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Accrued interest

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    Accrued interest

    Hi Guys
    I thought I maybe nearing the end of this nightmare for the last 3 years as I have paid all the tax owed on the loans via the loan charge and splitting over 3 years, and then HMRC asked me to do the Settlement 2020 process. I have sent them bank statements and details of the loans, contracts etc as they asked, and was hoping the settlement amount would be same as I have paid and be sorted. But I have a number of queries hoping people can help with but I wanted to start with this one. As I feel back to square one when reading this and feel sick about it.

    Under this page
    https://www.gov.uk/government/public...nheritance-tax
    on point 8 - 8. Accrued interest

    It says - Many disguised remuneration schemes involve a loan to the employee from a third party. Some of these loans are interest bearing and require the borrower (the employee) to pay interest to the lender, the trustee. Often, this interest is unpaid and either accrues or is added to the loan balance (capitalised).

    When a disguised remuneration scheme is closed the trustee may release or write-off the outstanding loan balance. This will give rise to a Part 7A charge on the accrued and capitalised interest, whether this has been paid or not.


    Now reading my loan agreement it says:
    Interest Interest shall accrue on the amount of the loan advance that is outstanding at any time at a rate of LIBOR plus 4%. Interest shall accrue and be calculated on a daily basis. Interest shall fall due for payment on the 15th of February each year in respect of the interest arising in the previous calendar year.

    >>
    Which if I understand this correctly would amount to a crazy amount of money and if HMRC were to tax that aswell as the tax I have paid on the loans it would ruin me
    my loan total was about £50k for ref

    #2
    I'll reply here, even though you sent me a PM. Then other people can chip in.

    I would have thought LIBOR+4% means an annual rate of interest. The fact that it is calculated daily is irrelevant. The total accrued would depend on how far the years go back but I wouldn't have thought it would be that much on £50k.

    -----------

    Have you had the loans released or written off?
    Scoots still says that Apr 2020 didn't mark the start of a new stock bull market.

    Comment


      #3
      Originally posted by DealorNoDeal View Post
      I'll reply here, even though you sent me a PM. Then other people can chip in.

      I would have thought LIBOR+4% means an annual rate of interest. The fact that it is calculated daily is irrelevant. The total accrued would depend on how far the years go back but I wouldn't have thought it would be that much on £50k.

      -----------

      Have you had the loans released or written off?
      It's also simple interest so it's LIBOR+4% times the number of years which means for the past few years it's 4.5% a year.
      merely at clientco for the entertainment

      Comment


        #4
        Originally posted by DealorNoDeal View Post
        I'll reply here, even though you sent me a PM. Then other people can chip in.

        I would have thought LIBOR+4% means an annual rate of interest. The fact that it is calculated daily is irrelevant. The total accrued would depend on how far the years go back but I wouldn't have thought it would be that much on £50k.

        -----------

        Have you had the loans released or written off?
        Thanks Deal I hope so, that would be better than 100's of £K's if was daily which would be ridiculous. Although this discovery last night is still a load more money I wasn't expecting (my loan started in 2016 and went on 3yrs, I presume they would calculate to current, even though they are taking forever to sort it out)

        Got no sleep last night worrying about this

        Comment


          #5
          Originally posted by eek View Post

          It's also simple interest so it's LIBOR+4% times the number of years which means for the past few years it's 4.5% a year.
          ok thanks mate
          I guess in the earlier years where my loan was less then the tax owed will be less on the interest on those years
          ugh I cant wait for the day all this is behind me

          Comment


            #6
            Are HMRC saying, as part of the settlement, that you have to get the loans written off by the Trustees within a month or so?

            If not, maybe you could either not bother getting them written off at all, or time the write-off to better suit you.

            I'm not advocating this but I know some people have had their loans written off, and "forgot" to tell HMRC.
            Scoots still says that Apr 2020 didn't mark the start of a new stock bull market.

            Comment


              #7
              Originally posted by DealorNoDeal View Post
              Are HMRC saying, as part of the settlement, that you have to get the loans written off by the Trustees within a month or so?

              If not, maybe you could either not bother getting them written off at all, or time the write-off to better suit you.

              I'm not advocating this but I know some people have had their loans written off, and "forgot" to tell HMRC.
              I'm not at the point of their settlement proposal, they requested I complete the settlement form about a year ago, then a few months back they asked for proof of how I came to my loan total, and that I provide evidence (which I did via bank statements) and also the contracts from the loan company, which I provided.

              I want to get the loan written off ideally so I can put the matter to bed, I think I would always worry that they may come banging on my door some time after demanding money, like the "cant pay we'll take it away" tv show.
              Why might someone not want to get their loan written off out of interest ?
              I think I was reading like you say, if you say you are going to get it written off you need to do so within a month, don't quite get this timeline as then you are dependant on the loan company playing ball.

              Also if someone in theory might get it written off and not tell HMRC, why might someone do this. Again I think then I'd be worried HMRC would question things later down the line and again be in a pile of tulip and more fees / taxes whatever else they can get out of me to pay.

              Comment


                #8
                Originally posted by Confusedetc View Post
                Why might someone not want to get their loan written off out of interest ?
                To avoid it triggering another tax bill (IHT, tax on accrued interest).

                Originally posted by Confusedetc View Post

                Also if someone in theory might get it written off and not tell HMRC, why might someone do this.
                Same answer.
                Scoots still says that Apr 2020 didn't mark the start of a new stock bull market.

                Comment


                  #9
                  Originally posted by DealorNoDeal View Post

                  To avoid it triggering another tax bill (IHT, tax on accrued interest).



                  Same answer.
                  Ah thanks mate
                  I assumed they charged this anyway wether it was written off or not, is that not the case ?
                  IHT is another thing I don't get, and how they can charge this when you're not dead, and also charge it when the value is not over the £325K threshold

                  Sorry for all the questions, I've been trying to do all this stuff by myself and alot of it doesn't really make sense to me (as you can tell)

                  Comment


                    #10
                    Originally posted by Confusedetc View Post
                    I assumed they charged this anyway wether it was written off or not, is that not the case ?
                    IHT is another thing I don't get, and how they can charge this when you're not dead, and also charge it when the value is not over the £325K threshold
                    No, the additional tax charges are only triggered when the loans are written off.

                    Don't know much about IHT, only that it has been mentioned here a few times.
                    Scoots still says that Apr 2020 didn't mark the start of a new stock bull market.

                    Comment

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