Loan charge review - Government response is here

[wilks]

Would it not be a bit weird for them to amend the loan charge only to subsequently introduce new legislation to do effectively the same thing. I see the above as pursuing through existing laws, e.g. where enquiries are already open. They have a big work load and they now need to do their job properly rather than relying on the LC so a new team to process all that work makes sense to me.

I'm not saying they won't come up with a LC2 for pre-2010 closed years, but surely this doesn't amount to a announcement of the same now and if it does all the news reports about this "climb down" (e.g. on BBC, Times, Daily Mail etc.) should reflect that.

If they undo these changes with new legislation then it will open up all the same questions again - which I think are not going to go away anyway as only 1/5 or so people have been let off the hook. So I fully expect the LCAG to continue their amazing work.

____________________

I guess it depends on whether HMRC will pursue the 20 year discovery assessment for those closed years - see below. Jim Harra in his TSC meeting earlier this year said they would. If a user did not disclose any info regarding the scheme use then is this considered deliberate? Many will say the scheme told them there was nothing to disclose but that doesnt make it right. If a user provided at least some info such as P11ds for BIK tax purposes then I suspect it could not be considered deliberate.

Probably a question for the "experts" ILT and webberg

the time limit for making a discovery assessment is not later than 20 years after the end of the tax year to which it relates where the loss of tax is:
brought about deliberately by the person;
attributable to a failure to notify liability under Section 7;
attributable to an avoidance scheme notifiable under DOTAS and the person making the return has not complied with their obligations under DOTAS to tell HMRC they have used that scheme; or
attributable to an avoidance scheme promoted by a Monitored Promoter (under POTAS [Promoters of tax avoidance schemes]) and the person making the return has failed to include the Promoter Reference Number on their return.

[starstruck]

____________________

I guess it depends on whether HMRC will pursue the 20 year discovery assessment for those closed years - see below. Jim Harra in his TSC meeting earlier this year said they would. If a user did not disclose any info regarding the scheme use then is this considered deliberate? Many will say the scheme told them there was nothing to disclose but that doesnt make it right. If a user provided at least some info such as P11ds for BIK tax purposes then I suspect it could not be considered deliberate.

Probably a question for the "experts" ILT and webberg

the time limit for making a discovery assessment is not later than 20 years after the end of the tax year to which it relates where the loss of tax is:
brought about deliberately by the person;
attributable to a failure to notify liability under Section 7;
attributable to an avoidance scheme notifiable under DOTAS and the person making the return has not complied with their obligations under DOTAS to tell HMRC they have used that scheme; or
attributable to an avoidance scheme promoted by a Monitored Promoter (under POTAS [Promoters of tax avoidance schemes]) and the person making the return has failed to include the Promoter Reference Number on their return.

The loans I had attracted interest payments that I paid, they weren't a benefit in kind. I also had a car loan, a mortgage and a personal bank loan. Are they saying I should have declared all these loans on my tax returns. As there were no entries on the tax return for such a declaration (pre-DOTAS) the only possible place to declare this would have been in the white space. Surely not putting something in the whitespace of the form, that was never asked for in the first place and not considered as necessary to declare (have you put your mortgage in the white space this year?), can't be used as justification for a 20 year enquiry! Further those comments were said before the review, opinion may have changed since. I think as I've said, to cut down the most egregious parts of the LC only to replace them with something even worse seems pretty unlikely to me. But who can predict politics?! It might happen and I guess we deal with it when it does.

EDIT - I can see there is a section in the tax return for loans that are a BIK (question 15) "Benefits from your employment > Other benefits (including interest-free and low interest loans". I imagine if your loans were on your P11D then they were a BIK (presumably low or zero interest) and in which case presumably should have been declared on the tax return as such to match the P11D. But even then putting on the P11D isn't exactly hiding them!

[wilks]

The loans I had attracted interest payments that I paid, they weren't a benefit in kind. I also had a car loan, a mortgage and a personal bank loan. Are they saying I should have declared all these loans on my tax returns. As there were no entries on the tax return for such a declaration (pre-DOTAS) the only possible place to declare this would have been in the white space. Surely not putting something in the whitespace of the form, that was never asked for in the first place and not considered as necessary to declare (have you put your mortgage in the white space this year?), can't be used as justification for a 20 year enquiry! Further those comments were said before the review, opinion may have changed since. I think as I've said, to cut down the most egregious parts of the LC only to replace them with something even worse seems pretty unlikely to me. But who can predict politics?! It might happen and I guess we deal with it when it does.

___________

There is some comfort in that:
-Why would HMRC accept the recommendation to refund voluntary (closed) settled years only to turn around and apply the 20 year discovery to open them? They could have just rejected this recommendation.
-If they were confident they could apply the 20 year discovery to these closed years why havent they already done so in the last 10+ years to open closed years to protect these years and and collect interest in addition to income tax.

[starstruck]

___________

There is some comfort in that:
-Why would HMRC accept the recommendation to refund voluntary (closed) settled years only to turn around and apply the 20 year discovery to open them? They could have just rejected this recommendation.
-If they were confident they could apply the 20 year discovery to these closed years why havent they already done so in the last 10+ years to open closed years and collect interest in addition to income tax.

Agreed. And how likely is it that MPs, many of whom are against the LC (now), would vote in new powers to undo this latest change. I would think quite unlikely. It's all possible but do you want to spent your life worrying every possible permutation. I think at face value for people now out of scope it is a genuine get out of jail free card and they should take it as so and worry only/if a LCv2 does ever appear.

[BrilloPad]

Would it not be a bit weird for them to amend the loan charge only to subsequently introduce new legislation to do effectively the same thing.

You really don't understand HMRC do you.

[BrilloPad]

And how likely is it that MPs, many of whom are against the LC (now), would vote in new powers to undo this latest change. I would think quite unlikely. It's all possible but do you want to spent your life worrying every possible permutation. I think at face value for people now out of scope it is a genuine get out of jail free card and they should take it as so and worry only/if a LCv2 does ever appear.

Agreed. Except to add that my MP was one of the Labour MPs on the finance committe who approvwed retrospection in 2008. He did not know what he was voting for.

Tax law is too complex for MPs to understand. HMRC rely on that. They are very sneaky.

But just to emphasize, no point in worrying unless LCv2 does appear.

[DealorNoDeal]

Agreed. And how likely is it that MPs, many of whom are against the LC (now), would vote in new powers to undo this latest change. I would think quite unlikely. It's all possible but do you want to spent your life worrying every possible permutation. I think at face value for people now out of scope it is a genuine get out of jail free card and they should take it as so and worry only/if a LCv2 does ever appear.

This. Emphatically!

If you have closed pre-2010 years, breath a sigh of relief and get on with your life.

If you have pre-2010 open years, just be glad that the LC no longer applies, and cross any future bridge as and when.

[AnotherContractor]

This. Emphatically!

If you have closed pre-2010 years, breath a sigh of relief and get on with your life.

If you have pre-2010 open years, just be glad that the LC no longer applies, and cross any future bridge as and when.

True, let's wait and see what contorted logic HMRC come up with to justify LC2, but it would have to be pretty incredible even by their own standards...

[Iliketax]

____________________

I guess it depends on whether HMRC will pursue the 20 year discovery assessment for those closed years - see below. Jim Harra in his TSC meeting earlier this year said they would. If a user did not disclose any info regarding the scheme use then is this considered deliberate? Many will say the scheme told them there was nothing to disclose but that doesnt make it right. If a user provided at least some info such as P11ds for BIK tax purposes then I suspect it could not be considered deliberate.

Probably a question for the "experts" ILT and webberg

I have no idea what HMRC will do and I doubt if they will know yet.

It will probably be a lot easier now to find people with old loans because of the April 2019 loan charge disclosures that have been made concerning the individual directly (e.g. by the individual, the lender, the employer) or indirectly (because they now know the PAYE scheme reference number of the employer who used the schemes and so can identify all the other employees with the same employer).

In terms of time limits, extending the discovery from four years to six years would probably be quite easy where nothing was disclosed on the tax return. But 9 December 2010 is a lot more than six years ago. Extending the discovery period to 20 years may be too much of a challenge in most situations. But it will be a question of understanding the right facts. If, for example, HMRC came across an email chain where:

1. the individual was told by their adviser to include something on their tax return about the loans but decided that that would be way too risky and so chose to not even bother completing a tax return then despite their adviser saying that was wrong then HMRC may well want to take the point.

2. the individual was told by their adviser to include the loan benefit in kind on their tax return, and did, then absent anything other facts I can't see HMRC being able to go back, or wanting to go back, 20 years.

[dammit chloe]

I have no idea what HMRC will do and I doubt if they will know yet.

It will probably be a lot easier now to find people with old loans because of the April 2019 loan charge disclosures that have been made concerning the individual directly (e.g. by the individual, the lender, the employer) or indirectly (because they now know the PAYE scheme reference number of the employer who used the schemes and so can identify all the other employees with the same employer).

In terms of time limits, extending the discovery from four years to six years would probably be quite easy where nothing was disclosed on the tax return. But 9 December 2010 is a lot more than six years ago. Extending the discovery period to 20 years may be too much of a challenge in most situations. But it will be a question of understanding the right facts. If, for example, HMRC came across an email chain where:

1. the individual was told by their adviser to include something on their tax return about the loans but decided that that would be way too risky and so chose to not even bother completing a tax return then despite their adviser saying that was wrong then HMRC may well want to take the point.

2. the individual was told by their adviser to include the loan benefit in kind on their tax return, and did, then absent anything other facts I can't see HMRC being able to go back, or wanting to go back, 20 years.

Given all settlement comms, in my case at least, were "without prejudice" then I don't think they can use that info ( esp some which was estimated as no records of any kind exist that far back ie 2001 ). Of course they could pretend they have found it in an alternative way.

However, if they did do that, then I have my settlement agreement from them that states that they are out of time and restitution would only be on a voluntary basis.

I am not really worried that they would win against me for the above reasons and the fact that everything I did was in accordance with professional advice and a well known QC opinion ( the one that was counsel for HMRC in the Rangers case so obviously HMRC can't argue his competence ).

I am worried that they may try, regardless, just because that is how they operate. Hence bit like a good slasher film, you have to keep fighting until the monster is decapitated, salted and burned.