AML 2019 Loan Charge

[webberg]

AML Loan Charge (please help with advice),

My situation with HMRC ...

. My issues:

1) I would like to re-distribute my earnings over the 3 tax years I was involved in the scheme ... therefore I have asked HMRC if I can re-distribute earnings over the 3 tax years. Does anyone have experience of this, I have had no response from HMRC. Not a hope I'm afraid. You cannot rewrite history.
2) The latest settlement figure offered to me from HMRC in April this year includes a IHT payment of roughly £10k or (5%). The wording around this is very vague, and they even suggest I get in touch with my trust provider to determine whether IHT is applicable. Nobody knows if IHT is due and if you elect not to have the loans written off, there is no immediate IHT charge. I find this situation wholly unacceptable, join the club
3) Finally, the total figure I am being asked to pay as a percentage of the payments I received is as follows (Income tax = 39.89%, NI = 5.10%, Interest = 3.70%, IHT = 5.19%). The total bill is therefore 53.88% of the loan amount. Considering that the ‘loan charge’ legislation suggests that you pay the total of your loan as a lump sum received in 2018/2019 to the maximum value of 45%, it would seem HMRC are suggesting I should pay more through voluntary restitution. Again, I have asked this question to HMRC, would it not be in my interest to just accept the loan charge and pay 45%, which is £8.8% cheaper than their settlement offer. Does anyone else have experience of this? Does the loan charge negate the interest and IHT payment, thereby making it a lot cheaper? No.

Help appreciated.

re the final point.

Paying the loan charge is NOT settling.

If you have years still under enquiry, you will have to agree those at some point and if they remain in time, you will be paying tax, NIC, interest etc on those.

So the reduction in the gross via the loan charge is temporary at best.

[dangermaus]

Has anybody gotten to the stage where they have agreed settlement with HMRC and also managed to get their loans with Knox House Trust written off?

[d70hef]

AML Settlement Questions

AML Loan Charge (please help with advice),

My situation with HMRC regarding loan charge started 1 year ago. I contacted them and completed a settlement pack, providing all of the amounts I received from the AML scheme over a 2.5 year period. My exposure was significant, and in an attempt to get the necessary funds available I released a significant amount of equity from my house.

1 year on I still have not settled with HMRC and they are extremely slow in responding. I have called the phone number at least 10 times over the last year, chasing them for updates which is probably stupid of me, but my aim has been to settle and forget about this whole situation. I have been dealing with HMRC direct rather than through my accountant. My issues:

1) I would like to re-distribute my earnings over the 3 tax years I was involved in the scheme. The amount of tax I am due to pay seems inflated because the accountant I employed during the time I was on the scheme, distributed my earnings in a tax efficient manner. This is no longer the case, now that I am required to pay tax on AML payments, and therefore I have asked HMRC if I can re-distribute earnings over the 3 tax years. Does anyone have experience of this, I have had no response from HMRC.
2) The latest settlement figure offered to me from HMRC in April this year includes a IHT payment of roughly £10k or (5%). The wording around this is very vague, and they even suggest I get in touch with my trust provider to determine whether IHT is applicable. I attempted to do this and was referred to a company called PTS Ltd but their advice was inconclusive (ie they are in discussions with HMRC as these schemes always are). I find this situation wholly unacceptable, in that HMRC are advising me to get in touch with the people who got me into this scheme in the first place to provide advice. It feels a bit like I am being asked to go back to the organisation that got me into this situation, rather than HMRC providing me any definitive advice. Again does anyone have experience with IHT and whether this is applicable.
3) Finally, the total figure I am being asked to pay as a percentage of the payments I received is as follows (Income tax = 39.89%, NI = 5.10%, Interest = 3.70%, IHT = 5.19%). The total bill is therefore 53.88% of the loan amount. Considering that the ‘loan charge’ legislation suggests that you pay the total of your loan as a lump sum received in 2018/2019 to the maximum value of 45%, it would seem HMRC are suggesting I should pay more through voluntary restitution. Again, I have asked this question to HMRC, would it not be in my interest to just accept the loan charge and pay 45%, which is £8.8% cheaper than their settlement offer. Does anyone else have experience of this? Does the loan charge negate the interest and IHT payment, thereby making it a lot cheaper?

Help appreciated.

[Willo76]

DOTAS

I'm not being unkind and I say with all respect that you need to invest a couple of days in getting up to speed with all of this.

DOTAS = disclosure of tax avoidance scheme.

In the period you were using the schemes, that was probably the obligation of the promoter.

The promoter tells HMRC about the scheme, gets a reference number (SRN) and tells each user that number to include on their tax return.

Check your tax returns.

Thanks webberg, I've been reading into DOTAS so thanks for the steer. I've been through my documents- SA & scheme contract and see absolutely no reference to the SRN. Not sure whether to be slightly relieved or very worried still...

[webberg]

Hello Webberg, I would not know where to find a DOTAS.....

I'm not being unkind and I say with all respect that you need to invest a couple of days in getting up to speed with all of this.

DOTAS = disclosure of tax avoidance scheme.

In the period you were using the schemes, that was probably the obligation of the promoter.

The promoter tells HMRC about the scheme, gets a reference number (SRN) and tells each user that number to include on their tax return.

Check your tax returns.

[Willo76]

DOTAS

An APN can be issued only if the year is under enquiry AND the scheme was disclosed for DOTAS purposes.

Noting in your note indicates this is the case.

Hello Webberg, I would not know where to find a DOTAS.....

[Willo76]

Has anybody gotten to the stage where they have contacted Knox House Trust to arrange write off or “release” from their loans?

Just looking to find out how painful and costly that part of the process is...

I was quoted £250 to sort out the paperwork/ and then 15% of settlement figure. Not interested in that and ran away from that cesspit.

[webberg]

This is the first I was aware of this but interpreting what you say this is not the case?

I'm sure it has all been said on here before but there are several 'bones of contention' which I would argue contrevenes human rights:

1/ the retrospective nature
2/ the fact that loans for all years will be due in a single tax year benefiting from only one years allowances
3/ The scheme was declared under DOTAS and was legal - so HMRC cannot claim that they were unaware of what was happening so why leave it almost 10 years before doing anything about it? and have the cheek to charge interest and penalties?
4/ the 'punitive' interest rate of 5% (when the prevailing base rate has been below 1%) which if applied from my first year 2010 will be over 50% compounded - how can they justify charging this?

If it were simply a case of repaying tax on loans that were allegedly due at the time and given time to pay then perhaps there may have been more people inclined to 'cooperate' but the HMRC's punitive sanctions and bullying tactics on individuals to 'frighten' them into paying make me more inclined to challenge them than to roll over and pay.

You have misinterpreted what I said.

If you have loans (original or replacement) then you are obliged to disclose them, unless you have a legal or practical reason not to. The grounds you mention are neither.

Your points as to the retrospective nature and the charge arising in one year, have been discussed many times in these threads. I suggest that you contact LCAG for more info and/or help in their campaign.

I don't know your situation, but if you have had enquiries, then clearly HMRC has "done something about it" and if not, then the loan charge is that "something".

If tax is due for a year under enquiry, then interest is charged if that tax value is correct. Penalties are rarer but not unheard of. If you have no enquiry, then no interest/penalty can be charged.

Where did you get "5%" from? Interest on overdue tax is presently 3.25% pa and has been just below that for the last 10 years or so. Also it's "simple" not compounded.

They do not have to "justify" anything. The law says that late paid tax attracts interest.

If you really are playing catch up here, discuss this with a professional or spend some time reviewing the threads as otherwise you are going to misunderstand some important issues.

[mst1958]

Knox House (connected with AML) have, as usual, mixed fact and fiction in order to either avoid a potential liability of their own or to sell you something else.

The assumption behind their statement is that you have had loans which are caught by the loan charge. If that is true (and you don't know this and certainly Knox House don't either) then you do have an obligation to report the loans and if they are taxable, then yes, an assessment will be made and tax will fall due.

However all you have is a view from a party which is arguably potentially conflicted and who may, in some iterations of the truth, be liable for the loan charge themselves or one of their connections may be.

Supplying numbers to HMRC and waiting is not sensible. An open enquiry can be settled ONLY by agreement with HMRC or by a Tribunal. If HMRC has stopped asking questions, this does not mean that they have reached a conclusion or can issue assessments/demands. The next step is for HMRC to issue a closure notice and if you agree with their position, you will get assessed and if not, you will go to Tribunal.

The loan charge is NOT a substitute or alternative for settling or fighting your corner. HMRC claim that it is a new tax on a new source. That is nonsense of course but it's helpful to think of it that way. So even if the loan charge disappeared tomorrow, you have open enquiries and they would need to be pursued to their natural end as above.

I have been unable to find much about a "Cresta" involved in the tax of contractor loans. The nearest I can find is a company within the Equiom Trust group who may have changed their name to Cresta. Equiom were certainly involved in some loan schemes and would probably have knowledge but how much and how relevant is unclear.

Contacting WTT is sensible. Other advisers are available.

Thanks for your reply. I have attached an email received from Knox House in April this year to a response to a post below. It seems that AML/Knox has sold the loans to a 3rd party (presumably for their own 'legal' purposes). They are claiming that I have to disclose loans to HMRC as stated above. This is the first I was aware of this but interpreting what you say this is not the case? Also as stated HMRC have requested all the info in form of enquiries from AML for all outstanding years - so I have done nothing until I get 'hit' by HMRC as at present there is nothing to contest.
I'm sure it has all been said on here before but there are several 'bones of contention' which I would argue contrevenes human rights:
1/ the retrospective nature
2/ the fact that loans for all years will be due in a single tax year benefiting from only one years allowances
3/ The scheme was declared under DOTAS and was legal - so HMRC cannot claim that they were unaware of what was happening so why leave it almost 10 years before doing anything about it? and have the cheek to charge interest and penalties?
4/ the 'punitive' interest rate of 5% (when the prevailing base rate has been below 1%) which if applied from my first year 2010 will be over 50% compounded - how can they justify charging this?

If it were simply a case of repaying tax on loans that were allegedly due at the time and given time to pay then perhaps there may have been more people inclined to 'cooperate' but the HMRC's punitive sanctions and bullying tactics on individuals to 'frighten' them into paying make me more inclined to challenge them than to roll over and pay.

[mst1958]

Has anybody gotten to the stage where they have contacted Knox House Trust to arrange write off or “release” from their loans?

Just looking to find out how painful and costly that part of the process is...

I don't know if that is still available? I am totally confused with conflicting info. Below is what I received from AML/Knox House in April: IT would appear that they are trying to dodge the bullet by selling the loans to a 3rd party. I contacted the number and they're not interested in you unless you wish to settle - I didn't bother going into details but I am guessing it's another dodgy scheme that you'll have to pay for to avoid the loan charge - which HMRC have already stated 'won't work' so all your doing is storing up even more pain for later!!! IMHO.



2019 Loan Charge: Update relating to your contractor loan
Last Spring we emailed advising you of the impending 2019 Loan Charge.
The 2019 Loan Charge applies an income tax charge on loans that are due by you to us, which remain outstanding at 5 April 2019.
Knox House Trustees Limited has carefully considered what actions could be taken to mitigate the impact of this legislation. To this end, we have signed a contract with an independent finance company who will takeover the debt that is due by you to us. In return, a fee is paid by us to the finance company. As part of this contract, it has been necessary to replace the original loan agreement with a new loan.
As part of the regulatory requirements relating to the Loan Charge legislation, you will be required to report the amount of the debt outstanding as at 5 April 2019 to HMRC. When reporting you should advise them of the details of the new loan.
We have engaged a specialist firm to liaise with contractors regarding their loan arrangements. Under the terms of a data sharing agreement the necessary information has been transferred to this team to act as a single point of contact so that enquiries are handled swiftly. Please contact them on 0161 710 0249 (Phone lines will be open from 9am on Monday 8th April ) for details of your new loan agreement. Please quote your unique reference which is detailed at the top of this email.
We trust that this matter will be of interest to you and urge you to take action quickly.
Kind regards
Knox House Trustees Limited