Loan Charge - a beginners guide

[Iliketax]

and loading the Panel with HMRC people

Out of interest, which members of the panel are you thinking of?

[lowpaidworker]

Have a look at this.

https://assets.publishing.service.go...__company_.pdf

See paras 10.3 and 10.4

These discuss whether Part 7A - one of the conditions for which is that a third party is in the chain of payments - can, when the INTENT of Parliament in approving that legislation is analysed, apply to situations where the loan was made by an employer but subsequently moved to another party.

They come very close to saying that the third party is irrelevant and that if an employee is rewarded by a loan, the intent of the law is that the loan should be taxed.

This analysis skirts a lot of philosophical tenets in taxation and is very close to saying that "tax law can mean whatever a Judge thinks it can". In other words, it comes close to overturning the rule of law and its entire purpose.

This is music to HMRC's ears.

They will believe that having secured this opinion (and another very similar), that they can (and no doubt will) be quoting this to taxpayers in their NUDGE letters and hope to avoid having this opinion tested in a Court.

In my opinion, the GAAR panel has come close to usurping the law making powers of Parliament and the judiciary powers to examine and interpret law.

Am I surprised?

Not in the least. This was, in my opinion, always the intention of the GAAR process (tax by stealth - HMRC's way or no way) and loading the Panel with HMRC people was always going to produce this result.

So your umbrella may be right.

However I think it likely that you will be asked to defend that position in Court (or cave in to HMRC's view) and you need to be asking yourself whether the Umbrella has the necessary guns and ammunition to fight for you. Even if they do, do they have any appetite for what promises to be a very long and dirty campaign?

Thanks for this GW. First time anyone has pointed out this level of detail. Many of my inquiries are this particular type of case. Direct loans rather than a trust. I have emails from my former employer saying the loans are not subject to the 2019 LC.

Interestingly HMRC sent me a mail yesterday saying that my settlement offer will be ready in December. Now considering I have not submitted my loans statement pack back to them I am really interested in how they view these loans. I guess if I had done that and included these employer loans then one could not argue.

I'm assuming either HMRC wrote to my former employer (IoM) or more are using the open enquiry details I sent them sometime back after my tax return. Am thinking its the latter so just by including the direct loans I assume they will backing up what you have pointed out. I'll keep you posted.

[Tim DSW]

Hi just, in response to the comment on advice given in regards to the interest and the LC.We advise that whilst interest is not automatically due, HMRC themselves have stated that the LC does not close any underlying enquires and there is, therefore the possibility of interest being pursued (via new/open enquires) after LC payment. This must be taken into account when choosing which you route you wish to pursue.

[piebaps]

IOM enquiries have been made in at least one case lowpaid. This one bubbled out into public view Isle of Man Judgments Online in a Court hearing in the IOM.

If they've made one, then there'll be others so don't discount the thought too quickly.

[webberg]

Thanks for this GW. First time anyone has pointed out this level of detail. Many of my inquiries are this particular type of case. Direct loans rather than a trust. I have emails from my former employer saying the loans are not subject to the 2019 LC.

I don't know who your employer is or what their tax qualifications might be. I have not seen any agreement you may have with them which spells out their duty of care (or not) to you in terms of tax advice.

I do say that it would be unusual for an employer to have any duty of care or level of tax knowledge detailed or deep enough to understand the nuances behind the loan charge legislation.

I also say (because of what I do), that you need to seek an independent view of the situation.

Yesterday I published links to a GAAR opinion. In that opinion, HMRC has convinced the GAAR Panel that when Parliament approved a law that said for a sum to be deemed to be disguised remuneration, the condition that a third part was required (section 554A (1)(d) ITEPA 2003), that was NOT what was intended. HMRC convinced the Panel to accept that the real test is to measure what the employee received and not to bother with which route was used to deliver that receipt.

It has been pointed out to me that this is has been a common HMRC approach for some years. Having considered this and reviewed some evidence from our own files, I would disagree with that position. I see no evidence and no rational (or irrational) argument from HMRC saying that. If anything, I see HMRC struggling in this space to make any form of coherent argument.

I can however acknowledge that it may appear this way if the HMRC statements are taken as being a correct analysis of the law here and uncontested. I am of the view that their interpretation of the law is incorrect and does not meet any common sense version of the legislation, does not align with the judicial principles of recharacterisation or purposive interpretation and is something that is yet to be examined by any arbiter.

Clearly, HMRC wants to include in its enquiries loans from employers and also wants these to be part of the loan charge. As such they are sure to fight their corner.

As I said, I have no idea if your employer has tax knowledge or any authority to act as tax agent for you. I suggest that you probe their credentials.

If you are unhappy with their level of knowledge, independence or potential to avoid a conflict of interest, go and get your own advice.

A nameless person on an internet forum is not "getting advice".

[WalterWhite]

Out of interest, which members of the panel are you thinking of?

I really would like to know your background.

Can you at least tell us why you won't share it?

[Iliketax]

I really would like to know your background.

Can you at least tell us why you won't share it?

Because I'm not after a name check and I'm not after clients.

I post because I know this stuff and because I'm fed up with a lot of "advice" I see. Some of it's well meaning, some of it's lack of knowledge, some of it's to distort things, some of it is to create uncertainty and so on. As I've said before, I am not and have never have been from HMRC.

[GreenMirror]

Hi just, in response to the comment on advice given in regards to the interest and the LC.We advise that whilst interest is not automatically due, HMRC themselves have stated that the LC does not close any underlying enquires and there is, therefore the possibility of interest being pursued (via new/open enquires) after LC payment. This must be taken into account when choosing which you route you wish to pursue.

So you think HMRC will just pluck figures out of the air?

Actually, since HMRC have done this hundreds of times, you are right!

Its going to be quite a shock for the CUK crowd after the private sector reforms come out......

[starstruck]

Interestingly HMRC sent me a mail yesterday saying that my settlement offer will be ready in December.

I think this is simply a blanket email sent to everyone that registered. I doubt they will provide any offer if you have not submitted any figures. Lots of people are reporting getting the same mail.

[webberg]

So you think HMRC will just pluck figures out of the air?

Actually, since HMRC have done this hundreds of times, you are right!

Its going to be quite a shock for the CUK crowd after the private sector reforms come out......

I may be a bit slow here but...

If HMRC has data sufficient to make the loan charge assessment - because the individual is obliged to supply these - then these will also be the basis of settlement for an earlier year liability.

Therefore that earlier year liability will able to be calculated, as will the interest to the due date of the loan charge (January 2020).

Accepting that the loan charge is not an end to enquiries (a point we have been banging on about since it first appeared and still believe despite many here saying once HMRC has the money, enquiries will cease), our understanding is that in the event of that earlier year producing a liability, the loan charge will be used to frank both tax and interest.

Even if that were not the case, interest is due on the earlier year and not the loan charge itself.