Loan Charge and Benefit in Kind

[demby]

I have a statement from HMRC

SATR showed
Employment £15,000
Benefits and expenses received £13,000

So I've been taxed on £28,000, £13,000 of which is BiK on Loan

The "Other income" on the right-hand side is £50,000 - so total loan was in fact £63,000

If I now declare the load as £63,000 as part of the Loan Charge surely I am being double taxed on the £13,000.
So my taxable loan is the remaining £50,000 and it's this value I should enter on SATR

Am I missing something here?

[webberg]

I fear you are mixing apples and cucumbers here.

Almost all HMRC statements on issues pertaining to settlement etc say clearly that where you have had a BIK charge on a loan, that will be used to reduce the amount of loan treated as income.

Example.

Original income reported = £25,000
BIK reported = £3,000

(I know you said £13k, but that implies a gross loan of over £280k in the tax year. That may be correct but looks to be very high).

Loan taken = £50,000.

revised calculation should be:

Original Income = £25,000
Loan as income = £50,000
Less: BIK = £3,000
Net taxable before PA and other relief = £72,000

[demby]

I fear you are mixing apples and cucumbers here.

Almost all HMRC statements on issues pertaining to settlement etc say clearly that where you have had a BIK charge on a loan, that will be used to reduce the amount of loan treated as income.

Example.

Original income reported = £25,000
BIK reported = £3,000

(I know you said £13k, but that implies a gross loan of over £280k in the tax year. That may be correct but looks to be very high).

Loan taken = £50,000.

revised calculation should be:

Original Income = £25,000
Loan as income = £50,000
Less: BIK = £3,000
Net taxable before PA and other relief = £72,000

The £13,000 is correct as this is not the 1st year I was using the scheme and benefit in kind was calculated on the total loans for this year and all previous years.

I'm not sure where you get your £25,000 original income reported figure from - this was £15,000

Total taxable income was £28,000. Total Loan was £63,000, but £13,000 already taxed as BiK

If I settle - the tax already paid on the BiK will be deducted and I'd pay tax on £50,000
If I pay the Loan Charge - I will have to declare the Loan as £63,000 and be taxed again on the £13,000

[webberg]

The £13,000 is correct as this is not the 1st year I was using the scheme and benefit in kind was calculated on the total loans for this year and all previous years.

I'm not sure where you get your £25,000 original income reported figure from - this was £15,000

Total taxable income was £28,000. Total Loan was £63,000, but £13,000 already taxed as BiK

If I settle - the tax already paid on the BiK will be deducted and I'd pay tax on £50,000
If I pay the Loan Charge - I will have to declare the Loan as £63,000 and be taxed again on the £13,000

The choice is not pay the loan charge or settle.

the choice is settle or litigate.

The loan charge is essentially just a payment on account of the final liability