OK let's say you want to unwind your EBT

[BrilloPad]

It gets rid of the loan which HMRC may view as a cash cow.
Even if employer pays tax, what's to stop HMRC still pursuing the 2019 loan charge.

It would be morally repugnant of them to chase for both taxes. But that's HMRC for you.

HMRC have proved themselves way beyond morally repugnant.

[Iliketax]

It gets rid of the loan which HMRC may view as a cash cow.
Even if employer pays tax, what's to stop HMRC still pursuing the 2019 loan charge.

It would be morally repugnant of them to chase for both taxes. But that's HMRC for you.

There is existing legislation that stops a double tax charge. And the draft April 2019 legislation contained a provision to stop double tax where an APN had been paid (and reimposed the tax if the APN tax is repaid). So as far as I can see HMRC is making sure that there is no double tax.

[jbryce]

There is existing legislation that stops a double tax charge. And the draft April 2019 legislation contained a provision to stop double tax where an APN had been paid (and reimposed the tax if the APN tax is repaid). So as far as I can see HMRC is making sure that there is no double tax.

What happens if the end client, the employer, holds up their hands and say's 'gee we need to pay the tax on the net cash that went to the employee'.
Then what happens to the loan charge? Does it still apply?

[Iliketax]

What happens if the end client, the employer, holds up their hands and say's 'gee we need to pay the tax on the net cash that went to the employee'.
Then what happens to the loan charge? Does it still apply?

The government said:

The government acknowledges that in some cases the current legislation is silent on how double taxation should be addressed. Therefore, the government is introducing comprehensive double taxation relief provisions, to ensure that no DR scheme user has to pay tax twice.

We don't have final legislation for all this yet. But the bit you are concerned about is covered by s554Z5. This makes clear that where the earlier tax liability has been paid in full then the DR tax charge is eliminated. Where the loan is (say) £1,000 and tax was paid on an earlier £800 of earnings then the remaining £200 is subject to the April 2017 loan charge.

[FormerContractor]

In the run up to the 2019 retro tax, if might make sense to unwind an EBT. Let's say you own the company and have taken out £1mill. HMRC says that if you pay the loan back you are home free.
1) Do you need to pay the stipulated loan interest rate to avoid BIK?
2) All the time the company has been getting Corp tax deductions which HMRC didn't object to. What is HMRC's current thinking on these historic CT deductions.
3) Can you pay the loan back to the company or does it have to go via the trustee? Assume direct.
4) So your company which has been dormant now has £1mill and buys a franchise or does something else and then is sold and you pay entrepreneurs relief (possibly property - accepting pitfalls of ER on a prop coy).

You get ER on the sale of the business, are you home free?

Thoughts on a postcard, or this forum. Somehow you still need to get your £1m out.

My concern with type of approach is this. If HMRC reviews the trustee's paperwork and sees "Joe Bloggs has paid back his EBT loans", then they would surely come and look at Joe Bloggs' tax affairs. They will see this very out of character ER transaction. Given they will already know about the loan repayments, would this not be seen as the money being returned, even if via a circuitous route and be caught in the GAAP rule.

[Iliketax]

If I assume that:

1. the new government brings in the legislation in roughly the same way as the March 2017 draft,

The updated draft legislation has just been published. It is pretty much identical to the March draft but has some tweaks to prevent people avoiding the tax liability. One minor change is to prevent a loan being treated as being repaid where a repayment is made that should have been taxed but the tax hasn't been paid. Another is to allow HMRC to revoke approval (to defer tax on certain qualifying loans that will almost certainly have no relevance to contractors) where deliberately inaccurate information has been given.

[jbryce]

The updated draft legislation has just been published. It is pretty much identical to the March draft but has some tweaks to prevent people avoiding the tax liability. One minor change is to prevent a loan being treated as being repaid where a repayment is made that should have been taxed but the tax hasn't been paid. Another is to allow HMRC to revoke approval (to defer tax on certain qualifying loans that will almost certainly have no relevance to contractors) where deliberately inaccurate information has been given.

IlikeTax. - I like your missives - and like many others welcome them, but why is someone so eminently qualified hanging out on Contractor forums?

[Iliketax]

IlikeTax. - I like your missives - and like many others welcome them, but why is someone so eminently qualified hanging out on Contractor forums?

I've got the week off but am doing a lot of "non-work" work on the computer and am bored of it and so surfing too much.

[jbryce]

I've got the week off but am doing a lot of "non-work" work on the computer and am bored of it and so surfing too much.

..tell me about it. You and Webberg should go for a pint together. Frankly, we all need the pair of you...