'compliant' arrangement

[animallover]

Hi, a company is saying their arrangements are not impacted by the 2019 Charge because they pay their loans as employers to employees and as such there is no 3rd party involved so it is not classed as DR.

Is there any legal basis for this can this be independently verified and challenged.ot experts say they feel that this is incorrect however us there any way of it being truly verified one way or the other such as bya lawyer who would be prepared to take it as a pro bono for example?

[northernladuk]

I think this thread covers the same...

https://forums.contractoruk.com/hmrc...-not-loan.html

[animallover]

I think this thread covers the same...

https://forums.contractoruk.com/hmrc...-not-loan.html

Thanks for the reply. I'm not sure if it strictly covers it. There is no trust involved as it is an employer to employee loan?

[northernladuk]

Thanks for the reply. I'm not sure if it strictly covers it. There is no trust involved as it is an employer to employee loan?

Yeah but there are some general statements about credit and Cojak post about percentages I thought would cover it.

Have you tried searching the forums to see if your provider has already been raised?

[webberg]

The argument above is being seen in various guises on different schemes.

Keeping things simple, a loan from an employer to an employee is usually within the benefit in kind rules. This says that there is a benefit to the employee if interest is not paid or if the loan is written off and not repaid. Where the loan is written off whilst you are still employed, it's taxable income for the borrower but the employer has to deduct PAYE. Where the borrower is no longer employed at the time the loan is written off, it's taxable income of the borrower and the borrower is usually liable to the tax.

Where a loan is made by an employer but later moved (contributed to a trust?) it's within Part 7A and therefore in the loan charge.

Most of those with experience in the tax issues here do not have enough detail of the original and final location of loans (or the funds that made the loan possible) to make any sort of informed judgement on this situation (or at least I don't have that knowledge).

I suggest that if you are offered this situation, you ask them for chapter and verse about why the rules will not apply - and keep pressing them.

[Iliketax]

is there any way of it being truly verified one way or the other such as bya lawyer who would be prepared to take it as a pro bono for example?

No.

But HMRC are likely to be able to tell you for free whether it is fine or not. Gather all the facts, paperwork and advertising material together (and I mean all facts, including why on earth you would be prepared to work for them in return for getting a loan) and send HMRC a non-statutory clearance. If HMRC say they are happy it means you've not given them all the facts or, if they really are happy, then get a legally binding indemnity from the employer, the promoter and whoever runs and owns the employer and promoter (including getting security over all of ther houses in the Isle of Man and Panama) and then fill your boots.

If it is a loan direct from an employer to the employee, and it is not funded by someone else for whom you work, and you don't have a self-employed trade, and you are not employed by anyone else, and you are not a director of anyone else, and no one (including you) is acting in a trustee capacity, and it is not an advance of earnings, and you don't directly or indirectly provide investment management services to a collective investment scheme or investment trust, and its not a sham, and viewed realistically it is actually a loan that all parties fully expect will be paid back in a realistic time, and the general anti-abuse rule does not apply, and the employer does not transfer the loan receivable to someone else, and the loan is never waived or released [and without having a proper understanding of the facts probably a few other things] then it may not be subject to income tax and NIC. But then the employer will be able to demand repayment from you. And is they go bust, the liquidator or the crown will demand payment from you. If after reading all that you think you are ok then you need to talk to an independent tax adviser (and I also have some snake oil for sale, only £1,000 per gram so snap it up quickly).

[webberg]

All of the above is true and sensible if we are discussing whether the "loans" are taxable.

Here though, the question is would a loan from employer to employee without a third party being involved, before during or after the employment/loan, be subject to the loan charge in 2019.

The claim that we have seen is that such loans are not within Part 7A and therefore excluded.

I'm sure that is a position HMRC will test and I'm sure that they will make claims that the money routing from client to agent to promoter to individual has enough third parties to be included.

Equally, if the employer/employee and loan position is bona fides, there is mileage in the argument.

I'm with you that the loan is almost certainly taxable income (in fact taxable income before it became a loan) but that is not the question here.

As I said, i do not have enough information to make anything more than a guess at this time.

[WTFH]

Hi, a company ...

Care to name the company, then maybe we can do a bit of research on it.

[Fred Bloggs]

Obviously I can't speak for the OP but I have been getting regularly spammed through a recruitment website pushing an outfit called Income Management who claim all sorts of nonsense including a 90% retention, counsel opinion, fully compliant etc.... Solutions.

I have complained to the recruitment website about them pushing these schemes, but to no effect.

[Iliketax]

Here though, the question is would a loan from employer to employee without a third party being involved, before during or after the employment/loan, be subject to the loan charge in 2019.

The claim that we have seen is that such loans are not within Part 7A and therefore excluded.

Ah, ok. Just look at the blue bits for what is relevant to the April 2019 loan charge and ignore the other bits as they are only relevant if HMRC want tax from you for the things that have already happened or what you are going to do.

If it is a loan direct from an employer to the employee, and it is not funded by someone else for whom you work, and you don't have a self-employed trade, and you are not employed by anyone else, and you are not a director of anyone else, and no one (including you) is acting in a trustee capacity, and it is not an advance of earnings, and you don't directly or indirectly provide investment management services to a collective investment scheme or investment trust, and its not a sham, and viewed realistically it is actually a loan that all parties fully expect will be paid back in a realistic time, and the general anti-abuse rule does not apply, and the employer does not transfer the loan receivable to someone else, and the loan is never waived or released [and without having a proper understanding of the facts probably a few other things] then it may not be subject to income tax and NIC. But then the employer will be able to demand repayment from you. And is they go bust, the liquidator or the crown will demand payment from you. If after reading all that you think you are ok then you need to talk to an independent tax adviser (and I also have some snake oil for sale, only £1,000 per gram so snap it up quickly).

And just to be pedantic too the PAYE point below is not right where DR is not in point:

Where the loan is written off whilst you are still employed, it's taxable income for the borrower but the employer has to deduct PAYE