Non-AML Schemes and the 2019 Loan Charge

[RickG]

Hi All.

I'm a long time lurker on these forums but have finally registered an account because of this 2019 Loan Charge. As with everyone else, this is stressing me out immensely and looking for any guidance or advice.

I wasn't part of the AML scheme. My situation seems to be somewhat different to others I have read on here, but probably ultimately in the same boat. I operated through a LTD company and it setup an EFRBS with the loan being paid to me (directly by my LTD) as a benefit. The scheme was dotas and so obviously declared. The LTD company no longer exists and the only communication from HMRC on the subject has been to say that the LTD co (which no longer exists) owes primary NICs because HMRC see the loan as income. I've not had anything further - no APNs, no open investigation or enquiry.

The only way I found out about this potential Loan Charge is from the trustees that issues the loan.

So some questions I have for you fine folk:

1. Has anybody else come across the LTD/EFRBS arrangement as above?

2. Given the communication I've had from HMRC (which was to say the LTD co owed money), am I silly to register an interest before 31st May 2018? Ie. am I unnecessarily putting myself on the radar, or does the fact the scheme was DOTAS mean that I'm inevitably on that radar anyway?

3. My first inclincation is to just settle immediately. I can't be handling this stress. There is the question of can I afford to settle and how long I'd have to do so. However, it seems to me HMRC are trying to get people to voluntarily settle well before Apr 2019. Is this perhaps some kind of ruse because they know they won't be able to follow through with this punitive retrospective charge? If so, am I being hasty in settling. Is there anyway to delay settlement to see what happens - but without getting hit with the 2019 LC?

I apologise for the long post and appreciate any and all feedback.

Thanks.

[cojak]

I've copied this from the AML Loan Charge thread and placed it here (to broaden the readership).

[Loan Ranger]

The loan charge will probably apply.

Which years were you in this?

HMRC have 4 years from the end of a tax year to issue a discovery assessment. If they issue one, the year then becomes protected, and you would have to pay late payment interest to settle. (Unprotected years don't incur interest.)

If you were in the scheme in 2014/15, or later, then registering for settlement might trigger a discovery assessment.

[fezster]

Deleted.

[RickG]

This was for year 2012/2013.

The initial letter sent by HMRC was to the LTD Company Secretary in late 2014. As the company is registered at my accountants, I was not privy to this and the accountant responded to them himself. The accountant is also the scheme promoter, if that matters.

The letter said they are "making enquiries into contributions made to an EFRBS". It then requested all of the relevant details on the EFRBS and the payment made (dates, amounts etc).

Does this constitute a discovery assessment?

The next communication was in 2017, addressed to myself. At this point, the LTD ceased to exist. The letter states:

"HMRC's view is that contributions made under these arrangements may be employment income either in and of themselves, or as a result of the legislation at Part 7A Income Tax (Earnings and Pensions) Act 2003. This does not prejudice any other argument that HMRC may wish to use."

It goes on to state that "LTD xxx is liable to pay primary and secondary Class 1 contributions in respect of the earnings of <insert my name here>".

What's confusing is that the company no longer exists, so the letter being sent directly to me indicates they are implying that I, personally, may be held liable. I'm not sure how this fits in with the Loan Charge because there is no mention of income tax on this letter.

[Iliketax]

Loans from EFRBS are squarely within the April 2019 loan charge. As the company no longer exists, HMRC say that you must pay the income tax on the April 2019 loan charge (by 31 January 2020). They also say no NIC. Scroll down to the "Dissolved employer" heading here: https://www.gov.uk/government/public...d-remuneration

You have an obligation to report the loan to HMRC by 30 September 2019 and include details in your tax return.

Take your own independent professional advice on how much benefit there is to settling. But don't take the advice from people who sold you the scheme.

[RickG]

Thanks for the reply.

Does the initial letter to the company (in 2014) and / or the Notice of Decision to me (in 2017) signify an open enquiry - i.e. will interest be charged from either of those dates?

I hope the part about not being liable for Class 1 NICs is correct. Otherwise, with Employers NIC and personal income tax, the combined rate is somewhere around 60%!.

[Loan Ranger]

The letter said they are "making enquiries into contributions made to an EFRBS". It then requested all of the relevant details on the EFRBS and the payment made (dates, amounts etc).

That's an enquiry, which also protects the year, so you would have to pay interest as part of a settlement.

[RickG]

That's an enquiry, which also protects the year, so you would have to pay interest as part of a settlement.

This just gets better and better :-(

Thanks for the reply.

[Iliketax]

That's an enquiry, which also protects the year, so you would have to pay interest as part of a settlement.

I was going to say that may not be right. The company made the contribution to the EFRBS so that was certainly being enquired into. But the company is different to the individual. So you need to understand what, if anything, was sent to the employee.

But then I saw: "the Notice of Decision to me (in 2017)". If that was to you as an individual (rather than as a director) then that is different.

Make sure you take proper advice.