New loan charge letters from HMRC

[Thin White Duke]

Sorry if this is rude. But the only reason I can think of for paying back the loan is being really stupid. I hope to be proved wrong.

Stupid is as stupid does

[regron]

I have gone through the voluminous correspondence and have found that that during the calculation preparation for the open years, HMRC tried to add a closed year but when pushed they conceded that they were out of time for that therefore it was out of scope for the CLSO1.

Would this closed year now be caught by the loan charge or can it be safely assumed to be off limits now?

Also, reading the loan charge letter more carefully, I see paragraph 2 says “if you have recently settled your liability with us then please ignore this letter” which I am inclined to do!

Yes, closed years are caught by the Loan Charge. HMRC's invention of mopping up everything ! I'll leave it to the regular professional advisors to comment on your plan to ignore.

[Paralytic]

Sorry if this is rude. But the only reason I can think of for paying back the loan is being really stupid. I hope to be proved wrong.

Perhaps one of our professional advisors can state whether there has ever, in their experience, been a scenario where paying back the loan was a recommended and beneficial strategy for a client.

[webberg]

Perhaps one of our professional advisors can state whether there has ever, in their experience, been a scenario where paying back the loan was a recommended and beneficial strategy for a client.

I cannot speak for other advisers but in the time we have been active, we have never identified any tax reason why a loan should be repaid.

None of our clients have made such a repayment post them joining us.

[lullaby]

Just make a "NIL" return.

Nil Return ?

Are you talking about any particular box/section what NIL/Zero needs to be mentioned ?

My accountant anyway always files my Self Assessment Personal tax return for me , but unless HMRC has specially added a new section for this. And as i have never taking any loans , not sure i need to fill any particular section

[lullaby]

If it is a generic letter and you are sure you have never used any scheme I would just ignore.

By generic do you mean it starts with "Dear Sir or Madam" ? That's how my letter begins, but still posed in my name to my address?

It does say at the end of first paragraph "If you think you did not use such scheme, please contact us on 03000599110 to confirm this.

Is anyone here in same situation as me and have called ?

Ideally i wouldn't want to Ignore even though i have no such loans. I would rather prefer to call and close the matter

[webberg]

Nil Return ?

Are you talking about any particular box/section what NIL/Zero needs to be mentioned ?

My accountant anyway always files my Self Assessment Personal tax return for me , but unless HMRC has specially added a new section for this. And as i have never taking any loans , not sure i need to fill any particular section

You have a "nudge" from HMRC and they are no doubt expecting a disclosure form.

If you do not make a disclosure, you may well get a question as to why. A NIL return - saying no loans, may save you that enquiry.

Your accountant may well file the SATR but it's YOUR LEGAL OBLIGATION to make sure it's correct. There is a new set of boxes (21 to 24 of the Additional Information part of the SATR). If you have no loans and no payments, then obviously leave them blank.

One of the many reasons why many here are in difficulties is because they have assumed that an accountant would always complete tax forms correctly and would always act in the best interests of the individual. All too often I'm ashamed to say, those agents either had insufficient knowledge, conflicting priorities or were all too willing to be led into the easy option of believing a promoter. As a result not enough critical thinking was done and many returns are incorrect.

This is, in the eyes of tax law, YOUR fault.

The agent may have been negligent and you may be able to sue them, but that will not help you or give you an excuse should HMRC decide that your returns are incorrect.

This sort of unthinking behaviour is not healthy and if t continues into the new age of IR35 reform will create ideal situations for tax avoidance vendors to prosper.

(I apologise to the poster for the rant, which is not personal).

[Iliketax]

Perhaps one of our professional advisors can state whether there has ever, in their experience, been a scenario where paying back the loan was a recommended and beneficial strategy for a client.

Ignoring contractors for a moment. There are some people who've borrowed money and who have to repay it in all circumstances. For those people it makes sense to have repaid the loan. I've seen this.

Another example would be if you want to sell your company. It can make sense to repay the loan if the year is closed for both income tax and corporation tax purposes and you are happy a discovery can't be made (e.g. before selling your company to a third party, you repay the loan, sell the company for additional considertaion (i.e. taking account of the loan repayment) and then the company's EBT can be asked to use the cash to pay normal bonuses to staff). It makes sense if you can turn the 47% + (13.8% + 0.5% less CT) into 10% and still get the purchaser to pay for the benefit of the cash held by the EBT. I've seen this but it's not always a pretty negotiation with the purchaser as there will be risks relating to the CT deduction for the bonuses. Just to make clear, I'm talking about a large trading company being sold in the normal course of life. Not a scheme to sell a PSC to the promoter.

In some circumstances, it can make sense to repay a loan you borrowed from your own employer-financed retirement benefit scheme. I've seen this being talked about (it potentially became sensible after the government made some changes in the pre-election Finance Act).

In all these cases, the loan would have had to have been repaid before April 2019.

If you borrowed before 2011 from an EBT to buy shares in your company then it makes sense to repay the loan within a year of selling the shares (compared with more than a year after). I've seen people in this position quite a few times.

For completeness, there is also a concept of a "qualifying loan". If someone had one of these it would normally also make sense to repay it. I've never seen one of these though and I doubt if there are any.

Going back to contractors, if the loan was economically your pay then it doesn't make sense to repay it.

Some people used schemes to "repay" their loan. They paid a bit of cash and some how the obligation to repay the loan disappeared. As far as I can tell, that was a way of the promoter getting a bit of extra cash and the individual no longer having the liability to repay the loan. However, I've never seen any evidence that these loans have actually ever been repaid in this type of scheme. But I don't work with contractors so I would expect to see this. Because of this, I would expect anyone who HMRC is aware of having a loan, and not reporting it, to get an enquiry into their tax return. But that's just an opinion, not an assumption.

[Billm]

Good Day All,

I too received the generic letter a few weeks back (the first correspondence I've had with HMRC about this and first I've heard about the "Disguised remuneration loan charge"). Firstly, I can't imagine what this must be like for those of you with astronomic tax bills/settlements and the havoc it is wreaking on you and your families. It is a disgraceful piece of legislation!

Perhaps foolishly I called the number on the letter and spoke to one of the drones at the loan charge centre to get some more information about what it was they think I had done (I pretty much had no idea what it was at the time) and provide a time period for which they think I used such a scheme. I have since done some reading and come to the conclusion that they are wrong!

A week later I received a letter that doesn't seem to be a "We are investigating you letter" but a "We think you were part of this scheme in 2010/11". The trouble is, they think I was using a scheme by the name "Flemming Laing Partnership" which I had never heard of or had ever been in contact with. However, a quick search of this forum leads to some fairly unpleasant reading and suggests that they may have ties to Sunday Solutions / Von Essen (which I did use and was heavily stung by in previous tax years (not 2010/11)).

Unfortunately I moved house around 6 months ago and went through the obligatory paperwork purge prior to the move. So, I have pretty much destroyed most of my physical paperwork older than 5 years based on HMRC's own guidelines: Business records if you're self-employed: How long to keep your records - GOV.UK

During the period 2010/11 I was entirely PAYE with Danbro Umbrella (as I wanted the most vanilla umbrella service possible after being stung by Sunday Solutions/Von Essen). I contacted Danbro who very kindly sent me all my payslips from the time. But unfortunately they didn't have my P60.

I have also contacted the bank I was using at the time for copies of my old statements from the period, however, they weren't overly hopeful that they would still have them (I guess I'll have to wait and see). I do also have electronic copies of my employment contracts covering 2010/11, which clearly state Danbro as my elected umbrella and hourly rate from 2010/11.

I have a few questions for you all:

1. I don't believe I have ever received any remunerations disguised as a loan, even when using the Sunday Solutions/Von Essen schemes. Am I wrong, did Sunday Solutions/Von Essen in-fact operate in this way?
2. Is the information I already have (without bank statements) enough for HMRC to concede that I didn't receive any disguised remunerations during the 2010/11 tax year?
3. Will HMRC come up with an arbitrary figure if they don't accept my limited figure? If so how will that be calculated?
4. Have the scheme administrators of the "Fleming Laing Partnership" fraudulently used my name? How can I get the information HMRC used to determine my involvement in the scheme?
5. Should I seek legal advice? If so, can anyone suggest a reputable specialist where the above is concerned?

Many thanks, I really appreciate any advice!

Will

[webberg]

Good Day All,

1. I don't believe I have ever received any remunerations disguised as a loan, even when using the Sunday Solutions/Von Essen schemes. Am I wrong, did Sunday Solutions/Von Essen in-fact operate in this way?
2. Is the information I already have (without bank statements) enough for HMRC to concede that I didn't receive any disguised remunerations during the 2010/11 tax year?
3. Will HMRC come up with an arbitrary figure if they don't accept my limited figure? If so how will that be calculated?
4. Have the scheme administrators of the "Fleming Laing Partnership" fraudulently used my name? How can I get the information HMRC used to determine my involvement in the scheme?
5. Should I seek legal advice? If so, can anyone suggest a reputable specialist where the above is concerned?

Many thanks, I really appreciate any advice!

Will

1. yes.
2. No. I suspect HMRC will maintain their position regardless of evidence (or lack).
3. Yes. They have models of how the scheme worked and access to many examples. So long as they are reasonable, a Court would accept them.
4. I have no idea. Ask HMRC why they think you were part of that scheme. the answer will be along the lines of "you used Von Essen, most VE users went on to use FL, ergo you did too". When you tell them different they may scrub you from the record.
5. Do you want legal advice to deal with HMRC or tax advice? there are a number of professional advisers here, some don't take on clients, others have particular niches. Do some research.