Disappearing loans?
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  1. #1

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    Default Disappearing loans?

    It's a common feature of these threads that lenders have become difficult to find and engage with.

    We have recently had some experience in this arena.

    In most schemes that used loans, certainly until 2011, loans were advanced by the company acting as trustee for a trust. In some cases, the loans were made by the company and later moved to a trust.

    For a lot of post March 2011 schemes, similar arrangements were used but often had more legs to the chain of process.

    A loan made by a trust cannot disappear.

    It remains a trust asset.

    A trust cannot disappear. The trustee can change from time to time but cannot be dissolved without the knowledge of the beneficiary.

    We have not come across any instances of the trust being dissolved.

    Of those trustees we have traced, some have been very helpful, some less so. Interestingly those who have not helped their beneficiaries, have done so for different reasons. No common reason can be identified.

    However the loan remains extant UNLESS you can show it has been legally waived, i.e. your obligation to repay has been removed. There are a number of ways of doing this.

    However not being in contact with the lender, the company acting as trustee no longer so acting, the promoter no longer existing, etc. None of these cause the legal waiving of that loan.

    The loan remains exposed to the 2019 charge.

    We have some instances where we know the trust/trustee and despite attempts to contact them, they have remained silent. One of our work streams is now to work out the legal position there. Our advice from a year or so ago was that the loan remains legally due and repayable but this is a situation that gets complicated very quickly. (Loan agreement subject to IOM law, UK based borrower, perhaps now out of the UK, trustee moved to say Panama?)

    However I suspect that claiming a loan has somehow disappeared is both legally very difficult and a situation HMRC will resist.

  2. #2

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    "However the loan remains extant UNLESS you can show it has been legally waived, i.e. your obligation to repay has been removed. There are a number of ways of doing this. "

    Hi Webberg

    Are you able to share a few ways to remove the obligation to pay?

    Thanks in advance

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    Not here I'm not.

    Loans are a legal matter.

    You need legal advice.

    I am a tax specialist and could not give you that advice.

  4. #4

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    Quote Originally Posted by webberg View Post
    It's a common feature of these threads that lenders have become difficult to find and engage with.

    We have recently had some experience in this arena.

    In most schemes that used loans, certainly until 2011, loans were advanced by the company acting as trustee for a trust. In some cases, the loans were made by the company and later moved to a trust.

    For a lot of post March 2011 schemes, similar arrangements were used but often had more legs to the chain of process.

    A loan made by a trust cannot disappear.

    It remains a trust asset.

    A trust cannot disappear. The trustee can change from time to time but cannot be dissolved without the knowledge of the beneficiary.

    We have not come across any instances of the trust being dissolved.

    Of those trustees we have traced, some have been very helpful, some less so. Interestingly those who have not helped their beneficiaries, have done so for different reasons. No common reason can be identified.

    However the loan remains extant UNLESS you can show it has been legally waived, i.e. your obligation to repay has been removed. There are a number of ways of doing this.

    However not being in contact with the lender, the company acting as trustee no longer so acting, the promoter no longer existing, etc. None of these cause the legal waiving of that loan.

    The loan remains exposed to the 2019 charge.

    We have some instances where we know the trust/trustee and despite attempts to contact them, they have remained silent. One of our work streams is now to work out the legal position there. Our advice from a year or so ago was that the loan remains legally due and repayable but this is a situation that gets complicated very quickly. (Loan agreement subject to IOM law, UK based borrower, perhaps now out of the UK, trustee moved to say Panama?)

    However I suspect that claiming a loan has somehow disappeared is both legally very difficult and a situation HMRC will resist.
    Do you have any thoughts on how people that worked for Norla / Edge and settled with HMRC around 2015, will/may be affected by the 2019 charge ?

    I'm told they are not able to reach their trustees (Mapatui ?) and are therefore not able to find out anything as to the status of their loan.

    Going on what you say above they are going to get by HMRC on their outstanding loan. Do we know yet what the damage (extortion %) of the 2019 charge will be on the loan for this scheme where there was a settlement ? Or will this be an IHT issue and if so at what point will the IHT kick in since the trust disappeared ?

    My understanding of this scheme is that these contractors declared it all to HMRC, HMRC knew everything going on. That is why HMRC hammered them first to settle. I would think (hope) HMRC will be friendlier towards them.
    Last edited by HMRC made Atlas Shrug; 27th November 2017 at 15:41.

  5. #5

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    Quote Originally Posted by HMRC made Atlas Shrug View Post
    Do you have any thoughts on how people that worked for Norla / Edge and settled with HMRC around 2015, will/may be affected by the 2019 charge ?

    I'm told they are not able to reach their trustees (Mapatui ?) and are therefore not able to find out anything as to the status of their loan.

    Going on what you say above they are going to get by HMRC on their outstanding loan. Do we know yet what the damage (extortion %) of the 2019 charge will be on the loan for this scheme where there was a settlement ? Or will this be an IHT issue and if so at what point will the IHT kick in since the trust disappeared ?

    My understanding of this scheme is that these contractors declared it all to HMRC, HMRC knew everything going on. That is why HMRC hammered them first to settle. I would think (hope) HMRC will be friendlier towards them.
    The current trustee is a matter of public record. I think that 20 minutes research could get you a name and email contact.

    Our experience with the trustee was generally good.

    This scheme will not have a special DR charge 2019 rate. As far as I now the tax rate will be determined by adding the loan balance to your income in 2018/19 and taxing it accordingly. I would like to see the rate fixed at say 10% but I'm not holding my breath on that.

    As I said in the original post, the trust has not disappeared and nor have the trust assets. As such HMRC will take the view that funds paid into the trust on your behalf and which are subsequently loaned to you, have an IHT position.

    I don't know if contractors "declared it all" to HMRC or not. Certainly I have no evidence that this was a widespread practice. I also think that Edge was not the first selected for settlement. Either way, if you think HMRC will be friendlier as a result, you are only fooling yourself I'm afraid.

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    What is HMRC's position if the Trust does not co-operate?

    If HMRC want to go back as far as 1999, and assuming the employer/promoter is no more, how can they expect anyone to have records - in which case, the Trust might be the only source of information for HMRC. If the Trust doesn't want to play, and legally doesn't have to play, then what will HMRC do?

    If HMRC have no information on a loan, and it's not up to you to prove anything (> 6 years, no enquiry etc), then isn't the onus on HMRC to provide the evidence?

    Surely they cannot demand a tax payment or Loan Charge based on their own random estimate.

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    Quote Originally Posted by ChimpMaster View Post
    What is HMRC's position if the Trust does not co-operate?

    If HMRC want to go back as far as 1999, and assuming the employer/promoter is no more, how can they expect anyone to have records - in which case, the Trust might be the only source of information for HMRC. If the Trust doesn't want to play, and legally doesn't have to play, then what will HMRC do?

    If HMRC have no information on a loan, and it's not up to you to prove anything (> 6 years, no enquiry etc), then isn't the onus on HMRC to provide the evidence?

    Surely they cannot demand a tax payment or Loan Charge based on their own random estimate.
    They probably can and will (and stop calling me Shirley).

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    Quote Originally Posted by webberg View Post
    They probably can and will (and stop calling me Shirley).
    Not without some legal backing, surely?

    As in, if - for whatever reason - the taxpayer is not under any legal obligation to provide information, then wouldn't it be up to HMRC to provide the evidence?

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    Quote Originally Posted by ChimpMaster View Post
    Surely they cannot demand a tax payment or Loan Charge based on their own random estimate.
    Have you learned nothing about HMRC?

    Worse, they will probably want income tax and inheritance tax....
    I keep pushing forwards but they keep pushing me backwards. So I have new rules. 1. Don't feed the trolls you know they have no souls. 2. Don't respond to them they'll only post back back again. 3. Don't be their friend they'll only knife you in the back. I have new rules I count them.

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    Quote Originally Posted by ChimpMaster View Post
    Not without some legal backing, surely?

    As in, if - for whatever reason - the taxpayer is not under any legal obligation to provide information, then wouldn't it be up to HMRC to provide the evidence?
    They have legal backing already and are able to make an assessment as is "reasonable".

    If challenged it is up to the challenger (you) to make a case for a different value.

    Like all other taxes, this is biased against you.

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