 2019 does not have that protection and may attract a Part 7A charge.

Remember that the trigger date for the 2019 charge was 17th March 2016. Write offs, etc post that date do not count towards reducing the basis of the 2019 charge unless it's a full cash repayment with no cash coming back to you.

As for IHT, if the OP is correct and HMRC has one office, that is good and bad news.

Good news in that perhaps we will see a concentration of expertise and coordination of information.

Bad news in that the office will have been charged with raising a certain amount of revenue and as such HMRC will be up to their old trick of collecting the maximum amount of tax, rather than stick to their terms of reference which is to administer the tax system and collect the amount intended by Parliament.

(On a personal note, a tax adviser of 30 years with IHT experience, would, in my opinion, be an educated person dealing with some high net worth clients. Accepting that I am a grammar and spelling pedant - my own errors accepted as well - I would have thought that the original piece does not play to that impression?)

[Loan Ranger]

It's crazy that we're even having this discussion.

What bunch of numpties come up with a charge that potentially works out cheaper, for many people, than settling.

They could be getting people to settle now if only they had an ounce of commercial acumen.

[WalterWhite]

It's crazy that we're even having this discussion.

What bunch of numpties come up with a charge that potentially works out cheaper, for many people, than settling.

They could be getting people to settle now if only they had an ounce of commercial acumen.

Because the message that "all loan schemes are caught" is a strong one - even if it may not technically be true.

That is my only thinking behind it

[DotasScandal]

Because the message that "all loan schemes are caught" is a strong one - even if it may not technically be true.
That is my only thinking behind it

It's simply the propaganda machine marching on.

[Silverskin]

Open = a year for which HMRC have sent you an enquiry or discovery assessment
Closed = HMRC haven't enquired within 1 year of receiving your self assessment and the year is now beyond the 4 year discovery window

If you don't know which years are open or closed, you can find out by submitting a SAR (subject access request) here: https://online.hmrc.gov.uk/shortforms/form/DPU_SAR

Thank you for replying. If an enquiry has been made on a tax year is there an expiration date on that enquiry or is it held open indefinitely? I believe there was an enquiry in 2006 but nothing was requested and there were no further communications.