HMRC settlement Deadlines/delays and the LC

[Finalwhistle]

I am about to complete a late Tax Return for 16/17 for someone who had a contractor loan with SmartPay.
The person has a late Return to file as well as a standard contractor loan charge letter.

What is not clear and what i cannot get from HMRC is if the person should enter details of the loan on the Tax Return itself and pay tax via self-assessment, or leave it off the Return and speak to HMRC about settling directly with them via the loan charge letter.

It seems if they settle directly they could have 5 years to pay but i assume this wont be the case if the loans are put as income in the Tax Return as they will want the money immediately.
When phoning the general HMRC phoneline they tell you to put the loans as other income on the Return however i am not convinced this is the correct way to go.

Has anyone done it one way or the other?

I think you’ve answered your own question. If you’ve decided you want to declare then CLSO process has to be preferred route for two reasons:
1) TTP arrangement
2) it is still none commital (I.e. you still have the option to pull out at any time of the settlement process should any additional information come to light.
There doesn’t seem like there is much going back after you’ve declared something as income on a tax return.

I’m not a tax advisor btw

[Boodog]

Better off with the Loan Charge ?????

Is there anyone out there who thinks that they may be better off with the loan charge?

So, if charging the loans to 1 tax year - 18/19 - is preferable to charging to the actual year/s in which the loan was paid?

I have asked a similar question previously in this thread but no opinions as yet.

[dammit chloe]

Is there anyone out there who thinks that they may be better off with the loan charge?

So, if charging the loans to 1 tax year - 18/19 - is preferable to charging to the actual year/s in which the loan was paid?

I have asked a similar question previously in this thread but no opinions as yet.

Possibly if you have only closed years. Possibly yes if you haven't worked this year. Possibly yes if you have money to offset it via pension payments. Only if your LC liability is not too great. ie one way or another you can keep your amount as close to the 20% tax band as possible.

Loan Charge does not resolve open years or any other tax matters.

But it really does depend on your situation.

[dangermaus]

Long time reader. First time poster

Hi all

Like many on here I have been caught up in this mess through a couple of the contractor loan schemes via my own Limited company set up. I've had discussions with both PTS a couple of perhaps what you may consider more "legitimate" companies offering settlement services but obviously none will tell me what figure I'll likely be facing until I've paid for their services.

PTS have said as I was "employed" by the scheme promoters, I was classed as employed and so will not pay NIC as part of settlement and as I've had no contact or correspondence from HMRC for any of these years, they are classed as closed and so no late payment interest is due either. Sounds totally incorrect to me as HMRC surely still have time to scrutinise tax returns from the last 6 years? and obviously I wont be using them as they are clearly linked to the Knox group.

What I have found difficult to understand is the calculations themselves. I have loans totalling approx £76k spread fairly evenly across 3 tax years 2015/16, 2016/17 and 2017/18. I've gone a few ways about working out my liability and my calculations seem to spit out very different figures from approx £24k to approx £41k.

I've been paid a basic salary (retainer) each of the 3 years which roughly equalled the tax free allowance. I've then had approx £2k in dividends each year and around £25k in loans. No expenses, pension payments or any other tax relief. Only about £500 paid in NIC (class 2 and 4) each year

Can anyone help me work out a rough ball park figure before I decide to proceed with settlement?

I consider myself very fortunate to have a much smaller sum of loans than many others out there and also luckily a means of paying a settlement. Although I do plan to settle in order to put this whole thing behind me, I wish the best of luck to all of you who have no other option but to wait and hope for the best with the legal challenge etc. None of us did anything illegal at the time and are now being punished for HMRC leaving open loopholes and not pursuing these schemes earlier! Good luck all

[dammit chloe]

Hi all

Like many on here I have been caught up in this mess through a couple of the contractor loan schemes via my own Limited company set up. I've had discussions with both PTS a couple of perhaps what you may consider more "legitimate" companies offering settlement services but obviously none will tell me what figure I'll likely be facing until I've paid for their services.

PTS have said as I was "employed" by the scheme promoters, I was classed as employed and so will not pay NIC as part of settlement and as I've had no contact or correspondence from HMRC for any of these years, they are classed as closed and so no late payment interest is due either. Sounds totally incorrect to me as HMRC surely still have time to scrutinise tax returns from the last 6 years? and obviously I wont be using them as they are clearly linked to the Knox group.

What I have found difficult to understand is the calculations themselves. I have loans totalling approx £76k spread fairly evenly across 3 tax years 2015/16, 2016/17 and 2017/18. I've gone a few ways about working out my liability and my calculations seem to spit out very different figures from approx £24k to approx £41k.

I've been paid a basic salary (retainer) each of the 3 years which roughly equalled the tax free allowance. I've then had approx £2k in dividends each year and around £25k in loans. No expenses, pension payments or any other tax relief. Only about £500 paid in NIC (class 2 and 4) each year

Can anyone help me work out a rough ball park figure before I decide to proceed with settlement?

I consider myself very fortunate to have a much smaller sum of loans than many others out there and also luckily a means of paying a settlement. Although I do plan to settle in order to put this whole thing behind me, I wish the best of luck to all of you who have no other option but to wait and hope for the best with the legal challenge etc. None of us did anything illegal at the time and are now being punished for HMRC leaving open loopholes and not pursuing these schemes earlier! Good luck all

Sounds like your exposure is closer to 24 than 41 to me but no-one can really help with out seeing all the details. There is potentially inheritance tax to pay but that is a very grey area. Personally I would get a good tax advisor even on your amount just to ensure that you get finality.

The only danger is if you don't get a settlement in time you are potentially due for the Loan Charge which will be significantly higher. Probably closer to the 41 you mention.

If I were you I would probably settle to but please consider donating something to the LCAG JR fund to help those less fortunate :-).

[Whysoserious]

I've been through the settlement process and inputting your numbers into my spreadsheet gives you a tax liability of around £6000 for each year. So approx £18,000 in total. This is taking into account the tax bands, allowances, interest and dividend rates at the time.

Basically HMRC will add £27k to your salary for each of those years.
£27k loans + £10k salary + £2k dividend = £39k income each year, which is within the basic rate band.

But subtract from £18,000 the tax you have already paid in those years to give your outstanding tax liability.

There could be IHT of approx 3% of the loan value depending on the type of trust S86 or S72 once the loan is written off.
This would be approx £2.5k.

So based on my calculations (i'm just a minion) i'd estimate your final bill between £18k-£21.5k.

[dangermaus]

I've been through the settlement process and inputting your numbers into my spreadsheet gives you a tax liability of around £6000 for each year. So approx £18,000 in total. This is taking into account the tax bands, allowances, interest and dividend rates at the time.

Basically HMRC will add £27k to your salary for each of those years.
£27k loans + £10k salary + £2k dividend = £39k income each year, which is within the basic rate band.

But subtract from £18,000 the tax you have already paid in those years to give your outstanding tax liability.

There could be IHT of approx 3% of the loan value depending on the type of trust S86 or S72 once the loan is written off.
This would be approx £2.5k.

So based on my calculations (i'm just a minion) i'd estimate your final bill between £18k-£21.5k.

What about employer's and employee's NIC and also late payment interest? Some people are saying this would have to be paid in this scenario and some people are saying it wouldnt. I personally cant see how HMRC wouldnt be including it in their calculations.

To be honest I'm fearing the worst and expecting it to be much, much higher than 21.5k. Could be in for a pleasant surprise though, if there is such a thing in these circumstances. May be the best way to approach this ordeal!

Will most likely be proceeding with settlement later this week so hopefully will be processed in time before the LC kicks in

[dammit chloe]

Probably the first post on here I've seen from somebody who has previously gone through a settlement with HMRC and lived to tell the tale!

What about employer's and employee's NIC and also late payment interest? Some people are saying this would have to be paid in this scenario and some people are saying it wouldnt. I personally cant see how HMRC wouldnt be including it in their calculations.

To be honest I'm fearing the worst and expecting it to be much, much higher than 21.5k. Could be in for a pleasant surprise though, if there is such a thing in these circumstances. May be the best way to approach this ordeal!

Will most likely be proceeding with settlement later this week so hopefully will be processed in time before the LC kicks in

Thats why no-one can give you a figure here. NIC and IHT are dependent on dates, trusts and employment status. Interest is only due if you have years with enquiries open. Hence why I suggest a tax advisor. HMRC will always ask for as much as possible even if they are not actually allowed to or it is not due.

[webberg]

Hi all

Like many on here I have been caught up in this mess through a couple of the contractor loan schemes via my own Limited company set up. I've had discussions with companies offering settlement services but obviously none will tell me what figure I'll likely be facing until I've paid for their services.

What I have found difficult to understand is the calculations themselves. I have loans totalling approx £76k spread fairly evenly across 3 tax years 2015/16, 2016/17 and 2017/18. I've gone a few ways about working out my liability and my calculations seem to spit out very different figures from approx £24k to approx £41k.

I've been paid a basic salary (retainer) each of the 3 years which roughly equalled the tax free allowance. I've then had approx £2k in dividends each year and around £25k in loans. No expenses, pension payments or any other tax relief. Only about £500 paid in NIC (class 2 and 4) each year

Can anyone help me work out a rough ball park figure before I decide to proceed with settlement?

It sounds to me like you have a "double limited" scheme. You were employed by the promoter and worked at the end user. However your limited company invoiced the end user, received money, paid some to you as salary and div and the rest back to the promoter, who after deducting fees, made a loan to you. Sound familiar?

If this was a scheme not involving your limited company, then £25k of loans a year at 20% is £15k of liability plus NIC which might add another £9k. So £24k before interest is in the right place.

If you read the terms of the settlement published in November 2017 it discusses double limited. In short, you may be required to settle employers NI as well. That adds around £10k to the total.

I would strongly refute the suggestion that any reputable firm will not tell you the answer without paying them. Most - certainly us - will be unable to give accurate numbers without information and are cautious about doing so.

[dangermaus]

Settlement figures

Has anybody here sent off their loan details to HMRC and received a settlement figure from them?

There must be people out there who are in the final stage of their settlement process.