Recovering loans?

[Calmbeforethestorm]

The point of the thread is to seek information on more instances of this sort of thing happening.

If we could stick to the subject, I'd appreciate it please.

fair enough, but its interesting that HMRC seem to want their cake and eat it....my MP may be interested to know that they want to collect tax by way of the loan charge from " employees" whilst also claiming the same tax from the assets of a defunct company.

[Iliketax]

The law firm claims to be acting on behalf of a liquidator of a scheme that closed a while ago.

Are you sure it is a pukka law firm (i.e. regulated by the SRA)? SRA | Bogus solicitors | Solicitors Regulation Authority

https://www.theguardian.com/money/20...care-customers

[Iliketax]

If the scheme used a trust and the excess is redistributed

If the lender is a trust, it is difficult to see how a liquidator would be involved in seeking reimbursement of the loans. If the company has indemnified the trustee for some expenses then I could see why the liquidator would want the the loans repaid as it reduces the company's liability under the indemnity. But it's going to be some very unusual situations where there would be such an expense (e.g. EBT borrowed from a bank).

[Iliketax]

I dont think there is any further tax until there is a distribution back.... funds were always earmarked for the loan holder from the inception of the loan so paying it back cant be a relevant step but its a moot point

In my day job, that is not a moot point. Section 554R would be pointless if that is the case. And repaying a loan cannot be within the s554R exemption. It will then be a question of fact whether the sums are actually earmarked, and that can be active or passive.

[Iliketax]

Also, if the main creditor on liquidation is HMRC and they take their share (which is presumably the PAYE element), then there is nothing in the loan charge rules to give a credit for this situation. (Unless this is seen as paying tax on the loans, but the tax here is paid by the employer).

If the tax paid by the employer is PAYE then the employees will get credit for that under s554Z5. If it is something else (e.g. CT or NIC) then they won't.

[Iliketax]

The company went into liquidation owing HMRC a few thousand. When the liquidator went out to the creditors asking for any more claims, HMRC made a huge (tens of millions) claim.

The liquidator notes in the report that it is disputed but that has not stopped the law firm issuing threats.

Lucky liquidator. That's going to be fun for them. It will get even more interesting if the liquidation continues to April 2019.

[Calmbeforethestorm]

In my day job, that is not a moot point. Section 554R would be pointless if that is the case. And repaying a loan cannot be within the s554R exemption. It will then be a question of fact whether the sums are actually earmarked, and that can be active or passive.

Will take this up with my advisor, if this is correct then how can HMRC and Mel Stride be saying that you can avoid the loan charge by repaying the loans....bit of a whopper if all it does is trigger a different tax charge.

[Iliketax]

Will take this up with my advisor, if this is correct then how can HMRC and Mel Stride be saying that you can avoid the loan charge by repaying the loans....bit of a whopper if all it does is trigger a different tax charge.

It will be a question of fact. But a FURBS will normally drafted in a way that means that s554B(1)(b) will apply. Section 554R was deliberately drafted so that FURBS could reinvest without a Part 7A tax charge (and s554Q was deliberately drafted so that a FURBS's income was not taxed under Part 7A). But HMRC also deliberately drafted s554R so that the FURBS could not buy a house from a member tax-free. When you ask your adviser about this, ask them why s554B and s554R focus on a "sum of money or asset" rather than the "fund". Ask they think it does mean "fund" (your implied interpretation) then (i) why is s554R required in the first place, and (ii) what is the point of limiting the s554R exemptions in certain circumstances? And just to labour the point, the FURBS's asset, the loan receivable, is "S", the FURBS is "P", you are "A" and "T" is the sum of money is that you would be paying the FURBS when you repay the loan.

[Calmbeforethestorm]

It will be a question of fact. But a FURBS will normally drafted in a way that means that s554B(1)(b) will apply. Section 554R was deliberately drafted so that FURBS could reinvest without a Part 7A tax charge (and s554Q was deliberately drafted so that a FURBS's income was not taxed under Part 7A). But HMRC also deliberately drafted s554R so that the FURBS could not buy a house from a member tax-free. When you ask your adviser about this, ask them why s554B and s554R focus on a "sum of money or asset" rather than the "fund". Ask they think it does mean "fund" (your implied interpretation) then (i) why is s554R required in the first place, and (ii) what is the point of limiting the s554R exemptions in certain circumstances? And just to labour the point, the FURBS's asset, the loan receivable, is "S", the FURBS is "P", you are "A" and "T" is the sum of money is that you would be paying the FURBS when you repay the loan.

I will, but in previous Counsel's opinion I had a few years ago he confirmed the point about buying a house or any similar transaction with a related party.A loan is an asset, repayment simply changes the asset for a different asset which is like a reinvestment if you like. It is no more or no less earmarked than it was before.If an annuity were then purchased for a beneficiary this would obviously be an earmarking like buying the house in your example.Simply holding the cash isnt I believe. Inevitably a FURB, being a defined contribution scheme holds assets " earmarked" for each beneficiary from day 1. This is something I have already sought clarification on.Perhaps it may ultimately depend on when the scheme was set up, when contributions from the employer were made etc

[GammaMadrid]

Good to see HMRC going after the promoters. Though the liquidators should be forced to sue the promoters and their insurers.