New loan charge letters from HMRC

[webberg]

Oh, and one other question if I may. I no longer have any records of any of my finances related to the period when I was supposedly in a disguised remuneration scheme and the company running the scheme no longer exists. I will be going through my old bank statements to get the best figures I can. I understand HMRC will penalise me at least £300 if the information is correct. Aside from my bank statements, is there any other way I can get the correct information? Thanks.

So long as you have made a demonstrably honest attempt to arrive at the correct value, you will be be penalised.

Quite what a box ticking line officer at HMRC believes (or more likely - is instructed to believe) is an honest attempt is open to interpretation but generally numbers from bank statements are OK.

If you can't get them, do a calculation based on your then day rate and that should get you close.

[webberg]

Before 1st October 2019, you are obliged to disclose to HMRC whether you had any loans from a "scheme" and the quantum of those loans. This is via an online reporting system accessed via gov.uk.

This is a legal obligation and failing to do this can lead to penalties.

Is this true?

Yes it is.

The letter says...

Disguised Remuneration Loans that you need to tell us about

By 30 September 2019, you must tell us about a loan if any of the following apply:

So no obligation to tell them if you had a loan but repaid it long before the dates mentioned above? It doesn't say that you have to tell them about 'any' loans; only those that meet the criteria.

If you really have repaid the loan, you are in a minority of one.

The "criteria" is covered to a degree in the post above from Iliketax. There is a specific definition of a "loan" for these purposes and a claimed "write off" or "forgiveness" from the lender without money changing hands, is not enough.

Of the 150+ schemes I've seen, I've not seen one in which you, the borrower, paid money to the lender to repay the loan.

[zedskidder]

Thinking about this in relation to insolvency some more. One of the key arguments from HMRC is that this is not retrospective legislation and that these schemes have never "worked". If that is true, then bankruptcy definitely puts the loans/tax liabilities out of reach. Had the liabilities been realised at the time, my bankruptcy would have swept them away, in the same sense that bankruptcy would do the same for anyone facing this issue now. Only retrospective tax legislation (which to this extent is unlawful as I understand it) could revive those debts from prior to bankruptcy.

I'm still taking advice on the matter of course, but the more I think about this, the more I think HMRC will not want to pursue in my particular case, otherwise I think the APPG might take special interest (more than they are already).

[Thin White Duke]

If you really have repaid the loan, you are in a minority of one.

The "criteria" is covered to a degree in the post above from Iliketax. There is a specific definition of a "loan" for these purposes and a claimed "write off" or "forgiveness" from the lender without money changing hands, is not enough.

Of the 150+ schemes I've seen, I've not seen one in which you, the borrower, paid money to the lender to repay the loan.

Can you point me to the law that says that I have to declare loans that do not have an outstanding amount? The legislation is clear on the definition of an outstanding amount and I don't believe that I have one. Thanks.

[webberg]

Can you point me to the law that says that I have to declare loans that do not have an outstanding amount? The legislation is clear on the definition of an outstanding amount and I don't believe that I have one. Thanks.

Let's start here:

This is Sch 11 F(No 2) A 2017, para 3.

Meaning of “outstanding”: loans
3(1)An amount of a loan is “outstanding” for the purposes of paragraph 1 if the relevant principal amount exceeds the repayment amount.
(2)In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—
(a)the initial principal amount lent, and
(b)any sums that have become principal under the loan, otherwise than by capitalisation of interest.
(3)In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—
(a)the amount of principal under the loan that has been repaid before 17 March 2016, and
(b)payments in money made by the relevant person on or after 17 March 2016 by way of repayment of principal under the loan.

So you have to determine if the "relevant principal amount" = amount loaned to you has been reduced by

"repayment amount" = amounts paid in money by way of repayment of principal.

There is no mention of wrote off, forgiveness, depreciation via currency trading, etc.

It's the cash you were paid, less the cash you paid back.

[Robk999]

I've just had this letter as well. I am sure I have never used any schemes involving loans, however back in about 2005-6 I used a Consulting Overseas scheme involving dividends from offshore companies (I think the British Virgin Islands) which may be why I ended up on the target list. Would I be better off phoning to tell them this or just ignoring the letter if I don't have any loans outstanding?

[Paralytic]

Would I be better off phoning to tell them this or just ignoring the letter if I don't have any loans outstanding?

Or send them the the information they want: that you had no loans and £0 is outstanding.

Or send them a blank piece of paper.

[Thin White Duke]

Let's start here:

This is Sch 11 F(No 2) A 2017, para 3.

Meaning of “outstanding”: loans
3(1)An amount of a loan is “outstanding” for the purposes of paragraph 1 if the relevant principal amount exceeds the repayment amount.
(2)In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—
(a)the initial principal amount lent, and
(b)any sums that have become principal under the loan, otherwise than by capitalisation of interest.
(3)In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—
(a)the amount of principal under the loan that has been repaid before 17 March 2016, and
(b)payments in money made by the relevant person on or after 17 March 2016 by way of repayment of principal under the loan.

So you have to determine if the "relevant principal amount" = amount loaned to you has been reduced by

"repayment amount" = amounts paid in money by way of repayment of principal.

There is no mention of wrote off, forgiveness, depreciation via currency trading, etc.

It's the cash you were paid, less the cash you paid back.

What I'm asking is where it says that I have to declare loans that I received that were paid off i.e. have no outstanding balance as defined by the Act. You said there was a legal obligation to declare such loans but I can't see or find such obligation anywhere.

[Iliketax]

What I'm asking is where it says that I have to declare loans that I received that were paid off i.e. have no outstanding balance as defined by the Act. You said there was a legal obligation to declare such loans but I can't see or find such obligation anywhere.

Did you see or find para 35A Schedule 11 Finance (No 2) Act 2017?

Out of interest, what currency was the loan in?

[Thin White Duke]

Did you see or find para 35A Schedule 11 Finance (No 2) Act 2017?

Out of interest, what currency was the loan in?

Er… no but I found Para 35 (below) but does that answer my question? I can't see in Para 35 where it says that I have a legal obligation to declare a loan that isn't outstanding under the Act. My loan was made in GBP. I paid it back. It wasn't a foreign currency loan, it wasn't written off etc.

I'm choosing to ignore HMRC's letter as I don't believe I have to respond to it. Webberg made a statement that there is a legal obligation to declare a loan even if that loan is not outstanding under the Act. I'm asking where it states that.

Here's Para 35

Acquisition of unlisted employer shares.


35

(1)

Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if the conditions in sub-paragraph (2) are met.
.

(2)

The conditions are that—
.

(a)

the loan or quasi-loan concerned was made before 9 December 2010,
.

(b)

if P is treated as taking a relevant step by paragraph 1 by reason of the payment of a sum of money by way of loan, the sum is used by A solely to acquire employer shares,
.

(c)

if P is treated as taking a relevant step by paragraph 1 by reason of making a quasi-loan, the transfer of assets mentioned in paragraph 2(3)(b) is the transfer of employer shares to A,
.

(d)

the employer shares are acquired, or transferred, before the end of the period of one year beginning with the day on which the loan, or quasi-loan, is made, and
.

(e)

the employer shares are not listed on a recognised stock exchange at any time during the period beginning with the day on which the loan, or quasi-loan, is made and ending with the earlier of—
.

(i)

the day on which A ceases to hold the shares, or
.

(ii)

the day on which the loan, or quasi-loan, is repaid.
.

(3)

In this paragraph “employer shares” means shares that form part of the ordinary share capital of—
.

(a)

B, or
.

(b)

if B is a company and is a member of a group of companies at the time the shares are acquired, any other company which is a member of that group at that time.
.

(4)

Sub-paragraph (6) applies if—
.

(a)

apart from sub-paragraph (1), Chapter 2 of Part 7A would apply by reason of the relevant step mentioned in sub-paragraph (1), and
.

(b)

at the end of the relevant period, an amount of the loan, or quasi-loan, is outstanding.
.

(5)

In this paragraph “the relevant period” means the period of 12 months beginning with the day on which A ceases to hold the shares.
.

(6)

Part 7A of ITEPA 2003 has effect as if—
.

(a)

a relevant step within paragraph 1 were taken by reason of making a loan, or quasi-loan, of an amount equal to the amount of the loan, or quasi-loan, outstanding at the end of the relevant period, and
.

(b)

the relevant step were taken on the day after the end of the relevant period.