Loan Charge - a beginners guide

[webberg]

I do not think taking THL's option will avoid the LC , HMRC are quite clear that you have to repay the full amount in cash to avoid the charge, a write of of the loan will not suffice.

My view here is that you are correct that a repayment of the loan in money will avoid the loan charge.

Also an agreement to pay tax on the years the loans were drawn, made before 5th April 2019, will also avoid the charge.

(An agreement signed in the 19/20 tax year exempting a tax on an event that happens on one day only in the 18/19 tax year - not so certain. We've asked the question and await an answer).

A tax charge raised on the write off of a loan is made under section 554C ITEPA. The loan charge is in two places. One is Sch 11 F(no2)A 2017 and Sch 12 ibid. Sch 11 deals with employment situations and Sch 12, self employment.

I believe that a loan charge under Sch 11 will be based on the value of the relevant step as at 5th April 2019, less the value of an earlier relevant step, being in this case section 554C.

So the write off - because it produces its own tax charge - will reduce the later loan charge.

I suspect the same effect happens in self employment scenarios but again I'm looking and seeking HMRC confirmation.

I would hope that a loan charge (if raised) in 18/19 would also reduce the tax charge on a write off in a later year. Again, checking and waiting.

[here4beer]

Are there protections? Yes but you have to use the documents you signed and contest the terms being applied and perhaps roll in a bit of trust law to help you.

Can you do this on your own? Yes, but let's be honest it's easier and cheaper as a group.

Can we (WTT) do this? No, we're not lawyers but we do have a solid and committed and growing daily group and good connections with law firms in the IOM and other places who will, for a fee, take this on.

Are there any guarantees that the loans will not be repayable? No. We think a Court may struggle for some of the reasons you mention (and some others) to find against you, but it's litigation and therefore uncertain.

Will writing the loan off be taxable? Yes.

Will I pay tax on the write off and also the loan charge? No.

Will I pay tax on the wrote off and the earlier years once the dust has settled? Probably not.

What here is certain and what is opinion? Nothing and most of it.

None of our clients will be taking the THL offer. Whether you chose to or not, I cannot help you with.

Hi Webberg, is this Big Group? Or is there a separate group for the settled people who want to attack the legal side of the loan?

[webberg]

Hi Webberg, is this Big Group? Or is there a separate group for the settled people who want to attack the legal side of the loan?

For the moment we are hosting this in Big Group.

I suspect however that for a number of statutory and legal and practical reasons, we may soon create

BIG GROUP (LEGAL)

which will be looked after by our new Legal entity and which will be a platform for action.

Watch this space.