Overdrawn Capital Account Scheme (Aston Mae / Glen Mae / Procorre)

[hungouttodry]

Regarding making a large pension contribution - if you do then I'd expect HMRC will not give you a TTP for what remains. If years are open HMRC will come back for the difference.

TTP = Time To Pay??

I assumed that if you are accepting the loan charge then it would be due for payment in January 2020. Is TTP supposed to be an option with LC19?

A question I also have - if you make a contribution to pension based on the 2019LC income - pension contribution has to be made prior to April 6th 2019. What if the LC is defeated after this date - would HMRC then come after you with a 55% tax on any pension contribution over the earnings limit?

I hadn't considered this exact scenario. My fears were that I would somehow find a very large sum to pay to my pension then find that I needed to make another contribution in another year and not have the funds to do this. Whilst it's remotely possible that I could make this contribution, there is no possibility of me doing this twice. But what you suggest is an equally terrible scenario.

I think that such a contribution would need to be left until April before committing to it.

[Delendog]

I accept this. But you see the injustice in the situation. HMRC are imposing something on us that changes a situation in the past that we believed to be legitimate, and still possibly would have been was it not for the heavy handed loan charge legislation. They can do this to us retrospectively but we are not allowed to make the plans that we would have made knowing the situation at the time.


I don't fully understand what you are saying here, especially bearing in mind what you have said after this.


This looks a little complicated, but as I have made no recent contributions I understand this to mean that I can potentially make a contribution this year of £150,000 bearing in mind the income I would have if I accept the loan charge. I've been looking on the gov.uk site and it didn't mention the reduction for over £210,000 where I was looking. It did mention the pre/post alignment tax year in 2015/16 which confused me a little.



I will definitely do this, as I am now seeing a possibility to improve my situation. I will also have more questions for Rhys when he calls me.

webberg I am very grateful for this information, you are obviously a very knowledgeable person in this area and also very helpful. Thank you.

Regarding making a large pension contribution - if you do then I'd expect HMRC will not give you a TTP for what remains. If years are open HMRC will come back for the difference.

A question I also have - if you make a contribution to pension based on the 2019LC income - pension contribution has to be made prior to April 6th 2019. What if the LC is defeated after this date - would HMRC then come after you with a 55% tax on any pension contribution over the earnings limit?

[hungouttodry]

If I might add some thoughts.

First there is no benchmarking in UK tax. You cannot say, especially after the event, that if I have used XYZ instead of ABC, then my liability would have reduced and therefore can I please have the effect of XYZ.

I accept this. But you see the injustice in the situation. HMRC are imposing something on us that changes a situation in the past that we believed to be legitimate, and still possibly would have been was it not for the heavy handed loan charge legislation. They can do this to us retrospectively but we are not allowed to make the plans that we would have made knowing the situation at the time.

Second, you cannot claim relief for pension contributions made outside the year you wish to claim against. You can carry forward unused allowances and pay a premium in a later year and have relief in that later year, but you cannot claim relief in an earlier year for a premium paid today. Your assumption is therefore incorrect I'm afraid.

I don't fully understand what you are saying here, especially bearing in mind what you have said after this.

Third, your maximum pension contribution, subject to the below, in 2018/19 is £160,000.

That is made up of £40,000 for each of the previous 3 years - assuming you had a pension scheme that was open and available and you have not already made contributions - plus £40,000 for 2018/19.

The 2018/19 maximum contribution is reduced where the taxable income is over £150,000 at a rate of £1 for every £2 over that amount. This capped out at £210,000. Therefore the maximum restriction is £30,000 and the pension contribution allowance will not drop below £10,000.

This looks a little complicated, but as I have made no recent contributions I understand this to mean that I can potentially make a contribution this year of £150,000 bearing in mind the income I would have if I accept the loan charge. I've been looking on the gov.uk site and it didn't mention the reduction for over £210,000 where I was looking. It did mention the pre/post alignment tax year in 2015/16 which confused me a little.

You need to go and ask a suitable pensions specialist to confirm/deny this.

I will definitely do this, as I am now seeing a possibility to improve my situation. I will also have more questions for Rhys when he calls me.

webberg I am very grateful for this information, you are obviously a very knowledgeable person in this area and also very helpful. Thank you.

[webberg]

@Quaixy,

I feel the same. There are many ways we could have organised our affairs to reduce the tax liability if we had planned this at the time.

I am trying to work out whether I can mitigate using pension contributions. Unfortunately you can only go back three years to claim tax relief on pension contributions, so this might just touch one of the years when I was operating through Glen May.

@starstruck,

I can see that what you suggest might be worth doing in some cases, but for me, lumping all my years with Glen May together into one tax year would put me massively into the 45% additional rate band, and even if I could contribute the maximum of £40,000 in pension it would only reduce my tax bill by £18,000. The extra tax by being in additional rate would be more than that so I would be worse off. I would need to be able to spread my income over recent years and I suspect that will not be possible.

If I might add some thoughts.

First there is no benchmarking in UK tax. You cannot say, especially after the event, that if I have used XYZ instead of ABC, then my liability would have reduced and therefore can I please have the effect of XYZ.

Second, you cannot claim relief for pension contributions made outside the year you wish to claim against. You can carry forward unused allowances and pay a premium in a later year and have relief in that later year, but you cannot claim relief in an earlier year for a premium paid today. Your assumption is therefore incorrect I'm afraid.

Third, your maximum pension contribution, subject to the below, in 2018/19 is £160,000.

That is made up of £40,000 for each of the previous 3 years - assuming you had a pension scheme that was open and available and you have not already made contributions - plus £40,000 for 2018/19.

The 2018/19 maximum contribution is reduced where the taxable income is over £150,000 at a rate of £1 for every £2 over that amount. This capped out at £210,000. Therefore the maximum restriction is £30,000 and the pension contribution allowance will not drop below £10,000.

You need to go and ask a suitable pensions specialist to confirm/deny this.

[hungouttodry]

@Quaixy,

I feel the same. There are many ways we could have organised our affairs to reduce the tax liability if we had planned this at the time. I for example am in a partnership where the profits could have been distributed differently, but it is probably too late now. There are legitimate business expenses that I could have claimed in most other scenarios. As it stands, we are in the worst imaginable scenario, worse than being caught by IR35 and worse than using a standard PAYE umbrella, and on top we have lost a large chunk of our earnings to Glen May for the privilege.

I am trying to work out whether I can mitigate using pension contributions. Unfortunately you can only go back three years to claim tax relief on pension contributions, so this might just touch one of the years when I was operating through Glen May. If I can use the profit share declared by Glen May last year then maybe I can reduce my liability against that, but as yet I don't know whether this is even possible.

@starstruck,

I can see that what you suggest might be worth doing in some cases, but for me, lumping all my years with Glen May together into one tax year would put me massively into the 45% additional rate band, and even if I could contribute the maximum of £40,000 in pension it would only reduce my tax bill by £18,000. The extra tax by being in additional rate would be more than that so I would be worse off. I would need to be able to spread my income over recent years and I suspect that will not be possible.

[starstruck]

Hi All,

I'm signed up with the WTT BG & hope their strategy will win out or at least win some concessions.

However, their advice is to register with HMRC, as though we intend to settle & complete the HMRC spread-sheet by 30/Sept/2018, fessing up to all the ODCA payments from Glen May/Procorre etc.

The email from HMRC suggests that settling is done on the basis of treating (what they consider to be loans) as income at the time they were received & utilising the relevant allowances, rate change thresholds etc from those years.

To my mind, if that money was truly being treated, as though they were income, in those years, then we would have the opportunity to utilise the mitigation mechanisms also available, at that time, e.g. pension contributions.

However, my understanding is that past year's pension contribution limits are closed, with the exception of the last 3 years, once you max out this year's allowance.

This to me seems very unfair. I know it's just a technical point if WTT BG wins, but I'm trying to keep options open.

Also, I don't get HMRC's 5 years to pay conditions, providing you don't earn more than £50,000. Surely they'd get the money sooner & from more people, if they allowed higher earners to participate.

Obviously, if we have Ltd Co, we can control what level of dividends & pension contributions etc from the company, in any given year. So during the 5 year payback we can leave money in the company to avoid going over that threshold, but it seems counter intuitive to me.

If anyone has any suggestions as to how to mitigate the retrospective tax, as I'd rather borrow money, from my offset mortgage account, to put into a pension, or some other vehicle, than pay tax on it.

Look forward to reading your responses.

If you want to mitigate with pension then you need to not settle, let the LC hit and make a pension payment (carrying forward where possible) in 2018/19.

[Quaixy]

Mitigation options if settling

Hi All,

I'm signed up with the WTT BG & hope their strategy will win out or at least win some concessions.

However, their advice is to register with HMRC, as though we intend to settle & complete the HMRC spread-sheet by 30/Sept/2018, fessing up to all the ODCA payments from Glen May/Procorre etc.

The email from HMRC suggests that settling is done on the basis of treating (what they consider to be loans) as income at the time they were received & utilising the relevant allowances, rate change thresholds etc from those years.

To my mind, if that money was truly being treated, as though they were income, in those years, then we would have the opportunity to utilise the mitigation mechanisms also available, at that time, e.g. pension contributions.

However, my understanding is that past year's pension contribution limits are closed, with the exception of the last 3 years, once you max out this year's allowance.

This to me seems very unfair. I know it's just a technical point if WTT BG wins, but I'm trying to keep options open.

Also, I don't get HMRC's 5 years to pay conditions, providing you don't earn more than £50,000. Surely they'd get the money sooner & from more people, if they allowed higher earners to participate.

Obviously, if we have Ltd Co, we can control what level of dividends & pension contributions etc from the company, in any given year. So during the 5 year payback we can leave money in the company to avoid going over that threshold, but it seems counter intuitive to me.

If anyone has any suggestions as to how to mitigate the retrospective tax, as I'd rather borrow money, from my offset mortgage account, to put into a pension, or some other vehicle, than pay tax on it.

Look forward to reading your responses.

[Myarworth]

Trying to track down Aston Mae details

Hi, I'm not sure how I've managed to not find this forum until now but I'm trying to collate my details for taking the settlement option with HMRC.
I've used more than once scheme over the years but I'm struggling to trace the details of my payments through Glen May/ Aston Mae and I'm getting not responses from what I'm guessing is an old email address [email protected].
I have a statement of drawings but not the other funds that I received and being so long ago I can't even find bank statements to track it.
Do you have any contact details I can use to try and get the info I need?
thanks

[TroyT]

Seriously considering taking HMRC up on the Settlement Deal

I’m now of the opinion that if I’m going to pay all the tax on the Profit Share Figures then I’d be better off just doing the deal on Settlement and structuring the repayments in an affordable timescale. Putting the matter to bed once and for all.
I’m struggling to see a downside of that approach now with the unknown Loan Charge amount possibly being added in.

[nucastle]

It's already been floated on here that the idea that you can arbitrarily declare profits at some point in the future outside of the year you earned the money for the LLP, is not legit.

Of course the likes of Procorre and GM/Sanderosa don't mention this at the time as you would have wised up to their 'scheme' in the first year, which is why under the guise of a 'business development fund' you get the good news, 4-5 years after the fact.

You need to make sure that HMRC are happy with this approach, as the last thing you want in 2019/2020 is a letter telling you this 'strategy' was not valid, and that you are liable for other things.