Settlement whist in review

[Hitchphil]

Sooooo

I declared all loans by April this year & sent in the completed settlement some month back - recorded delivery & evidence of posting & - no reply?

HMRC have withheld ~£1k paye rebates from the last 2 tax years (not connected with my loans in anyway) & said my account is under review when I asked when it would be refunded.

I made contribution to my SIPP that largely offsets the agreed DR settlement amount & that generates a moderate rebate to this years SA return, that I have submitted now. So that generates another few £k that are now due. I have relevant income & am now paye employed.

My questions' worries are:

(1) Is interest suspended on the settlement value till paid? or does it continue to rack up more!? as its been agreed for months now & HMRC have done nothing!
(2) Will they apply +interest to my unconnected but withheld PAYE rebates?
(3) When will they actually want the settlement sum off me? because its in the bank waiting & not earning much interest & I could invest it in better if that's another 6months or more?
(4) Will they trade off any PAYE rebates due vs the settlement & then ask me to pay the difference?
(5) I didn't declare any DR/EBT/Loans etc in my 2018-19 SA tax return because as far as I am concerned I have settled. Is that ok to do?

I am assuming the LC review is only about the LC its self & does not affect settlement & because I have signed up to what is in effect a contract, I will owe that money regardless of any LC review outcome?

My lenders have all closed their companies +10y ago & were abroad. - do I assume that HMRC in settling with me wont go after them for ENIC? corp tax etc & on finding them closed then come after me again so I end up owing even more later? is settlement the end of this BS?

A legal adviser said no need to write of any loans as that just makes settlement more costly & once you have settled then in the eyes of UK law they are no longer loans but income that I have paid tax on them? so they cease to exist in law & if trustees come asking me to repay them that's a defence they were not real loans & tax has been paid & that shows they were income - so go away?

[webberg]

Sooooo

I declared all loans by April this year & sent in the completed settlement some month back - recorded delivery & evidence of posting & - no reply? Not a surprise as HMRC are way behind here.

HMRC have withheld ~£1k paye rebates from the last 2 tax years (not connected with my loans in anyway) & said my account is under review when I asked when it would be refunded.

I made contribution to my SIPP that largely offsets the agreed DR settlement amount & that generates a moderate rebate to this years SA return, that I have submitted now. This confuses me. By implication the settlement is for past years. A pension premium would be for 2018/19 presumably. How then can a tax credit in 18/19 offset an earlier liability? So that generates another few £k that are now due. I have relevant income & am now paye employed.

My questions' worries are:

(1) Is interest suspended on the settlement value till paid? or does it continue to rack up more!? Interest is calculated from due date to date paid. Why do you leave this to HMRC instead of taking some control?
as its been agreed for months now & HMRC have done nothing!
(2) Will they apply +interest to my unconnected but withheld PAYE rebates? yes.
(3) When will they actually want the settlement sum off me? because its in the bank waiting & not earning much interest & I could invest it in better if that's another 6months or more? If you settle, then obviously they want the money.
(4) Will they trade off any PAYE rebates due vs the settlement & then ask me to pay the difference? Yes if you ask them to - take control.
(5) I didn't declare any DR/EBT/Loans etc in my 2018-19 SA tax return because as far as I am concerned I have settled. Is that ok to do? See numerous threads about this.

I am assuming the LC review is only about the LC its self & does not affect settlement & because I have signed up to what is in effect a contract, I will owe that money regardless of any LC review outcome? Yes.

My lenders have all closed their companies +10y ago & were abroad. - do I assume that HMRC in settling with me wont go after them for ENIC? corp tax etc & on finding them closed then come after me again so I end up owing even more later? is settlement the end of this BS? yes

A legal adviser said no need to write of any loans as that just makes settlement more costly & once you have settled then in the eyes of UK law they are no longer loans but income that I have paid tax on them? so they cease to exist in law & if trustees come asking me to repay them that's a defence they were not real loans & tax has been paid & that shows they were income - so go away?

That's a very brave legal adviser and I'd get that assurance in writing if I were you.

[Hitchphil]

That's a very brave legal adviser and I'd get that assurance in writing if I were you.

Update discussed with DR team HMRC:

Interest was suspended form the date I submitted the settlement & no forward interest was applied.
Settlement is on ice pending the outcome of the LC review - expected by end Nov they say?
The question there is if that review says its wrong to go back x years then can I rescind the settlement?
They will add interest to the PAYE refunds outstanding & reconcile them off vs the settlement. I am OK with that.

Re investment - using relevant earnings for 2018-19 I can recover the settlement value by moving some savings sideways to a SIPP, the tax rebates = the settlement, so although not connected by years they offset it & I recover the settlement; some to SIPP & some to my PAYE return & that's most of the refund now held by HMRC pending final settlement payment. Of course I could do that anyway but I calculate my retirement funding to include a good fund in tax wrapped investments so if I retire I can take the PAYE allowance from pension & then a balance from other sources & pay minimal tax. So its not in my longer term interests to have too much pension income.

Re legal advice - yea right! get a legal person to write down what they see in their crystal ball? however the settlement does say 'no IHT is due to 31st Jan 2019' so my guess is write them off shortly after settling & 2 loans are past 10y & the original trustee company is dissolved.

Good luck to all getting out of this mess!

[webberg]

Update discussed with DR team HMRC:

Interest was suspended form the date I submitted the settlement & no forward interest was applied.
Settlement is on ice pending the outcome of the LC review - expected by end Nov they say?
The question there is if that review says its wrong to go back x years then can I rescind the settlement?


There is NO CONNECTION between the settlement and loan charge or loan charge review. There is a popular view that the loan charge "forced" people into settlement but it's a view without any statutory evidence or any legislative cause and effect. If you have signed a contract to settle, the outcome of the loan charge review will NOT give you the unilateral right to rescind it.

If the review concludes that the loan charge needs amending, then HMRC/HMT/HMG may also tweak the settlement terms, either historically (retrospectively) or prospectively. There is however absolutely no evidence, proof or even rumour that I am aware of that says they will. Best to proceed as though the settlement process will be completely unaffected by the loan charge review.

As to why HMRC has apparently ceased working on loan charge and what that may mean, I am as much in dark as everybody else and chose not to speculate.

Re investment .. I confess you have totally lost me there. If you have the money to settle why do you need to complicate matters as you suggest? I'm being a bit dim perhaps by not seeing the incremental benefit in what you propose. (But as I said, you've lost me).

Re legal advice - yea right! get a legal person to write down what they see in their crystal ball? however the settlement does say 'no IHT is due to 31st Jan 2019' so my guess is write them off shortly after settling & 2 loans are past 10y & the original trustee company is dissolved. So ask yourself. What happens if there is an IHT event post 31/1/19? There is no protection from the statement you quote and we know that HMRC suggest a subsequent write off of a loan "could" be such an event. The time the loans have been extant is not relevant. the fact that the trustee is dissolved is not relevant as the trust and its assets will survive that.

Good luck to all getting out of this mess!

I hope the above gives you more food for thought.

[dammit chloe]

No

"There is NO CONNECTION between the settlement and loan charge or loan charge review. There is a popular view that the loan charge "forced" people into settlement but it's a view without any statutory evidence or any legislative cause and effect".

Utterly disagree. As I think very many would. Would I be considering settling if there was no Loan Charge. Absolutely not, but I have two choices! One very bad, one very, very bad.

Remember these words from the HMT ( HMRC :-) report earlier this year.

“The intention of the charge is to encourage settlement for the right amount of tax that is due for the periods in which DR tax avoidance schemes were used.”

Or these from Jon Thompson's letter to MPs

“The Loan Charge has also supported our efforts to settle DR cases without the need to litigate”.

You may be looking for a letter of the law "if not A then B" clause but the intention of the Loan Charge is clearly documented.

[Nissan07]

"There is NO CONNECTION between the settlement and loan charge or loan charge review. There is a popular view that the loan charge "forced" people into settlement but it's a view without any statutory evidence or any legislative cause and effect".

I too disagree with this totally and I have heard you say this before surprisingly Weberg.

Yes I see your point there is no statutory evidence, but are you really suggesting those that have settled just paid up without any feeling of pressure and consequence from HMRC.

There were clearly underhanded threatening tactics utilised by HMRC to gain revenue and pressure individuals to pay up or suffer the consequences.

I have settled but that is completely due to the fact the Loan Charge would have doubled my liability and the stress of that and this whole process was affecting my well being.

There is absolutely no way I would have done this for all my closed years if the Loan Charge didn't exist.

And Good luck to those continuing the fight!

[Hitchphil]

"There is NO CONNECTION between the settlement and loan charge or loan charge review. There is a popular view that the loan charge "forced" people into settlement but it's a view without any statutory evidence or any legislative cause and effect".

I too disagree with this totally and I have heard you say this before surprisingly Weberg.

Yes I see your point there is no statutory evidence, but are you really suggesting those that have settled just paid up without any feeling of pressure and consequence from HMRC.

There were clearly underhanded threatening tactics utilised by HMRC to gain revenue and pressure individuals to pay up or suffer the consequences.

I have settled but that is completely due to the fact the Loan Charge would have doubled my liability and the stress of that and this whole process was affecting my well being.

There is absolutely no way I would have done this for all my closed years if the Loan Charge didn't exist.

And Good luck to those continuing the fight!

LD Resolution said:

No interest applied & wont be till the outcome of the CL loan thing. I have nowt to lose by waiting to Nov-Dec & its an extra 2-3m interest at bank or investment growth time on the funds sat there waiting to settle with.

I asked what if the CL loan is rejected by parliament? & they said there will be a review of settlements as the review is also about the ability of HMRC to go back in time to recover from so long ago..... that its potentially bankrupting people whos tax affairs are now very different. Its not just the ability to apply a tax charge to the 2018-19 tax year?

If so then my position is I signed a settlement under duress vs the LC & not because I wanted to & if they cant claim those previous tax years then I would want to change my position & the person on phone said agree & obviously?

Webberg the 'revenge investment' is a standard thing anyone can do with relevant earnings & a SIPP. Every £1000 to SIPP generates £250 tax rebate in the pension scheme & because I pay 40% tax a £200 payg rebate once I put in the SA for the tax year too. So if I get a £100 parking ticket then by moving £222 from savings to SIPP I generate a tax rebate of £100 & feel a whole lot better about it!

If my settlement says no IHT to 31st Jam 2019 then once settled (or HMRC abandon demanding past closed years lol ) then I will ask my trustees to write them off. I don't understand, nor does lawyer or tax advice, the IHT charge I only know there is a IHT allowance of £325k & my loans are nowhere near that value?

[webberg]

LD Resolution said:

I asked what if the CL loan is rejected by parliament? & they said there will be a review of settlements as the review is also about the ability of HMRC to go back in time to recover from so long ago..... that its potentially bankrupting people whos tax affairs are now very different. Its not just the ability to apply a tax charge to the 2018-19 tax year?

I'm assuming LD Resolution are a tax advisory firm?

If so and you have paid them, then you should go with their advice as otherwise you have wasted your money.

For my money I see nothing in the statute, the terms of reference of the loan charge review, the conversation we had with the Reviewer, statements from HMRC that indicates the review will extend to settlements.

Unless/until I do, my advice to my clients is that a signed settlement contract is legal and binding and cannot be undone.

I agree that HMRC may seek to amend contract terms in the future, but changing agreements already signed presents a huge challenge if it is to be done fairly.

[MLeggsy]

What defines the settlement?

Unless/until I do, my advice to my clients is that a signed settlement contract is legal and binding and cannot be undone.

Hi Webberg, can you confirm exactly what defines the final settlement?

1 - My acceptance to pay the figure as defined/agreed with HMRC. The "Offer amount"
2 - HMRCs acceptance of my offer.
3 - Notification of Charge and Notice to Pay from HMRC.
3 - Payment.

MLeggsy

[webberg]

Hi Webberg, can you confirm exactly what defines the final settlement?

1 - My acceptance to pay the figure as defined/agreed with HMRC. The "Offer amount"
2 - HMRCs acceptance of my offer.
3 - Notification of Charge and Notice to Pay from HMRC.
3 - Payment.

MLeggsy

None of the above. Rather between 2 and 3 HMRC need to have countersigned the offer you made them in the contract.

A contract is an agreement between parties.

Here you send an offer to HMRC to settle your affairs for a given amount. That offer is in a contract that you have signed and sent to them.

HMRC accept that offer by countersigning the contract.

At that point it becomes a legally binding obligation on both parties.

Where this gets difficult is matching this to HMRC practice and internal administration.

To date, almost all the settlements we have dealt with, which have reached the point of the offer being sent to HMRC, have NOT resulted in anything from HMRC accepting that offer. The incidence of copies of countersigned contracts being sent back to us are as rare as hen's teeth.

Somewhere in HMRC must be a room stacked floor to ceiling with unsigned contracts.

Now, if by some magic I'm unaware of, HMRC were persuaded to revisit settlement, (and I would guess that the only way this may happen is because a political decision is made), there is likely to be a bun fight over which contracts are "final" and which not.

I'd invite those advisers with legal skills and/or who deal with settlements as their raison d'etre to contribute to the above.

For what it's worth, my opening position will be (in the event of settlement being amended) that any contract that remains unsigned by an authorised HMRC officer is NOT complete and my client can withdraw from it. If HMRC claims that the contract is signed or their acceptance letter is as good as signing, I will contest that and demand proof that is incontrovertible.

One reason I think HMRC will resist any review of legislation impacting settlement is that they have collected (allegedly) £700m and I can't see them handing that back. Of that £700m, perhaps only 30% has been paid so far, but the rest is "booked" and has no doubt been spent by the Government.

Let the fun begin (in November).