Reply to: can I contact HMRC to settle

[webberg]

From a tax advisor connected to the loan scheme that I had used, it was a couple of years ago so unsure if the rules may have changed... or maybe my own misunderstanding.

Was he/she actually a tax adviser with suitable qualifications etc?

Was he/she YOUR tax adviser or were they an adviser to the scheme?

Nothing has really changed in this space in a couple of years save HMRC's desire to extract maximum tax. To do that they use a skewed and flawed interpretation of IHT (and everything else).

The adviser may have been entirely correct but HMRC's default position is that tax is payable - and argue about it later.

If you are no longer UK resident, I suggest you go to a reputable local adviser and ask them.

[Headinthesand27]

What is the source of your understanding?

From a tax advisor connected to the loan scheme that I had used, it was a couple of years ago so unsure if the rules may have changed... or maybe my own misunderstanding.

[webberg]

Thank you for your reply webberg.

Just to clarify, when the loans were made I was non UK domiciled and when I finally settle & write off the loans I will be non UK resident. I was only in the UK for less than 5 years (departed in 2012).

My understanding was that iht will not apply in this scenario?

What is the source of your understanding?

[Headinthesand27]

Perhaps at the time the loans were made you were resident?

If so, losing your UK resident status could be a trigger.

IHT also tends to be driven more by domicile than resident status. These are different and distinct states.

Domicile is usually something you are born with. Initially it would be your parents' domicile status and as you obtain your majority, it's where you consider your home to be.

It is based on a longer term test than resident status and is usually very difficult to change.

Hence the comment above that for IHT purposes being tax resident in the UK for 14 out of 15 years (I think this has varied from time to time) is enough to make you domiciled for IHT purposes.

If you have recently left the UK or are planning on being out of the UK at the time of the write off, that 14/15 rules may still catch you.

Thank you for your reply webberg.

Just to clarify, when the loans were made I was non UK domiciled and when I finally settle & write off the loans I will be non UK resident. I was only in the UK for less than 5 years (departed in 2012).

My understanding was that iht will not apply in this scenario?

[webberg]

This may have already been brought up subsequently (sorry) but just thought I’d add my 2c worth.

I’m non domiciled and non resident when loans will be written off and HMRC insist that I owe IHT. Not sure why and getting any bit of clarity from them is like getting blood out of a stone.

Does anyone know more about this at all??

Perhaps at the time the loans were made you were resident?

If so, losing your UK resident status could be a trigger.

IHT also tends to be driven more by domicile than resident status. These are different and distinct states.

Domicile is usually something you are born with. Initially it would be your parents' domicile status and as you obtain your majority, it's where you consider your home to be.

It is based on a longer term test than resident status and is usually very difficult to change.

Hence the comment above that for IHT purposes being tax resident in the UK for 14 out of 15 years (I think this has varied from time to time) is enough to make you domiciled for IHT purposes.

If you have recently left the UK or are planning on being out of the UK at the time of the write off, that 14/15 rules may still catch you.

[Headinthesand27]

Makes a difference to IHT calculations.

Non domiciled people are unlikely to pay IHT until they have been here (I think) 14 out of 15 years.

This may have already been brought up subsequently (sorry) but just thought I’d add my 2c worth.

I’m non domiciled and non resident when loans will be written off and HMRC insist that I owe IHT. Not sure why and getting any bit of clarity from them is like getting blood out of a stone.

Does anyone know more about this at all??

[EBTwhatwhenhow]

Makes a difference to IHT calculations.

Non domiciled people are unlikely to pay IHT until they have been here (I think) 14 out of 15 years.

Thanks webberg. All the best.

[webberg]

Just wondering if anyone knows the relevance of the domicile questions on page 2 the CL5a Settlement Options form? The form asks you to complete the domicile questions if you are planning on writing off the loan balance with the trustee after agreeing a settlement with HMRC. Thanks :-)

Makes a difference to IHT calculations.

Non domiciled people are unlikely to pay IHT until they have been here (I think) 14 out of 15 years.

[EBTwhatwhenhow]

CL5a Settlement Options Form - Why do they ask about domicile?

Just wondering if anyone knows the relevance of the domicile questions on page 2 the CL5a Settlement Options form? The form asks you to complete the domicile questions if you are planning on writing off the loan balance with the trustee after agreeing a settlement with HMRC. Thanks :-)

[webberg]

Just wondering, what is the difference and which is better for IHT minimization purposes?

Depends also on the trust type.

Without seeing the deed, I can't say.

[HMRC made Atlas Shrug]

Just wondering, what is the difference and which is better for IHT minimization purposes?

I sent a letter to HMRC's IHT department asking them this before I settled. HMRC did not want to tell me, they never responded.

[ChimpMaster]

A trust which is settled (paid for) by an employer and one that is settled by you, have completely different IHT rules.

Just wondering, what is the difference and which is better for IHT minimization purposes?

[HMRC made Atlas Shrug]

[QUOTE=webberg;2501806]Yes, facts are more important than bits of paper."



"I seriously doubt that the contract settlement you signed would have prevented HMRC coming for more. Most of those we have seen say something like
.........
A trust which is settled (paid for) by an employer and one that is settled by you, have completely different IHT rules.

In particular check out sections 21 and 65 of IHTA 1984.

The latter in particular was mentioned in previous settlement opportunities and might be very useful."

Thanks, some light reading for me for the weekend. Can't wait. Thanks for the info and also thanks for the headache I'm going to get trying to decipher IHT rues.

"I know you have doubts about the value of professional advice, but for what it's worth I'll look over the agreement for you, free of charge, if you want me to and let you know what I think."

I appreciate (and anticipated) your kind offer to have a look so I jumped the gun.
I contacted you around 5 weeks ago and again around 2/3 weeks ago via e-mail, that was before finding and joining this forum. You already have the information. I'm waiting patiently to hear if you need additional information or for your opinion.

[webberg]

My apologies, I did not know/realise why you asked about the loan total regarding IHT until now.

More bad news, just another one of HMRC's rules HMMafia are ignoring. My loan (total) is less than £325k and HMMafia is charging IHT from the first loan to the last. The whole lot, no exceptions.

I had a look at the discussion on the £325k limit but like everything else to do with HMRC, it looks as if they kept their backdoor open.

We need a revolution in this country!!!

Some types of trust (EBTs mainly) are outside the lifetime allowance.

[webberg]

Thank you for the simple explanation.

This should be concerning to everybody in the country because once (since) HMRC is allowed to ignore legal contracts (?), next time it will be someone else's (another industry's) turn and they should then not complain it us unfair. I for one will then be

So if I understand the ruling, the crux of it is it does not matter to HMRC what was agreed or written in our contracts with e.g. Horizon. That explains why (as I read and understand English), HMRC is also ignoring what they put in their own settlement regarding having included the release of my loans in their settlement.

I think people are not (yet) realising that even if they settle and pay PAYE, it is not the end of it. HMRC will then come after them for thousands in IHT on released loans or my guess, the 2019 charge will still catch them on the outstanding loans. My guess is many people think settling is the end of it, as you know, it is not.

Since I already settled I guess my problem apart from that HMRC included the release of my loans in their own settlement agreement and are now ignoring that fact. "However the employer (promoter) "redirected" £75 to a trust". So this is one of the big sticking points in my case.

Since HMRC is allowed to ignore contracts we are all . . . . . whats the word.

Yes, facts are more important than bits of paper.

I seriously doubt that the contract settlement you signed would have prevented HMRC coming for more. Most of those we have seen say something like

"We have assumed that your loans will be written off and we have charged IHT accordingly. If this does not happen within 90 days, we reserve the right to recalculate IHT at the time the loans are written off."

Just be aware that whilst the Judges decided that facts are better than papers, HMRC claim that this applies only for income tax and that for IHT purposes, they can follow paper over facts. Completely barmy.

A trust which is settled (paid for) by an employer and one that is settled by you, have completely different IHT rules.

In particular check out sections 21 and 65 of IHTA 1984.

The latter in particular was mentioned in previous settlement opportunities and might be very useful.

Whilst I think HMRC's analysis is wrong, if they have written an agreement that they are now reneging on, you have recourse to law and should stop corresponding with HMRC and reach for a lawyer.

If they have written the sort of agreement I think they may have, they are probably correct.

I know you have doubts about the value of professional advice, but for what it's worth I'll look over the agreement for you, free of charge, if you want me to and let you know what I think.