Sympathy for the Devil

[phil@pmtc]

Without wishing to steal Phil's opportunity, I'll add some personal experience here.

HMRC's vulnerable list has perhaps 20 clients of ours on it and frankly is a joke. It's a sop to PAC and whatever other oversight HMRC consider they have to pander to.

In my experience, the only way to make this work for your friend is for her to contact her MP, explain the position, share the correspondence and EVERY time more nonsense happens, go back to the MP.

We have tried to intercept the brown envelopes and DMB calls/visits and frankly have had little success.

Just last week a DMB officer claimed not to know what a 64-8 was. (It's a general authority for an agent to act) and on being told, claimed that it did not apply to DMB - which is an outright lie.

I hope Phil has a better experience and if so, I'd like to hear it.

Pretty similar experiences unfortunately. As for the DMB guy - that's appalling yet depressingly doesn't surprise me.

Also - you can always feel free to chip in on any questions directed to me! I certainly don't claim to know all the answers and I'm sure the forum appreciates as much assistance as poss.

[Loan Ranger]

Hi Phil,

If LC19 is treated as earnings in 2018/19, will it be possible to get tax relief using pension contributions?

https://forums.contractoruk.com/hmrc...an-charge.html

Example
Person has an existing pension but hasn't contributed to it in 2015/16, 2016/17 and 2017/18.
Outstanding loans on 5/4/19 are £200,000.

They are allowed to contribute maximum £40,000 in 2018/19, plus carry forward 3 x £40,000 from previous years.

Because their earnings (£200,000) are over £160,000, they could contribute and get tax relief on pension contributions of £160,000.

[webberg]

Hi Phil,

If LC19 is treated as earnings in 2018/19, will it be possible to get tax relief using pension contributions?

https://forums.contractoruk.com/hmrc...an-charge.html

Example
Person has an existing pension but hasn't contributed to it in 2015/16, 2016/17 and 2017/18.
Outstanding loans on 5/4/19 are £200,000.

They are allowed to contribute maximum £40,000 in 2018/19, plus carry forward 3 x £40,000 from previous years.

Because their earnings (£200,000) are over £160,000, they could contribute and get tax relief on pension contributions of £160,000.

I'm being a bit slow this evening.

Somebody has say £250,000 of income in 18/19. This is £50,000 salary and £200,000 loan charge.

They pay £160,000 in premiums.

They pay tax on £90,000 (around £26,000).

They have therefore paid away £186,000 out of a gross £50,000 salary?

We have asked HMRC about whether pension contributions would reduce the charge and whether the loan charge would constitute earnings for pension relief purposes. They initially said yes and a week later said that their Head Office colleagues were not sure. We expect (more in hope than real life) to have a definitive answer by the end of February.

[ChimpMaster]

I'm being a bit slow this evening.

Somebody has say £250,000 of income in 18/19. This is £50,000 salary and £200,000 loan charge.

They pay £160,000 in premiums.

They pay tax on £90,000 (around £26,000).

They have therefore paid away £186,000 out of a gross £50,000 salary?

We have asked HMRC about whether pension contributions would reduce the charge and whether the loan charge would constitute earnings for pension relief purposes. They initially said yes and a week later said that their Head Office colleagues were not sure. We expect (more in hope than real life) to have a definitive answer by the end of February.

This would be really quite handy to people who have the funds to put into a pension.

Upvoted (mods, where's that thumbs up emoji?).

[webberg]

This would be really quite handy to people who have the funds to put into a pension.

Upvoted (mods, where's that thumbs up emoji?).

I suppose that you could try to remove 25% of the pension contribution immediately (risky) and recoup £40,000 but as you say unless you have the funds, why would you not just pay the tax on the DR charge?

[ChimpMaster]

I suppose that you could try to remove 25% of the pension contribution immediately (risky) and recoup £40,000 but as you say unless you have the funds, why would you not just pay the tax on the DR charge?

Not sure I understand.

Assuming you have the funds, it's still better to pay as much as you can into a pension (rather than pay tax on the whole loan sum), because ultimately you are investing for your future.

A simplified example with no other income, and where you have the funds: if you had a £200k loan declaration as income in 2019, you could pay £160k into a pension and so only be liable for tax on £40k. The £160k is then locked up in a pension until you're 55 years old. So tax is only £10k (or whatever it is on £40k).

Some people would be happier to do that, than pay 40%/45% on the £200k.

Of course it means you need to have liquid funds of £160k + £10k (or whatever the tax is on £40k) rather than just the £80k (or whatever amount) tax otherwise due on the £200k. And I guess that's what makes this so hard to do.

[Loan Ranger]

Not sure I understand.

Assuming you have the funds, it's still better to pay as much as you can into a pension (rather than pay tax on the whole loan sum), because ultimately you are investing for your future.

A simplified example with no other income, and where you have the funds: if you had a £200k loan declaration as income in 2019, you could pay £160k into a pension and so only be liable for tax on £40k. The £160k is then locked up in a pension until you're 55 years old. So tax is only £10k (or whatever it is on £40k).

Some people would be happier to do that, than pay 40%/45% on the £200k.

Of course it means you need to have liquid funds of £160k + £10k (or whatever the tax is on £40k) rather than just the £80k (or whatever amount) tax otherwise due on the £200k. And I guess that's what makes this so hard to do.

WHS

If I had the money I'd rather put it in MY pension than hand it over to HM Robbers and Crooks.

[badchi]

Hi Phil, what is the advantage of settling using a specialist service such as your company vs me settling direct with the HMRC? Are you able to get better deals / discount? I ask because I called the HMRC and they said no difference and just get the same deal. Thanks

[phil@pmtc]

Hi Phil, what is the advantage of settling using a specialist service such as your company vs me settling direct with the HMRC? Are you able to get better deals / discount? I ask because I called the HMRC and they said no difference and just get the same deal. Thanks

Hi,

I'm afraid I most definitely can not get a deal in the form of a discount (unfortunately). I'd suggest that if any advisor claims they can then you should be very wary of using their services.
Now I try to avoid breaking forum rules by clearly plugging my service so ill keep this short and I hope the Mods can see I'm only answering the question (MODS - Please feel free to delete this if not suitable)

The service that we offer is (in short):

- check the figures are correct (as you may know, HMRC have been known to estimate - they often used simple multiples on many APNs). If there is a problem on both sides finding the actual figures (due to the time that has passed since a lot of people used the schemes) then we discuss with HMRC on your behalf.

- Each case receives an individual review - we don't simply process them in bulk but instead look at challenges that may be available for each individual case (for example - checking HMRC enquiry cover for each and every year as we may be able to remove the interest if HMRC have made an error in the opening of the enquiry)

- Check that we agree the overall interest/penalty position (though tbh I don't think penalties will be applied but we will seek assurance on that matter).

- Ensure that the settlement deeds are correct (watertight) and that finality and certainty (potentially the main reasons people settle) are achieved.

- Negotiate Time to Pay arrangements (which for many is of utmost importance and tbh prob one of the main reason people use an advisor)

As i say, I don't think any reputable advisor would claim to offer a discount other than any which stem from the above points which are more procedural matters rather than 'a deal'. This is why we quote less than an hours worth of my time for settlement cases (I wont say here what that is as again I don't wish to break forum rules).

That being said I would honestly say its always sensible to use an advisor but I realise that me saying so sounds ridiculous as I am one, but clearly there's other advisors you can use and I know that Webberg and his firm also offer a similar checking service so id suggest you have a look about and consider whether or not you feel the need for assistance.

Hope that helps,
Cheers
Phil

[badchi]

Hi,

I'm afraid I most definitely can not get a deal in the form of a discount (unfortunately). I'd suggest that if any advisor claims they can then you should be very wary of using their services.
Now I try to avoid breaking forum rules by clearly plugging my service so ill keep this short and I hope the Mods can see I'm only answering the question (MODS - Please feel free to delete this if not suitable)

The service that we offer is (in short):

- check the figures are correct (as you may know, HMRC have been known to estimate - they often used simple multiples on many APNs). If there is a problem on both sides finding the actual figures (due to the time that has passed since a lot of people used the schemes) then we discuss with HMRC on your behalf.

- Each case receives an individual review - we don't simply process them in bulk but instead look at challenges that may be available for each individual case (for example - checking HMRC enquiry cover for each and every year as we may be able to remove the interest if HMRC have made an error in the opening of the enquiry)

- Check that we agree the overall interest/penalty position (though tbh I don't think penalties will be applied but we will seek assurance on that matter).

- Ensure that the settlement deeds are correct (watertight) and that finality and certainty (potentially the main reasons people settle) are achieved.

- Negotiate Time to Pay arrangements (which for many is of utmost importance and tbh prob one of the main reason people use an advisor)

As i say, I don't think any reputable advisor would claim to offer a discount other than any which stem from the above points which are more procedural matters rather than 'a deal'. This is why we quote less than an hours worth of my time for settlement cases (I wont say here what that is as again I don't wish to break forum rules).

That being said I would honestly say its always sensible to use an advisor but I realise that me saying so sounds ridiculous as I am one, but clearly there's other advisors you can use and I know that Webberg and his firm also offer a similar checking service so id suggest you have a look about and consider whether or not you feel the need for assistance.

Hope that helps,
Cheers
Phil

Hi Phil,

Thanks for the detailed reply.

Would you say as a ballpark estimated amount the settlement will be approx 35-40% of the total loans? so for e.g. 500k loan would be between £175 to £200k?

If I first try to settle with HMRC myself but if I then find the amount is a lot higher than I expected e.g £250K and payment term is too short e.g 3 years then could I then use your services to check the calculations and negotiate a longer payment term or will it be too late then as I have already engaged with the HMRC?

Thanks