AML 2019 Loan Charge

[GUD]

[QUOTE=Iliketax;2555529]

OK. You are going to hate me for this...

Based on what you say, I think you may be in a substantially worse position than many.

Just to be clear:

1. On the basis that you are an employee/director of your company then, as you've described it, the payments by AML/SPM to you are within the employee disguised remuneration rules that have been around since December 2010. The fluff around self-employment does not come into it. Your company has an obligation to operate PAYE/NIC. When you take your independent tax advice you should make sure that it covers the GAAR (general anti-abuse rule) and its specific penalty regime. https://www.rossmartin.co.uk/penalti...gaar-penalties. GAAR penalties are up to 60% of the tax. Oh, there would also be employee's and employer's NIC.

Which 2010 rules are you referring here please? The scheme is providing loans and is covered by DR loan charge....

[webberg]

Could you please advise whether HMRC charged you interest and their calculations were fair reflection of tax and NI due to be paid? Were their calculations close to yours estimates and did you reach any settlement terms with HMRC?

The answer to the points here, which have been raised and answered before, are:

HMRC charges interest on overdue tax and will not negotiate on that.

The arithmetic in the calculation is usually accurate and can be challenged if not.

Whether the HMRC calculations match yours is irrelevant.

Settlement terms? if you mean some sort of discount to the tax figure, the answer is no. If you mean time to pay, then it depends on circumstances.

[webberg]

[QUOTE=GUD;2556070]

OK. You are going to hate me for this...

Based on what you say, I think you may be in a substantially worse position than many.

Just to be clear:

1. On the basis that you are an employee/director of your company then, as you've described it, the payments by AML/SPM to you are within the employee disguised remuneration rules that have been around since December 2010. The fluff around self-employment does not come into it. Your company has an obligation to operate PAYE/NIC. When you take your independent tax advice you should make sure that it covers the GAAR (general anti-abuse rule) and its specific penalty regime. https://www.rossmartin.co.uk/penalti...gaar-penalties. GAAR penalties are up to 60% of the tax. Oh, there would also be employee's and employer's NIC.

Which 2010 rules are you referring here please? The scheme is providing loans and is covered by DR loan charge....

I'm sure Iliketax will be along to answer the specifics.

However the insertion of your own limited company into a scheme is generally not good news.

[Iliketax]

Which 2010 rules are you referring here please? The scheme is providing loans and is covered by DR loan charge....

The DR rules originally came in for loans made from 9 December 2010. You can find them here if you are keen: https://www.legislation.gov.uk/ukpga/2011/11/schedule/2

So if the facts are as the poster originally said:

Just to clarify my pay structure is: My company does work for company X through agency Y, my company invoices agency Y, agency Y pays my company, I send AML/SPM my timesheet, AML/SPM send my company bill, my company pays AML/SPM bill, AML/SPM pay me retainer (as self-employed) and loan, job done.

Then "my company" is "B", Pipjb (assuming he or she is a director of "my company") is "A", AML/SPB is "P" and P makes a payment (by way of a loan and retainer) to A which is a "relevant step". That's exactly what the disguised remuneration rules were designed to stop.

So that would mean "my company" would have to operate PAYE and NIC on all payments made by AML/SPM to Pipjb. There is also a horrible penalty provision (called s222) for Pipjb not reimbursing "my company" for the PAYE (that it didn't deduct from pay but was supposed to) quick enough. Based on those facts, the only way out is to say that there was no connection to his or her employment / directorship with "my company". But that does not sound likely.

If the facts are like that, the original DR rules would have created a tax charge on all the amounts paid. The April 2019 loan charge then taxes all the loans outstanding. There would be some double tax relief though.

On the GAAR point, there have been some GAAR Advisory Panel opinions on disguised remuneration and so this shows that this is something that HMRC takes very seriously: https://www.gov.uk/government/public...e-arrangements and https://www.gov.uk/government/public...g-gold-bullion

If this is your position, you should take independent professional tax advice.

[webberg]

The analysis above is one that we would generally agree with.

This type of scheme is however quite popular and is seen in many guises. Examination of the justification behind the flows of money and use of the contractor's own limited, reveals a number of elements that are claimed to exempt the process from the rules mentioned.

The strength or otherwise of those defences has not been tested in any Tribunal or Court. My personal opinion is that reliance upon a literal interpretation of the documents and legislation is, these days, unlikely to produce the claimed result.

We would agree however that the general thrust and intent of the rules introduced in 2010 is as described and that HMRC will almost certainly be running an argument on those lines.

Which would a Tribunal prefer?

Would it be one of the above or something else?

[Loan Ranger]

Just to clarify my pay structure is: My company does work for company X through agency Y, my company invoices agency Y, agency Y pays my company, I send AML/SPM my timesheet, AML/SPM send my company bill, my company pays AML/SPM bill, AML/SPM pay me retainer (as self-employed) and loan, job done.

So, the money flows are:

Co X ---> Agency Y ---> MyCo

MyCo ---> AML/SPM

AML ---> Me (as self-employed sole trader)

AML ---> Me (loan)

Jesus.

[CockneyRed]

The method that Pipjb mentions is what many AML contractors were directed to use, I too was paid that way. This was, of course, on regulation from HMRC !!! An invoice was raised by AML to our LTD company which was then paid from the business account, AML then paid us direct into our bank accounts after deductions etc. The comment 'That's exactly what the disguised remuneration rules were designed to stop'
Then how were AML able to proceed with this way?

[Iliketax]

This was, of course, on regulation from HMRC !!!

Sorry, I don't understand. What does that mean?

[Loan Ranger]

The method that Pipjb mentions is what many AML contractors were directed to use, I too was paid that way. This was, of course, on regulation from HMRC !!! An invoice was raised by AML to our LTD company which was then paid from the business account, AML then paid us direct into our bank accounts after deductions etc. The comment 'That's exactly what the disguised remuneration rules were designed to stop'
Then how were AML able to proceed with this way?

Here's my theory as to why AML did it this way.

1) The Dec 2010 DR rules only covered employees, not self-employed sole traders. That's why AML inserted the self-employed bit.

2) A lot of agencies wouldn't deal with offshore companies, so that's why they inserted your own company. They were trying to make it appear to the agency as though you were a bog standard Ltd Co contractor.

From what Iliketax says, inserting that Ltd Co may have had unintended consequences.

[CockneyRed]

Sorry, I don't understand. What does that mean?

AML always quoted they were compliant with HRMC, they told me when I signed up for the LTD company option that this is what HMRC have advised to do to stay within their compliance.