September loan charge deadline - thoughts

[Concernedlc]

Not sure if this is the best place to post - obviously there is a lot going on atm.

Understandably I am concerned about the 2019 Loan Charge, however, after discussing with my accountant they feel that disclosure before the end of September 2019 might not be needed.

Obviously, I am concerned about the potential penalty for non-disclosure. But having looked at the legislation myself (although not an expert) I feel that disclosure might be more detrimental given that it would indicate that I am agreeing that there is a liability - surely this would need to go in my tax return?

Has anyone else had similar thoughts/discussions with their advisors?

Thanks

[webberg]

You are obliged by law to make a disclosure via the on line form AND via you tax return.

Failure to do so can bring a penalty which in the case of the latter could be a percentage of tax due in certain circumstances.

It is HMRC's view that the loan charge applies to pretty much every loan received via a mass marketed scheme.

That is a view that many advisers consider to be hopelessly wrong.

Nonetheless, not reporting via both methods - even if you think you have reason not to - will almost certainly result in HMRC claiming that you were statutorily obliged to report and failure = penalty.

If that is the case, you will be obliged to defend yourself against that penalty probably in Tribunal.

Don't forget however that the Tribunal will decide whether you had a reasonable excuse not to make the statutory disclosure. They may not be interested in whether the disclosure was required (or not) because of flaws in the legislation.

Does that load the dice toward HMRC? yes.

[Concernedlc]

Thanks for the response Webburg, I suppose what confuses me is that the legislation states that there is a duty to provide loan charge information where there is a relevant step before 5 April 2019 and that Chapter 2 of Part 7A applies by reason of that step.

Surely therefore by disclosing I am admitting that there is a liability by virtue of Part 7A, I don't see any way out of this.

I must say that I don't fully understand the application of Part 7A, but my understanding of the legally binding disclosure conditions is that there is both a relevant step and a liability.

[webberg]

Thanks for the response Webburg, I suppose what confuses me is that the legislation states that there is a duty to provide loan charge information where there is a relevant step before 5 April 2019 and that Chapter 2 of Part 7A applies by reason of that step.

Surely therefore by disclosing I am admitting that there is a liability by virtue of Part 7A, I don't see any way out of this.

I must say that I don't fully understand the application of Part 7A, but my understanding of the legally binding disclosure conditions is that there is both a relevant step and a liability.

The way out is to send a pre cursor letter to HMRC explaining the above and saying that whilst you do not agree that a liability arises, in order to prevent the possibility of a non disclosure penalty, you are making the required declaration.

You need to repeat that with the tax return.

[webberg]

For the avoidance of doubt, we have advised our clients to make the on line disclosure and a tax return disclosure.

[ChimpMaster]

For the avoidance of doubt, we have advised our clients to make the on line disclosure and a tax return disclosure.

If they've applied for CLSO2, then just the online disclosure and not the tax return?

[webberg]

If they've applied for CLSO2, then just the online disclosure and not the tax return?

I think strictly "applied" in not enough.

In theory at least you had to have reached agreement by the end of August on settlement.

That deadline seems to have been informally extended to "whatever deadline the last HMRC letter" says.

HMRC also indicates (but infuriatingly refuses to confirm) that if you are still in the process of settlement as above, then the online disclosure is not required.

I personally think that not disclosing in these circumstances is a risky strategy.

As to what happens if you have not formally settled by the time the SATR is due, who knows?

[Concernedlc]

The way out is to send a pre cursor letter to HMRC explaining the above and saying that whilst you do not agree that a liability arises, in order to prevent the possibility of a non disclosure penalty, you are making the required declaration.

You need to repeat that with the tax return.

Hi Webberg, thank you for taking the time to respond.

This is what I find confusing if I write to HMRC stating that there is no liability why am I then making a disclosure? I do agree that contact needs to be made with HMRC before the end of the month.

Surely by making a disclosure HMRC will argue that I considered there was a liability (as disclosure is not needed if there is no liability). That liability then needs to be disclosed in my tax return and tax paid on it by the end of January. I understand that there are potentially large penalties for filing an incorrect return or not paying the tax in full.

I just feel that by making a disclosure I am agreeing that the disclosure conditions are met and that the loans are taxable - notwithstanding any letter that I may have previously sent. If it is about saving £6K, well this is nothing in comparison to what my liability is and what a penalty for submitting an incorrect return will be. It is clear that I am going to have to argue this with HMRC and that I will get an enquiry but I'd rather not be on the back foot.

If it makes any difference, my argument is not based on a Murray Holdings type argument that someone else owes the tax.

The risks as I see it are;

1. Don't disclose (provided you have an argument that the loans are not taxable) and get a potential 6K penalty, or
2. Disclose, by virtue of the disclosure accept that there is a liability and get ready to either pay the tax or challenge a much larger penalty.

I don't hold myself to be an expert, thats why I pay others.

If anyone is having similar thoughts let me know.

[webberg]

This is what I find confusing if I write to HMRC stating that there is no liability why am I then making a disclosure? Disclosure and liability are not cause and effect. There are many occasions in which disclosure is required but liability does not follow.

Surely by making a disclosure HMRC will argue that I considered there was a liability (as disclosure is not needed if there is no liability). False assumption - see above. That liability then needs to be disclosed in my tax return yes. and tax paid on it by the end of January. no I understand that there are potentially large penalties for filing an incorrect return or not paying the tax in full. Yes there are penalties for an incorrect return and also for non payment of sums due, but there is no link between these.

I just feel that by making a disclosure I am agreeing that the disclosure conditions are met yes and that the loans are taxable they are taxable.- notwithstanding any letter that I may have previously sent. If it is about saving £6K, don't understand where this figure comes from, likely to closer to £9k well this is nothing in comparison to what my liability is and what a penalty for submitting an incorrect return will be. It is clear that I am going to have to argue this with HMRC and that I will get an enquiry but I'd rather not be on the back foot.

If it makes any difference, my argument is not based on a Murray Holdings type argument that someone else owes the tax.

The risks as I see it are;

1. Don't disclose (provided you have an argument that the loans are not taxable) and get a potential 6K penalty, or
2. Disclose, by virtue of the disclosure accept that there is a liability and get ready to either pay the tax or challenge a much larger penalty.

I don't hold myself to be an expert, thats why I pay others.

If anyone is having similar thoughts let me know.

Please see above.

[Concernedlc]

Please see above.

Let me preface with I am not a lawyer, nor an accountant.

Not sure where the £9K comes from, surely its £300 for failure to comply then £60 per day for each subsequent day up to 90 days. Max = £5700.

There is an additional penalty for an inaccuracy not exceeding £3000 and payable for each inaccuracy. Non-disclosure and inaccuracy are not the same, even if it is £9K that is nothing compared to what I owe.

I assume that your position is that the loans are taxable, assumingly not on the individual but some other third party?

Note your point that there is a no correlation between disclosure and liability. Surely you can understand my point that disclosing the loans because there is a liability under Part 7A is an acceptance that as the "employee" I have a liability on the 5 April 2019 which needs to then be included in my tax return and tax paid. You have just confirmed that there is penalty for incorrect returns and non-payment of tax.

I do not see how I have made a false assumption, given the way HMRC are acting at the moment surely the will argue that disclosure = liability, due to how the legislation is written.

I appreciate that you possibly have a large number of clients on here and that you want to keep your message consistent in such a public setting, however from a logical standpoint I do find what you are saying to be rather confusing. That being;

1. Write to HMRC to say that I do not have personal liability,
2. Disclose by the end of the month, under the condition that there is a liability under Part 7A on the employee, (to prevent a £9k penalty)
3. Disclose the loans in the tax return, assumingly with a note saying that I do not owe the tax. (Potentially opening myself up to penalty for an incorrect return/non-payment).

Again I do thank you for your input and I have taken on board what you have said. I will have to carefully review my options going forward, maybe it's my fault for trying to bring logic into it.