HMRC settlement Deadlines/delays and the LC

[Iliketax]

Thanks iliketax

Scenario 1: I settle:
As you have pointed out, it gets rid completely of the need to declare any previous loan income as a part of the loan charge by fulfilling the 'payment condition' of s554z5

Scenario 2: I DON'T settle:
The main reason I would do this would be if my tax liability was reduced in doing this... so I would absorb the loan amount in lower tax brackets.
In your example, let's say that the £1000 is taxable, but falls in the 0% tax bracket (personal allowance), so tax due is £0.
Now the £1000 has been declared in taxable income and taxed at the applicable rate.
s554Z5 it seems wouldn't apply here, because according to HMRC, the tax charge was due in the previous tax year and is now past due and because I haven't paid the tax due or agreed payment.
s554z11b and c will both mean that the tax which was due in 2016/17 will be due in full plus any interest & penalties.

This implies that the settlement option will ALWAYS be the best option. Why are people then considering bearing the loan charge as a viable option at all? It seems as if the least tax we will ever have to pay will be through the settlement offer.

Has the loan charge legislation come into effect already? If so, we have already incurred a tax liability in past years on loan-based income. Or will it only come into effect in April 2019? In which case it would meet the 'liability condition' of s554z5, and scenario 2 becomes a viable option.

Just spotted that I didn't add "DON'T" in scenario 2 so thanks for adding it in.

HMRC have said that they believe that for most people settlement will be the cheapest option. If the earlier year is closed (so no interest exposure) and you can make pension contributions in 2018/19 not settling may be a better position. Other people on here will be able to advise you on what they see for real (I don't work with contractors).

The legislation came in with Finance (No 2) Act 2017 - You can find it here Finance (No. 2) Act 2017 or here Finance (No. 2) Act 2017 depending whether you are employed or not.

The date that the April 2019 loan charge arises is on 5 April 2019. So the tax charge for the current year has not yet arisen.

[pateen]

Does anyone know the best place to discuss the CLSO in terms of:

1. Options for calculating tax (for CSLO only).
2. Negotiations and how to achieve the lowest tax payable.
3. Expenses and how to utilise these for each year.
4. Extending payment terms and the best ways of getting them from 2 up to 5 years.
4. Any other methods of reducing that overall tax bill.

A sticky for this type of thing would really be great

[WTFH]

Does anyone know the best place to discuss the CLSO in terms of:

1. Options for calculating tax (for CSLO only).
2. Negotiations and how to achieve the lowest tax payable.
3. Expenses and how to utilise these for each year.
4. Extending payment terms and the best ways of getting them from 2 up to 5 years.
4. Any other methods of reducing that overall tax bill.

A sticky for this type of thing would really be great

The best place is to discuss it with a tax adviser - Webberg or Phil will help you with this.

[pateen]

The best place is to discuss it with a tax adviser - Webberg or Phil will help you with this.

Thanks WTFH,

Its actually a wider question for the community on here rather than just a WTT/Tax advisor direct question.

[webberg]

I'm not sure what you expect from the wider community here? You will find that the advisers here have different opinions as to the appropriateness of CLSO and the degree to which it provides an answer, but we would all agree that it is non negotiable as far as HMRC is concerned. HMRC will run a calculation and if you don't like the answer, your only choice is to walk away and explore other ways to resist/pay.

I will however give you an opinion on your questions. (My opinion).

1. Options for calculating tax (for CSLO only). Loans and other payments are added to income in the year drawn and the tax calculated. Deduct tax paid, add interest = amount due.
2. Negotiations and how to achieve the lowest tax payable. See above. Unless there is gross arithmetical error, there is no negotiation.
3. Expenses and how to utilise these for each year. To date none have been allowed. I'm not saying that they never will be, nor that some may have achieved this, certainly we have not but we are pressing a number of cases to get some expenses allowed.
4. Extending payment terms and the best ways of getting them from 2 up to 5 years. This will depend on your individual circumstances. There is no set "plan" which will achieve an extension.
4. Any other methods of reducing that overall tax bill. If you settle via CLSO 2, what you see is what you get. If you are being told that a firm can negotiate a settlement down, other than for gross calculation error, ask them to base their entire fee on that.

[Dmac]

Delays

I emailed HMRC twice now to register my interest in settling - once in late May and once yesterday - but have still only received their standard, auto response "Your query will be passed to a caseworker for review".

Has anyone else not had a "pack" from them after having tried to register during May? Does anyone have any idea of the volumes they are looking at?

[Scotslaw]

I emailed HMRC twice now to register my interest in settling - once in late May and once yesterday - but have still only received their standard, auto response "Your query will be passed to a caseworker for review".

Has anyone else not had a "pack" from them after having tried to register during May? Does anyone have any idea of the volumes they are looking at?

You will have a much quicker response getting the initial settlement pack through if you call them on the Loan Charge helpline (0300 053 4226).
They have been inundated with tens of thousands of people registering interest and will handle things first come first served. So if you speak to someone, they can send you a pack within 5-10 minutes.
Once you send the completed pack through, it may take longer to receive a settlement offer… I’m not sure that part can be expedited by calling the helpline.

[Iter]

Doesn’t sound like a settlement agreement will be agreed before April 19 deadline for many thousands.... what will this mean? Possible date changes by HMRC likely?

[Calmbeforethestorm]

If there only 4-5000 registered there are many thousands that haven't.

I have spoken to Montpelier in IOM today.... they say most of their people haven't registered , they also say that they dont think they need to as HMRC doesn't know who they are , nor do they believe, currently, that they will have to divulge this information.They also say that , of the many that HMRC do know about, very few have received, follower notices, APN or any enquiries as yet.

HMRC are in a complete shambles.


It seems to me that there is virtually no chance of many , if any , settlements before April.

[Dmac]

If there only 4-5000 registered there are many thousands that haven't.

I have spoken to Montpelier in IOM today.... they say most of their people haven't registered , they also say that they dont think they need to as HMRC doesn't know who they are , nor do they believe, currently, that they will have to divulge this information.They also say that , of the many that HMRC do know about, very few have received, follower notices, APN or any enquiries as yet.

HMRC are in a complete shambles.


It seems to me that there is virtually no chance of many , if any , settlements before April.

Well, an email to me from Knox House stated as below:-

"If you do nothing and your loan remains outstanding, HMRC could at some point in the future make a request under the Exchange of Information rules for the Trustees to disclose the information held regarding your loans. Doing nothing will not avoid the 2019 Loan Charge."

That tells me that, at some point the trusts will be compelled to share information with HMRC so those who do not settle now may have a period of uncertainty, followed by some contact from HMRC to pay up under LC19.