Settling is more expensive that paying the 2019 loan charge

[Loan Ranger]

That is the surprising conclusion after doing a load of worked examples.

You would think having all the loans taxed in a single year 2018/19 would make the loan charger higher than if the loans were taxed in the years they were received, especially if you earn other income in 2018/19.

However, it doesn't work out like that.

The loan charge is just tax & nics on the loans, whereas settling is tax & nics on the loans plus:

1. extra tax because, in most cases, HMRC treat the promoters fees (typically 10%) as your income
2. accrued interest

(1) & (2) make it significantly more expensive to settle.

Don't ask me to show you the examples. Go and do your own calcs and report back here if you find otherwise.

[Delendog]

it depends

That is the surprising conclusion after doing a load of worked examples.

You would think having all the loans taxed in a single year 2018/19 would make the loan charger higher than if the loans were taxed in the years they were received, especially if you earn other income in 2018/19.

However, it doesn't work out like that.

The loan charge is just tax & nics on the loans, whereas settling is tax & nics on the loans plus:

1. extra tax because, in most cases, HMRC treat the promoters fees (typically 10%) as your income
2. accrued interest

(1) & (2) make it significantly more expensive to settle.

Don't ask me to show you the examples. Go and do your own calcs and report back here if you find otherwise.

It does depend on individual circumstances if your loans are pre 2011 then no nics is charged on settlement. Also if your years are closed no interest is charged on settlement. If all loans are above £150K then the loan charge tax will hit 45% and all allowances removed. In settlement you may find individual years have spare allowances to use. For me settlement is less than the 2019 charge would be.

[Loan Ranger]

if your loans are pre 2011 then no nics is charged on settlement. Really? Is that official HMRC policy?

Also if your years are closed no interest is charged on settlement. Is that also official HMRC policy?

You are obviously dealing with a reasonable, pragmatic HMRC that I don't recognise.

[Loan Ranger]

Or, as several people have suggested to me, you are HMRC.

[Delendog]

"Go and do your own calcs and report back here if you find otherwise".



So I reply as you ask and then get accused of being from HMRC. If you don't want to hear anyone disagreeing with you then just don't ask.

[Loan Ranger]

if your loans are pre 2011 then no nics is charged on settlement. Really? Is that official HMRC policy?

Also if your years are closed no interest is charged on settlement. Is that also official HMRC policy?

Has anyone else been offered these settlement terms?

[regron]

The original CLSO on offer back in 2015 said closed years would remain closed and no NIC or promoter fees would be charged on pre-2011 years, interest only.

[NotAllThere]

Or, as several people have suggested to me, you are HMRC.

Mod notice. There's no evidence that suggests Delendog is an HMRC mole. Of course lack of evidence is not evidence that he isn't. Best to assume that
a) HMRC are reading
and
b) Not all advice from posters on this site will be accurate, even with the best will in the world.

[elpinar]

You are obviously dealing with a reasonable, pragmatic HMRC that I don't recognise.

Has anyone else been offered these settlement terms?

this is totally different to what I am being told by the person I am dealing with at hmrc .... although I have been told ni depends on the type of scheme - so self employed vs depreciating loans etc as apparently somehow those4 attract different types of ni ...

I would LOVE the name of who you are dealing with at HMRC as I would like to see if they work my figures out differently ...any chance you can post those or PM me if you don't want to do that

thanks

[Loan Ranger]

Mod notice. There's no evidence that suggests Delendog is an HMRC mole. Of course lack of evidence is not evidence that he isn't. Best to assume that
a) HMRC are reading
and
b) Not all advice from posters on this site will be accurate, even with the best will in the world.

Thanks.

If they are reading this, and assuming they actually want people to settle, maybe they could find some way of communicating what the official position is?