HMRC webinar on disguised remuneration - 1 May 2018

[phil@pmtc]

He did not know the one in the newspapers which supposedly was 31 years.
But he did know of someone who's ttp was 18 years.
So if you can persuade them that is all you can pay then it is possible.

Absolutely. I think the main point on TTP is that, HMRC cant get blood from a stone. If for example they asked me for 100K they may as well ask me for 100m, I still wouldn't have it. I'm finding they have slowly come around to accepting that bankrupting people achieves nothing either for themselves, the individual or indeed the wider economy. If there's a genuine need for a TTP then don't be afraid to set it out to them. Also, don't offer more than you can afford.

[NotAllThere]

Tanksyou me26 and phil esureing itax gives view. clerly just hepful and kindly like HRMC no otter reason

i() i aslo surfing web like itax when HRMC explain but itax tustworty | so listen EXEPRT / S2123Z ect

(ii) ita x catarogeraly NOT HRMC AND NOT ASDIVE cotanractar AND NO SUGARCOTS.
said MANYS time so TRUE/ safe purses

(iii(HRMC kindly CSLO2 ONLY OPTOIN. ALL CLEAR HRMC do NOT think soloutin worked
(iiii) rebemer CSLO2 dedline may MUST RUSH/

(iiiii) kindly CLS02. nasty 2019 loncharge ONLY open/ paytime beter CLS02.

****DICSLAMER i aslo NOT HRMC or asdive cotanractors/ i wait for kindly HRMC CSL02 nubmers
ONLY CETRAINTY NO FEAR NO DOUBT CS0L2 ONLY WAY
REPAT ONLY WAY.

You managed to write clear, coherent English here, https://forums.contractoruk.com/hmrc...t=#post2528530. Perhaps you could try it again?

[Iliketax]

DICS

I fear you peaked some months ago.

[starstruck]

Yep. But some interesting bits from my perspective:

1. Making a pension contribution is fine for the April 2019 loan charge if you have closed years (i.e. reduces the 2018/19 tax due). If you have open years, HMRC says as less tax actually paid in 2018/19, the double tax relieving rule won't relieve the tax due for the earlier years. They did not say this, but this effectively means you don't get tax relief for pension contributions to the extent that there are open years.

I keep re-reading this but I don’t follow. Could you elaborate on this. Why are open years “less tax actually paid in 2028/19?

[Iliketax]

I keep re-reading this but I don’t follow. Could you elaborate on this. Why are open years “less tax actually paid in 2028/19?

Scenario 1

Image £100 of tax due for (say) 2010/11 but the year is closed. In 2018/19 you have used up your personal allowance so (ignoring April 2019 loan charge) you have paid no tax. But the April 2019 loan charge means that £100 of tax is due. So you make a big enough pension contribution to get £100 of tax relief. This is fine. You pay no tax is 2018/19. You don't need double tax relief against the 2010/11 year as HMRC can't assess that.

Scenario 2

Now imagine same as above, except (i) 2010/11 is open, (ii) you don't make the pension contribution. The £100 tax you pay in 2018/19 credits the 2010/11 tax of £100 that you owe (so that the 2010/11 tax bill is now nil). So you only pay £100 of tax (not £200). This is fine. This is how the double tax relief rules are supposed to work.

Scenario 3

Now imagine you make a pension contribution that gives £100 of tax relief in 2018/19 so that it reduces you 2018/19 tax bill to nil. For the open 2010/11 year HMRC say that the £100 is still due as the double tax is limited to the lower of (i) the 2010/11 tax due, and (ii) the 2018/19 tax actually paid.

I'm not clear that that is right. My guess though is that you'd have to go through the minutia of the charging provisions in ITEPA and ITA to work out what the right answer is. HMRC may have done that. But unless (i) you want to do that, and (ii) are you are completely confident it is right, you would need to make sure you pay enough actual tax in 2018/19 to cover the 2010/11 tax under dispute.

Note, to get a bit pedantic - you'd need to make sure you pay enough actual tax in 2018/19 to cover the (i) 2010/11 tax under dispute, plus (ii) the interest on that late tax.

[Loan Ranger]

Scenario 3

Now imagine you make a pension contribution that gives £100 of tax relief in 2018/19 so that it reduces you 2018/19 tax bill to nil. For the open 2010/11 year HMRC say that the £100 is still due as the double tax is limited to the lower of (i) the 2010/11 tax due, and (ii) the 2018/19 tax actually paid.

HMRC may say this but 2010/11 is still in dispute.

HMRC would have to go to a tax tribunal, and win, to get the £100.

[Iliketax]

HMRC may say this but 2010/11 is still in dispute.

HMRC would have to go to a tax tribunal, and win, to get the £100.

I agree that if the old tax is not due then the point goes away.

But HMRC's view substantially increases the risk of (i) the individual getting no effective tax relief on their pension contributions where there are open years, and (ii) the pension income (less 25%) will be taxed at marginal rates.

As for going to the tax tribunal, you've got to want to go, afford to go (alone or as part of a group), not lose (which has got harder following the RFC Supreme Court decision) and hope HMRC will not be successful by the time the last appeal is over. But by then you cannot undo those pension contributions.

I'm not saying HMRC's view is right or wrong, just that the implications of it completely skews the playing field where there are open years.

[Loan Ranger]

I agree that if the old tax is not due then the point goes away.

But HMRC's view substantially increases the risk of (i) the individual getting no effective tax relief on their pension contributions where there are open years, and (ii) the pension income (less 25%) will be taxed at marginal rates.

As for going to the tax tribunal, you've got to want to go, afford to go (alone or as part of a group), not lose (which has got harder following the RFC Supreme Court decision) and hope HMRC will not be successful by the time the last appeal is over. But by then you cannot undo those pension contributions.

I'm not saying HMRC's view is right or wrong, just that the implications of it completely skews the playing field where there are open years.

Fair point.

[shevlane]

Can pension contribution be used to offset *open* years

1. Making a pension contribution is fine for the April 2019 loan charge if you have closed years (i.e. reduces the 2018/19 tax due). If you have open years, HMRC says as less tax actually paid in 2018/19, the double tax relieving rule won't relieve the tax due for the earlier years. They did not say this, but this effectively means you don't get tax relief for pension contributions to the extent that there are open years.

Hi Iliketax,

I didn't manage to make the call yesterday (had a meeting over lunch), but how clear were they on this point? Did they actually say "double tax relieving rule won't relieve the tax due for the earlier years"?

I have made considerable steps (remortgaged my house, etc.) towards the strategy of using a large pension contribution to reduce LC19 taxable income. However, nearly all my years are open; so if this really is the case, then I will have to re-think my strategy entirely.

Is your analysis that this is definitely the case, or that the risks are too high here to go down this path...?

[SummerhillLass]

TTP

I need about 10 years. Think they’ll buy that? I have young children.

You might do ! We are caught by the APNs over Montpelier and have until 2049 to repay, when we will both be in our 80s. Sorry to cheer you up in this way !