To settle or pay loan charge if LC is cheaper.

[hmrcvictim]

Please help me - I have been having headache since October when I received first letter from HMRC.

I received Settlement figures from HMRC today - approximately £11,000.

I had loans from E-Cover Solutions for 5 months in 2010 (financial year 2010-11). Total £26,400.

HMRC didn't charge any interest or NIC.

I am a british citizen but I am not in UK now. My UK income for FY 2018-19 will be about £18000 (rental). So, If I go for a loan charge, my income will increase by the loan amount and will become 18,000+26,400 = 44,400

Subtracting personal allowance of 12,500 - my taxable UK income will be £31,900

I will still be under £50,000 limit and will be paying basic rate of tax (20%) on £31,900 - which would be about £6,380

So, it seems to me that by going through LC route, I am saving £4,620.

Am I calculating LC correctly? Am I missing something? Will there be any penalty with the LC?

What would you do if you were in my place?

[Albert49]

Please help me - I have been having headache since October when I received first letter from HMRC.

I received Settlement figures from HMRC today - approximately £11,000.

I had loans from E-Cover Solutions for 5 months in 2010 (financial year 2010-11). Total £26,400.

HMRC didn't charge any interest or NIC.

I am a british citizen but I am not in UK now. My UK income for FY 2018-19 will be about £18000 (rental). So, If I go for a loan charge, my income will increase by the loan amount and will become 18,000+26,400 = 44,400

Subtracting personal allowance of 12,500 - my taxable UK income will be £31,900

I will still be under £50,000 limit and will be paying basic rate of tax (20%) on £31,900 - which would be about £6,380

So, it seems to me that by going through LC route, I am saving £4,620.

Am I calculating LC correctly? Am I missing something? Will there be any penalty with the LC?

What would you do if you were in my place?

Since HMRC did not asses you for any interest, I assume that 2010-11 is a Unprotected (Closed ) tax year, if this is the case then given that your tax on your rental income would be about £1,200 anyway, your tax due to the LC is in fact only 20% of 26,400 which is £5,260 so the LC seems the option to go for, however there may be an NI charge on the LC also.