Edge EBT thread

[Tiger22]

Too late to appeal?

Ex-Edge here finally pulling head out of the sand and trying to get a grip...

I just got an APN for 06/07 for Edge-related activity. Now, other than a single one-page letter sent back in Jan 2009 saying they "intend to enquire into this return" (no mention of under what tax law), I received no further communication from HMRC for this year until the recent notice of an impending APN followed by the APN itself. Certainly I received no information until the APN itself demanding money or telling me they thought I owed money for that year (no notice of assessement, etc).

Reading the first post in this thread it is suggested that if you don't appeal then the value of the demand becomes legally enforceable. This APN is essentially the first demand to say any money is due. So should I be appealing this APN (and can I at this late stage) on basis that I don't think the money is due even though I am obliged to pay the APN? I will pay the money because I understand, legally, I have to but I don't want them to think I'm agreeing with their demands.

[jbeer]

IHT

Fact... IHT is only relevant to schemes having a trust. IHT will apply to the numbers of years you used the scheme (whether discovered or not).

A friend my mine was on a non-trust scheme, hence no IHT.

This means depending on what scheme you are on, you are taxed differently. This is all really madness!

Sorry but just to be clear - have HMRC actually told you this fact ? You mention you have a friend who was in a non-trust scheme where it didn't apply but does anyone know someone who was in the Edge scheme or another scheme where a Trust is used and been told it does apply ?

[DonkeyRhubarb]

This is why settlement is not a good option.

HMRC are playing a "Choose & Pick" game. They are treating "Loan" as artificial but treating the "Trust" as real. How can they be different! Surely, the whole thing is either artificial (so the loan is income and trust is meaningless hence no IHT), or the whole thing is "Real" (ie it is indeed a loan under a trust). This is just another way of getting double the money from us poor contractors!

It does seem perverse. The loan is not a genuine loan for income tax purposes but it is a genuine loan for IHT purposes.

I wonder how that argument would go down at a tax tribunal?

It would be interesting to hear what a leading Tax Counsel made of this.

[SimonJones]

This it's been mentioned before that IHT was applicable on the Edge setup, sadly.

This is why settlement is not a good option.

HMRC are playing a "Choose & Pick" game. They are treating "Loan" as artificial but treating the "Trust" as real. How can they be different! Surely, the whole thing is either artificial (so the loan is income and trust is meaningless hence no IHT), or the whole thing is "Real" (ie it is indeed a loan under a trust). This is just another way of getting double the money from us poor contractors!

[flyinghaggis]

So what type of scheme was Edge? Does the T in EBT gives us a clue.

This it's been mentioned before that IHT was applicable on the Edge setup, sadly.

[gettingangry]

Fact... IHT is only relevant to schemes having a trust. IHT will apply to the numbers of years you used the scheme (whether discovered or not).

A friend my mine was on a non-trust scheme, hence no IHT.

This means depending on what scheme you are on, you are taxed differently. This is all really madness!

So what type of scheme was Edge? Does the T in EBT gives us a clue.

[SimonJones]

Hi, is this your opinion or fact ? As far as I understood, the year you settle is irrelevant. Also, does the IHT issue not depend on the actual scheme, i.e. not all schemes are affected in the same way ?

Fact... IHT is only relevant to schemes having a trust. IHT will apply to the numbers of years you used the scheme (whether discovered or not).

A friend my mine was on a non-trust scheme, hence no IHT.

This means depending on what scheme you are on, you are taxed differently. This is all really madness!

[jbeer]

IHT calculation

I'm assuming when you say "Paying in full" meaning you are settling.
If this is the case, than please note, this is not final as IHT will still be outstanding.
IHT is applied at 1% of the total loan, from the years that you have used the scheme to the year you finally settle. This accumulates substantially if the scheme was used for few years.

Hi, is this your opinion or fact ? As far as I understood, the year you settle is irrelevant. Also, does the IHT issue not depend on the actual scheme, i.e. not all schemes are affected in the same way ?

[bluemonkey71]

Is this IHT issue confined to the open enquiry years only?

Nope, writing off a loan could incur IHT (depending on the trust) whether HMRC had the year under discovery or not.

[gettingangry]

Yes, this is correct. For example if you used the scheme since 2005/2006 for 4 years than at £100 loan/year your IHT liability will be:
2005/2006 - present = 10 years x 1k = 10K
2006/2007 - present = 9 years x 1k = 9K
2007/2008 - present = 8 years x 1k = 8K
2008/2009 - present = 7 years x 1k = 7K

Total IHT = £34K

In some cases one's IHT will be greater than the actual tax + interest that they are initially after!

This is absolutely crazy. They already tax you with interest, and than on top they want even more.

Is this IHT issue confined to the open enquiry years only?

I look forward to seeing a new box on my tax return next year for "Loans from parents, grandparents etc. that you never paid back"