Loan charge review - Government response is here

[ChimpMaster]

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.

So this was something I was thinking about too.

The whole loan charge fiasco has been a huge exercise in data collection by HMRC. One would have been better off not disclosing anything at all to HMRC (for LC I mean), but the timing did get a bit too tight what with Jan 31st just a few weeks ago, and given HMRC's monumental failure in processing settlements.

But it means that HMRC have all the loan data they need, to be able to go back and say, hey Mr. Smith we know you were in a XYZ loan scheme from 2003 - 2009 and your loan balance is £xxxxxx. So we're going to be checking your (Unprotected/Closed) tax returns for all those years because we believe you did not provide us with a DOTAs number (or any other excuse).

Now I don't know what reasons HMRC can use to open up Returns from > 6 years ago, and I would like to think that it's a real long shot for them to attempt this, but you just don't know. It seems the only way you can have certainty is to wait 20 years. Which is pretty much a life sentence. Except they just won't let you live. Death and taxes come to mind.

It's easy to see why there is such a hatred of HMRC.

[BrilloPad]

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.

This.

[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.

[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.

[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...

[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.

[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.

[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.

[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.

[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.