HMRC say the loan is taxable, therefore it cannot be a loan. Right? WRONG

[Paralytic]

That is just not true. If there is the fact of money moving from A to B but there is no papered transaction, a Court will examine the circumstances. If a court decides that the transaction has the characteristics of a loan then it will decide that there is either a verbal agreement or a tacit agreement that a loan and ergo - a repayment obligation - exists.

I was referring to "loan agreement" in general terms, not literal/legal (eg. signed document). ie. If there was not a written, verbal, tacit or otherwise agreement nor circumstances that have the characteristic of a loan.

I should have just said "If no loan exists, then the contractor should not have to pay back the monies..".

[RickG]

So...

The money paid into the contractor's bank account was a loan.

But it's not this payment which is being taxed.

The tax liability arose, well before this, when the Employer received money from the agency, which should all have been subject to PAYE. (HMRC argue this liability should now fall on the contractor)

Is that correct?

I'm not sure that's completely correct. HMRC argue the money moving from the employer to the third party (usually a trust) is a Part 7A taxable payment - the liability falls on the employer in the first instance, but given it is a notional payment, the liability can be transferred to the employee.

The question arises, though - why did HMRC not chase the employer for the tax due? And if the employer underwent liquidation, why was the tax liability not discharged at that point?

[webberg]

I was referring to "loan agreement" in general terms, not literal/legal (eg. signed document). ie. If there was not a written, verbal, tacit or otherwise agreement nor circumstances that have the characteristic of a loan.

I should have just said "If no loan exists, then the contractor should not have to pay back the monies..".

I'd agree with that position but think about the first question a Judge may ask you.

What did you think the payment from xx was?

If you are ruling out a written, verbal, tacit or otherwise agreement and circumstances characteristic of a loan, how would you answer the above question?

[webberg]

I'm not sure that's completely correct. HMRC argue the money moving from the employer to the third party (usually a trust) is a Part 7A taxable payment no they don't. HMRC has a judgement that says that the moment the employer has an obligation to pay the employee a tax liability arises. That is BEFORE the money moves to a third party.- the liability falls on the employer in the first instance, but given it is a notional payment, the liability can be transferred to the employee.

The question arises, though - why did HMRC not chase the employer for the tax due? And if the employer underwent liquidation, why was the tax liability not discharged at that point?

Very good question and one that is being tested in tribunal right now.

Playing Devil's Advocate here, why did you, the recipient of the money, not ask HMRC - at the time - why no tax was being withheld from the payment?

[DealorNoDeal]

I'm not sure that's completely correct. HMRC argue the money moving from the employer to the third party (usually a trust) is a Part 7A taxable payment - the liability falls on the employer in the first instance, but given it is a notional payment, the liability can be transferred to the employee.

The question arises, though - why did HMRC not chase the employer for the tax due? And if the employer underwent liquidation, why was the tax liability not discharged at that point?

Does that only apply to payments made after Dec 2010?

If so, what's HMRC's argument, that tax is due, for payments made prior to Dec 2010?

[webberg]

Does that only apply to payments made after Dec 2010?

If so, what's HMRC's argument, that tax is due, for payments made prior to Dec 2010?

HMRC has a case based on the application of section 62 ITEPA. read the Rangers case where Lord Hodge covered a lot of this.

HMRC runs a counter intuitive (and possibly unsustainable and illogical) argument.

They say the Part 7a (post 2010 as noted) applies to DR transactions and prior to that the section 62 argument.

If however section 62 is correct, why is Part 7A needed?

That's going to be debated in Tribunal no doubt.

[webberg]

Here and in other threads, you may have noticed that I've been challenging certain ideas and assumptions and views around the loan repayment demands and where they might go.

This is not because I'm a little stir crazy and looking for entertainment.

It's because I think that we are about to enter a phase in the contracting saga that will see those without any shred of empathy or who cling to the Thatcherite "greed is good" philosophy, acquire loan books and seek to make some dirty money.

If so, being armed with facts, proven strategies and good information and advice is going to make resisting these "people" an easier task. Not an easy win but enough people armed with enough good information may make one or two think hard before pursuing their dreams of avarice.

In doing so, we all need to be aware of where certain arguments sit in terms of weight and application. Some are very good, pertinent and powerful. Some I'm afraid belong in the realms of fantasy or to a utopian world in which everybody plays by the rules.

So I apologise to any here who I may have inadvertently offended or be perceived as being unduly harsh with. My intention is to test the ideas and theories put forward and allow you to judge whether those tests have been passed.

[DealorNoDeal]

If however section 62 is correct, why is Part 7A needed?

Part 7A merely clarifies that section 62 always applied to such payments.

Or some other such slippery, weasely BS.

[Confusedetc]

As I've stated many times I wont ever pay the 'loan' back in any circumstances and I agree with many posters on here that attempts to get the loans back are just scams that will come to nothing.

Regardless of the minutia of current tax law vs. current contract law vs. trust law etc - In my humble opinion, you will never see a final ruling that agrees that HMRC taxes £500 as remuneration and the very same £500 (because it is!) is found in court to be a loan that needs to be repaid in full. One of the key principles of the legal system is that of reasonableness and no fair minded person could ever consider this reasonable.

I hope this is the case, I was wondering if anyone has actually ever been forced to pay back this money ? had heavies sent round to retrieve it if not paid etc.
Like you say I can't see how this would ever stand up in court, I really hope it wouldn't.

I've recently paid back a vast sum of money to HMRC and will have to do so for the next 2 years after having the total loan split by 3 years.
Whilst I am now happy I am doing the right thing and getting this sorted, in the back of my mind is as part of this loan agreement and having to pay it back after 10 years (It makes me feel sick how I was so stupid I didnt read the T&C's properly with this in it), that come this time they are going to come after me.

It's actually causing me alot of stress and anxiety thinking about it every day at the moment.

[webberg]

I hope this is the case, I was wondering if anyone has actually ever been forced to pay back this money ? had heavies sent round to retrieve it if not paid etc. I am not aware that such an event has happened.
Like you say I can't see how this would ever stand up in court, I really hope it wouldn't. Like I have been saying, "hope" in matters legal is often false. You are better off with evidence and argument.

I've recently paid back a vast sum of money to HMRC and will have to do so for the next 2 years after having the total loan split by 3 years. This is the loan charge? Be aware that paying the loan charge settles nothing. eventually you will have to agree the tax position for each year you had payments and the amount paid via the loan charge will be a credit against that but there may be more to pay.
Whilst I am now happy I am doing the right thing and getting this sorted, in the back of my mind is as part of this loan agreement and having to pay it back after 10 years (It makes me feel sick how I was so stupid I didnt read the T&C's properly with this in it), that come this time they are going to come after me.

It's actually causing me alot of stress and anxiety thinking about it every day at the moment. you are not alone in feeling as you do. Help is available. We (WTT) and others offer a free initial call to help you understand this and put you in touch with people who can help. Call us.

Please see above.