Horizon exit opportunity (Non-Big Group discussion thread)

[FakeHorizon]

Sorry about being thick, but how can you repay more than you owe? So if it was 10,000 ickies (originally £10,000), and that is still now 10,000 ickies (now worth £1), how can you pay £10,000 to repay it? Surely that's a £1 repayment and a £9,999 something else?

And putting tax aside for now, what benefit are you getting from repaying £10,000? What future benefit are you expecting?

The trustees are restoring the full balance of the original sterling value as they claim HMRC don't recognise the currency depreciation angle so they have no choice. Obviously this suits them as they can charge 5% on a much larger amount, rather than let people know the loan value is only a couple of pounds so chuck us a fiver and everything is cushty. A money-making scheme, as far as they go. I probably could seek a 2nd opinion from someone who understands trusts (a legal mind), but what could they do, the new trustees are not going to reduce the balance, I'd imagine.

I was also interested in a line from the link you posted in the 2019 reporting charge thread - "It also introduces a requirement for employees in scope of the loan charge to provide additional information to HMRC about the loans they have received.". From that, I take it if I pay back all the loans I received in full, I am no longer in scope for the 2019 loan charge, therefore not caught by this requirement to tell all to HMRC. So there isn't the possibility that I will still have to pay tax on loans already repaid. That is the benefit I am (hopefully) expecting, to answer your question.

[Iliketax]

The trustees are restoring the full balance of the original sterling value as they claim HMRC don't recognise the currency depreciation angle so they have no choice. Obviously this suits them as they can charge 5% on a much larger amount, rather than let people know the loan value is only a couple of pounds so chuck us a fiver and everything is cushty. A money-making scheme, as far as they go. I probably could seek a 2nd opinion from someone who understands trusts (a legal mind), but what could they do, the new trustees are not going to reduce the balance, I'd imagine.

Forget what they think HMRC claim or not. You need to understand what the loan agreement actually says. It sounds like they want to ignore the paperwork and pretend that the loan is a higher (in current sterling) amount even though it is contractually a lower (in current sterling terms) amount. If that is what they are trying to do and you are going along with it then I think you might want to talk to a criminal lawyer.

The tax consequences of that seem to be (i) you will gift money to a trust that you do not have to pay and so that is a chargeable lifetime transfer for you for inheritance tax purposes, (ii) the extra amount won't count as a repayment of a loan because it is, per the loan agreement, not a repayment of your liability under a loan. So you'd still have an April 2019 loan charge.

But bear in mind I've not seen the actual loan agreement (and don't want to).

I was also interested in a line from the link you posted in the 2019 reporting charge thread - "It also introduces a requirement for employees in scope of the loan charge to provide additional information to HMRC about the loans they have received.". From that, I take it if I pay back all the loans I received in full, I am no longer in scope for the 2019 loan charge, therefore not caught by this requirement to tell all to HMRC.

In another post I said:

One of the seven circumstances is when the loan (or quasi-loan) is still outstanding on 5 April 2019. I've not time to study it properly, but it looks like another one is where the loan was oustanding on 16 March 2016.

So even if you repay the loan in full today, because it was outstanding in March 2016 you will (based on the current draft) still have to report. And that is because HMRC want to find out about dodgy stuff that people might to before April 2019.

So there isn't the possibility that I will still have to pay tax on loans already repaid. That is the benefit I am (hopefully) expecting, to answer your question.

But I asked you what the benefit was if you ignored tax. In other words, if whatever you did you were guaranteed to pay the April 2019 loan charge, what benefit would you get from doing whatever they want you to do?

[starstruck]

I was also interested in a line from the link you posted in the 2019 reporting charge thread - "It also introduces a requirement for employees in scope of the loan charge to provide additional information to HMRC about the loans they have received.". From that, I take it if I pay back all the loans I received in full, I am no longer in scope for the 2019 loan charge, therefore not caught by this requirement to tell all to HMRC. So there isn't the possibility that I will still have to pay tax on loans already repaid. That is the benefit I am (hopefully) expecting, to answer your question.

What are your "loans already repaid"? If they have been written off by currency devaluation then they are not actually repaid at all and will need declaring (in HMRCs warped opinion!)

[starstruck]

Forget what they think HMRC claim or not. You need to understand what the loan agreement actually says. It sounds like they want to ignore the paperwork and pretend that the loan is a higher (in current sterling) amount even though it is contractually a lower (in current sterling terms) amount. If that is what they are trying to do and you are going along with it then I think you might want to talk to a criminal lawyer.

The tax consequences of that seem to be (i) you will gift money to a trust that you do not have to pay and so that is a chargeable lifetime transfer for you for inheritance tax purposes, (ii) the extra amount won't count as a repayment of a loan because it is, per the loan agreement, not a repayment of your liability under a loan. So you'd still have an April 2019 loan charge.

That's really interesting. Sounds like repaying is just opening up a further can of worms!

[Iliketax]

That's really interesting. Sounds like repaying is just opening up a further can of worms!

If the loan was £10,000 and you repaid £10,000 that's fine. But if the loan is 10,000 of some currency [originally £10,000] and is still 10,000 of that currency [but now just £1] then the first £1 you pay to the the trust is repaying the loan. But the other £9,999 is not a repayment. A chargeable lifetime transfer also means 20% tax now (to the extent it's over your IHT limit) so for big loans there is a real cost. For other loans then there is no real cost to you (unless you die within seven years).

[starstruck]

If the loan was £10,000 and you repaid £10,000 that's fine. But if the loan is 10,000 of some currency [originally £10,000] and is still 10,000 of that currency [but now just £1] then the first £1 you pay to the the trust is repaying the loan. But the other £9,999 is not a repayment. A chargeable lifetime transfer also means 20% tax now (to the extent it's over your IHT limit) so for big loans there is a real cost. For other loans then there is no real cost to you (unless you die within seven years).

And yet HMRC can just ignore the ickles and say £10,000 despite all the legal documentation to the contrary!

[FakeHorizon]

Forget what they think HMRC claim or not. You need to understand what the loan agreement actually says. It sounds like they want to ignore the paperwork and pretend that the loan is a higher (in current sterling) amount even though it is contractually a lower (in current sterling terms) amount. If that is what they are trying to do and you are going along with it then I think you might want to talk to a criminal lawyer.

The tax consequences of that seem to be (i) you will gift money to a trust that you do not have to pay and so that is a chargeable lifetime transfer for you for inheritance tax purposes, (ii) the extra amount won't count as a repayment of a loan because it is, per the loan agreement, not a repayment of your liability under a loan. So you'd still have an April 2019 loan charge.

But bear in mind I've not seen the actual loan agreement (and don't want to).



In another post I said:



So even if you repay the loan in full today, because it was outstanding in March 2016 you will (based on the current draft) still have to report. And that is because HMRC want to find out about dodgy stuff that people might to before April 2019.



But I asked you what the benefit was if you ignored tax. In other words, if whatever you did you were guaranteed to pay the April 2019 loan charge, what benefit would you get from doing whatever they want you to do?

I haven't paid anything back at the moment so no need to call a criminal lawyer yet, although not sure if that is for me or the new trustees?! The position is that the new trustees have reinstated loans which were written off in 2010 (same person involved), to the original sterling-equivalent value. My loan value in 2010 was under 5k so this should be the amount I have to repay, in theory. But 5% of 5k isn't that much. If I don't repay these loans, HMRC will be informed in 2019 they are still outstanding and I will pay 20% tax on the full amount. If I repay them now, using a borrowing facility being offered, I pay 7.5%. There is certainly an element of coercion here, probably a stronger word would be appropriate, but best left unsaid. This is all backed by QC-opinion, naturally. If I am still subject to the 2019 charge, no benefit at all to repaying loans unless I get hit by IHT. The advice I'm getting is contradicted by a lot of what you've said, but the choices are pay 5-7.5% and hope for the best or pay 20% tax.

[FakeHorizon]

And yet HMRC can just ignore the ickles and say £10,000 despite all the legal documentation to the contrary!

which is the rationale for the new trustees to reinstate loans to the full sterling-equivalent value. I guess hiring a Bulgarian lawyer to challenge this isn't really an option.

[FakeHorizon]

What are your "loans already repaid"? If they have been written off by currency devaluation then they are not actually repaid at all and will need declaring (in HMRCs warped opinion!)

loans written off years earlier have been reinstated by the new trustee. Who is the old trustee. I have no clue what legal rights they have to do this, it's akin to buying a settled debt and sending round the heavies i.e. HMRC. The new trustee is now offering 'opportunities' to repay these reinstated loans. The whole devaluation thing basically never happened. Know any bulgarian lawyers who specialise in IOM trust law?

[jbryce]

Does anyone on this thread *really* think that the 'Horizon exit' opportunity will work?
Does anyone think that HMRC is going to allow a half-baked idea, with no provenance, such as this succeed?
Have we not learnt that the promoters of such schemes/products do nothing but collect the fees and then vanish?
Guys FFS, get a grip. There is no opportunity here for anyone other than those who will collect the fees.