AML 2019 Loan Charge

[Loan Ranger]

For the second, I probably misunderstand the sentence - but if HMRC raise a DR charge, this would include all years (where the individual has had a loan), so what do you mean by "earlier years"?

He means, paying the LC may not be the end of the matter. HMRC could still continue pursuing their enquiries for open (protected) years after you've paid the LC.

[webberg]

Hi Webberg

I have highlighted 2 lines in bold.

For the first, if you agree a settlement figure under CLSO2 but do not actually pay HMRC until > 05/04/2019 (either if using TTP or for whatever reason), do you still have to report on the LC?

For the second, I probably misunderstand the sentence - but if HMRC raise a DR charge, this would include all years (where the individual has had a loan), so what do you mean by "earlier years"?

1. No. If you have agreed that the loans are taxable and agreed to pay the tax, then irrespective of whether all the tax has been paid or not, that amount of loan will be excluded from the DR charge.

2. The loans arose in an earlier year (earlier than 18/19). Having a DR charge and paying the tax will not (in my opinion) lead to HMRC abandoning their enquiries into those earlier years. If they are eventually agreed, the tax paid in 18/19 is a credit against the tax and interest.

[ChimpMaster]

He means, paying the LC may not be the end of the matter. HMRC could still continue pursuing their enquiries for open (protected) years after you've paid the LC.

1. No. If you have agreed that the loans are taxable and agreed to pay the tax, then irrespective of whether all the tax has been paid or not, that amount of loan will be excluded from the DR charge.

2. The loans arose in an earlier year (earlier than 18/19). Having a DR charge and paying the tax will not (in my opinion) lead to HMRC abandoning their enquiries into those earlier years. If they are eventually agreed, the tax paid in 18/19 is a credit against the tax and interest.

Thanks guys. I knew this (so I thought) but the recent spate of "new hope" from newbies on this forum has thrown me off.

Personally, I'm still planning on CLSO2.

[Loan Ranger]

Having a DR charge and paying the tax will not (in my opinion) lead to HMRC abandoning their enquiries into those earlier years.

Maybe not but I can't see them going to any real effort to pursue those enquiries. I'm sure most resources will be redeployed elsewhere.

After all, the reason we have this ridiculous 18-year retro charge is because HMRC never got their finger out in the past. After collecting the charge, they'll have even less motivation to do so.

[LOL17]

Sorry. Maybe "opt" wasn't the best choice of word to use.

[webberg]

Maybe not but I can't see them going to any real effort to pursue those enquiries. I'm sure most resources will be redeployed elsewhere.

After all, the reason we have this ridiculous 18-year retro charge is because HMRC never got their finger out in the past. After collecting the charge, they'll have even less motivation to do so.

It's not a question of motivation, it's a question of law and how the tax system works.

If there is an outstanding appeal against an assessment or liability, then it has to be settled in some manner. It cannot be allowed to remain open for ever.

HMRC could issue a closure notice which is an end to the enquiry so far as they are concerned. If that notice said "tax is due on loans" then the interactions between the DR charge tax paid and that earlier liability would presumably be applied.

The closure notice could say "no tax due". If so, where does that leave the DR charge? Where does that leave those millions HMRC has spent in Court etc? What does it say about HMRC management and policy? I think this is unlikely.

That closure notice gives the taxpayer the opportunity to contest the position in Tribunal. If an individual did this, HMRC would almost certainly defend it even if this was on grounds of public interest.

My view therefore is unless there is a change of law that permits a later tax charge (on a different source in a different year) being allowed to close an enquiry, HMRC has no choice and must continue.

I would expect to see the usual dragging of heels and "lost" correspondence and the assignment of the work experience candidates to the enquiry, but continue it must.

[me206et]

It's not a question of motivation, it's a question of law and how the tax system works.

If there is an outstanding appeal against an assessment or liability, then it has to be settled in some manner. It cannot be allowed to remain open for ever.

HMRC could issue a closure notice which is an end to the enquiry so far as they are concerned. If that notice said "tax is due on loans" then the interactions between the DR charge tax paid and that earlier liability would presumably be applied.

The closure notice could say "no tax due". If so, where does that leave the DR charge? Where does that leave those millions HMRC has spent in Court etc? What does it say about HMRC management and policy? I think this is unlikely.

That closure notice gives the taxpayer the opportunity to contest the position in Tribunal. If an individual did this, HMRC would almost certainly defend it even if this was on grounds of public interest.

My view therefore is unless there is a change of law that permits a later tax charge (on a different source in a different year) being allowed to close an enquiry, HMRC has no choice and must continue.

I would expect to see the usual dragging of heels and "lost" correspondence and the assignment of the work experience candidates to the enquiry, but continue it must.

One would therefore assume interest, as ever, would be accumulating.
Depending on the calculation method,
i.e.
(tax due - dr charge paid) x interest rate
or knowing them more likely
(tax due x interest rate) - (dr charge paid x a much lower interest rate).

Could get very expensive over the number of years they will take to close anything.

[ChimpMaster]

It's not a question of motivation, it's a question of law and how the tax system works.

If there is an outstanding appeal against an assessment or liability, then it has to be settled in some manner. It cannot be allowed to remain open for ever.

<snip>

In the case where there are no open enquiries on years beyond the 6 year window, what might HMRC do after the DR charge is raised and paid?

There was never any prior liability in this case. I guess HMRC will just take the payment and say Thank You Very Much and Goodbye.

Chances of the individual getting the money back ever = Zero, realistically. So it's pretty much the same as CLSO2 (or actually about 10% less tax with CLSO2 for me, having done my calculations).

[Loan Ranger]

In the case where there are no open enquiries on years beyond the 6 year window, what might HMRC do after the DR charge is raised and paid?

There is nothing they can do but it will be a result as far as they're concerned. The LC will enable them to catch all the fish that slipped through the net.

[Loan Ranger]

If there is an outstanding appeal against an assessment or liability, then it has to be settled in some manner. It cannot be allowed to remain open for ever.

I don't know when HMRC first started raising assessments against loan schemes but I do know of people with open enquiries which are over 13 years old and HMRC have done very little in all that time.

Maybe they will eventually progress all open cases to a conclusion but I'm not holding my breath.