Reply to: AML 2019 Loan Charge

[Fred Bloggs]

I will allow this duplicated post, Phes has posted a very useful resource.

Thank you Phes.

Indeed. It's very interesting that almost all the offshore scheme companies have a similar UK domiciled twin. No doubt that's how agencies in the UK saw the scheme and it satisfied their requirements of no off shore entities in the supply chain. What a shame they didn't scratch at the paper thin veneer of UK domicile. Their finger would have gone right through at the slightest touch.

[cojak]

I will allow this duplicated post, Phes has posted a very useful resource.

Thank you Phes.

[Phes]

I've recently come across a list on Opencorprates that links all crooked AML/Knox umbrellas. Don't let them sting you like they me (and countless other contractors)

https://opencorporates.com/corporate...of%20Companies

[webberg]

Or is that a silly notion?

Not at all.

Most have a mix of open and closed years.

If the situation works out as HMRC expect, open years will be settled or agreed by a Tribunal.

Closed years can be settled of course, but where they are excluded, will become liable to the loan charge (in HMRC eyes).

Where there is a fight and the loan charge is payable it's entirely possible that the total paid - open years plus loan charge, even after set off, will be more than just settling. If so, no refund.

[d70hef]

In that case not settling, and falling into the LC, only makes any sense if you intend to fight.

The OP is probably an unusual case. I expect, for the majority of people, the LC would work out more expensive than settling.

Maybe it's just me, but it seems a bit perverse that the LC should ever be a lower amount than settling. Surely, HMRC should be incentivising people to settle? Or is that a silly notion?

Thanks Stonehenge and Webberg for your advice. I appreciate that the worst case scenario in this situation is the most likely . I won’t be making any rash decisions. I do find it slightly perverse that in trying to settle the amount is greater than the loan charge. Then again, nothing about this situation is normal.

All I would add is that can HRMC really argue that a 53.88% charge is fair and reasonable. It seems that 45% is the maximum amount that they argued would bring this legislation into effect.

[stonehenge]

And what happens if the LC is £100k but settlement would £80k?

In that case not settling, and falling into the LC, only makes any sense if you intend to fight.

The OP is probably an unusual case. I expect, for the majority of people, the LC would work out more expensive than settling.

Maybe it's just me, but it seems a bit perverse that the LC should ever be a lower amount than settling. Surely, HMRC should be incentivising people to settle? Or is that a silly notion?

[Quaixy]

Let's up the anti

This chap Doug Barrowman, if he has a private super yacht that undoubtedly sales in international waters, I am sure some members here have ties with friends abroad outside British jurisdiction. Thereby if it is anywhere near the horn of Africa or gulf of Aden strange things do happen especially if you don't have the right private security contractors looking after you. There are organisation based in UAE or west Africa that do private security contracting and risk neutralisation. I am sure if the 100000 plus contractors affected donate even 100 GBP would help alleviate their frustration. Not advocating anything illegal under British law of course .

I'd be happy to add a 0 to that donation, sod it, let's put a bounty on his & people like Anne O'Donnell at Procorre's heads.

I've never contemplated suicide as a result of the loan charge, murder yes, suicide no

[webberg]

The OP (d70hef) only has closed years, so for him/her there is no risk. Paying the LC will be the end of the matter, and for him/her it works out cheaper than settling.

Sure, for open years, there is a risk that HMRC could come back for more at a later date but as long as people understand this then IMHO it's worth a punt if paying the LC is substantially less than settling.

Example

Paying the LC (tax only) - £100k
Settlement (tax + interest + possible class 4 nics) - £130k

If you pay the LC, worst case is you could have to pay another £30k at some later date.

And what happens if the LC is £100k but settlement would £80k?

[stonehenge]

I suggest however that to suggest to newcomers here that there is a choice between loan charge and agreeing the final position for each year of loans based on the opinion that HMRC will then allow things to be indefinitely shelved, should come with an advisory warning.

The OP (d70hef) only has closed years, so for him/her there is no risk. Paying the LC will be the end of the matter, and for him/her it works out cheaper than settling.

Sure, for open years, there is a risk that HMRC could come back for more at a later date but as long as people understand this then IMHO it's worth a punt if paying the LC is substantially less than settling.

Example

Paying the LC (tax only) - £100k
Settlement (tax + interest + possible class 4 nics) - £130k

If you pay the LC, worst case is you could have to pay another £30k at some later date.

[webberg]

The legislation sets no time limit on how long cases can be left open. There's nothing to prevent HMRC putting cases on hold. (indefinitely )

And, they absolutely do this.

You are correct that once an enquiry is open it can remain open indefinitely.

There is however a process under which you can ask HMRC to close the enquiry and if they refuse, you can ask a Tribunal to force the closure notice issue and then - if matters remain in dispute - go to Tribunal to argue it.

That is something EVERY taxpayer can do.

It's also the case that HMRC will not wish to report a growing number of unresolved enquiries to Parliament every year. This is a reflection on their efficiency.

It's also the case that to open enquiries, put them on hold forever and not resolve them is not something HMRC has done - EVER - even with the most complex of cases. Eventually things have to be agreed, sometimes at the point of a Judge.

To allow a case to go unresolved would be completely unprecedented. (Or at least I've not seen this happen in 40+ years working in tax).

If however you have any evidence that this has happened or that HMRC is planning on this happening, as I said, I'd be happy to eat humble pie.

If all you have is an opinion, that's absolutely fine.

I suggest however that to suggest to newcomers here that there is a choice between loan charge and agreeing the final position for each year of loans based on the opinion that HMRC will then allow things to be indefinitely shelved, should come with an advisory warning.

[stonehenge]

Clearly all I know is what the legislation says.

If you can point me at any public statement or material that says I am wrong, I will gladly eat humble pie.

The legislation sets no time limit on how long cases can be left open. There's nothing to prevent HMRC putting cases on hold. (indefinitely )

And, they absolutely do this.

[webberg]

Maybe, eventually, whenever.

If you seriously believe that HMRC pursues all open cases through to closure, then you obviously don't know what I know.

Clearly I don't.

Clearly all I know is what the legislation says.

If you can point me at any public statement or material that says I am wrong, I will gladly eat humble pie.

[stonehenge]

No.

The loan charge is not something to do "instead" of settling.

If you pay the loan charge, you MUST still agree the open years.

Maybe, eventually, whenever.

If you seriously believe that HMRC pursues all open cases through to closure, then you obviously don't know what I know.

[webberg]

. As long as you are aware of this possibility then there's no harm in paying the charge instead of settling.

No.

The loan charge is not something to do "instead" of settling.

If you pay the loan charge, you MUST still agree the open years.

[stonehenge]

3) Finally, the total figure I am being asked to pay as a percentage of the payments I received is as follows (Income tax = 39.89%, NI = 5.10%, Interest = 3.70%, IHT = 5.19%). The total bill is therefore 53.88% of the loan amount.

Are you being charged NI because it was a self-employed scheme?

You could pay the loan charge but, if at some point in the future HMRC defeat the scheme in court, they can come back to you for the shortfall. As long as you are aware of this possibility then there's no harm in paying the charge instead of settling.