EBT HELL: Assignment Solutions Isle Of Man / Premier Tax Strategies / DMS

[DonkeyRhubarb]

On mine the interest worked out as follows:

2005/06 - 33%
2006/07 - 25%
2007/08 - 18%
2008/09 - 15%
2009/10 - 12%
2010/11 - 9%

Did you get these figures from HMRC?

My estimates only go up to 2007/8, when our scheme ended, but are a little higher:

2001/2 64%
2002/3 57%
2003/4 51%
2004/5 44%
2005/6 37%
2006/7 30%
2007/8 22%

Many of us are facing as much as two thirds interest !

[Boobetty]

I did. They run from the Jan 31st due date up to 28/03/15. Can I bore you with some figures using 2005/06 tax year (so tax due 31/01/07):

3% from 29/09/09 (2006 days)
2.5% from 24/3/09 (189 days)
3.5% from 27/1/09 (56 days)
4.5% from 6/1/09 (21 days)
5.5% from 6/12/08 (31 days)
6.5% from 6/11/08 (30 days)
7.5% from 6/1/08 (305 days)
8.5% from 6/8/07 (153 days)
7.5% from 31/1/07 (187 days)

Total 2,978 days or 8.16 years. If you weight the above you get to an average annual % of 4.0755% which when multiplied by 8.16 gets me 33% which is the interest I have been charged....£6k on loans of £18k.

[NeedTheSunshine]

I did. They run from the Jan 31st due date up to 28/03/15. Can I bore you with some figures using 2005/06 tax year (so tax due 31/01/07):

3% from 29/09/09 (2006 days)
2.5% from 24/3/09 (189 days)
3.5% from 27/1/09 (56 days)
4.5% from 6/1/09 (21 days)
5.5% from 6/12/08 (31 days)
6.5% from 6/11/08 (30 days)
7.5% from 6/1/08 (305 days)
8.5% from 6/8/07 (153 days)
7.5% from 31/1/07 (187 days)

Total 2,978 days or 8.16 years. If you weight the above you get to an average annual % of 4.0755% which when multiplied by 8.16 gets me 33% which is the interest I have been charged....£6k on loans of £18k.

My interest calculations are in line with Boobetty's.

My tax year was 2006/7 so due on 31st Jan 2008, and therefore interest charged slightly less as an annual average. Total interest is approximately 25% of the tax charged.

[DonkeyRhubarb]

My tax year was 2006/7 so due on 31st Jan 2008, and therefore interest charged slightly less as an annual average. Total interest is approximately 25% of the tax charged.

This is not quite right. Interest is charged from when payments on account were due.

For 2006/7, payments on account were due on 31st Jan 2007 and 31st July 2007.

HMRC will charge interest on 50% of your 2006/7 liability from 31st Jan 2007, and interest on the other 50% from 31st July 2007.

That is why my figures are a few % higher.

[NeedTheSunshine]

This is not quite right. Interest is charged from when payments on account were due.

For 2006/7, payments on account were due on 31st Jan 2007 and 31st July 2007.

HMRC will charge interest on 50% of your 2006/7 liability from 31st Jan 2007, and interest on the other 50% from 31st July 2007.

That is why my figures are a few % higher.

I've taken my percentage from the figures I received in my settlement "Opportunity" calculation letter. The calculation shows for each interest rate how many days were calculated at each interest rate and from which date the calculation started. My interest start date is stated as 31st Jan 2008.

[DonkeyRhubarb]

I've taken my percentage from the figures I received in my settlement "Opportunity" calculation letter. The calculation shows for each interest rate how many days were calculated at each interest rate and from which date the calculation started. My interest start date is stated as 31st Jan 2008.

Interesting. All the figures we've been quoted have been calculated from the dates when payments on account would have been due.

Perhaps it is because, with EBTs, HMRC are treating the loans as unearned income (other income).

[Boobetty]

Hi DR, are your numbers direct from HMRC?

[DonkeyRhubarb]

Hi DR, are your numbers direct from HMRC?

No, they're taken from a spreadsheet. However, they do tally with figures we've previously been given by HMRC.

As I said, I think the difference might be because in our case they are treating the income as earned whereas with EBTs they are not.

[MrsB1974]

A simple (I hope) question on APN interest

So... if I receive an APN for tax payable based on a reasonably accurate total of EBT loans, and I pay it within the timeframe allowed, when is the interest applied? Only when HMRC wins against ASIOM (or a scheme with an identical set up)?

And how do they notify you of the interest payable - by issuing another APN?

The only thing I'm really nervous about is if HMRC does the dodgy and increases their 'calculation' of loan amounts, thus increasing the tax payable in comparison to the settlement opportunity calc. (Though surely if I have their settlement calc in writing they have to stick with that loan amount?)

Many thanks

[Boobetty]

So... if I receive an APN for tax payable based on a reasonably accurate total of EBT loans, and I pay it within the timeframe allowed, when is the interest applied? Only when HMRC wins against ASIOM (or a scheme with an identical set up)?

And how do they notify you of the interest payable - by issuing another APN?

The only thing I'm really nervous about is if HMRC does the dodgy and increases their 'calculation' of loan amounts, thus increasing the tax payable in comparison to the settlement opportunity calc. (Though surely if I have their settlement calc in writing they have to stick with that loan amount?)

Many thanks

I believe they would have to defeat your particular scheme in order to enforce interest. Interest cannot be collected under current APN legislation nor, as far as I am interpreting the legislation, can they use APN's to collect IHT from us. This said, if HMRC take a 'view' on this IHT issue then we could see APN's coming for IHT at some point.

As far as the settlement calculations go, I'd like to think that they can tax the loan amounts as they have been agreed/determined as part of the SO process. To deviate from those numbers subsequently would make collecting cash from us harder. That's not to say they won't try it, but the pragmatist in me says they will stick with these numbers, assuming they are more or less accurate.