Reply to: Anyone repaying loans - who "owns" the funds

[Kragon]

ie. earmarking caught by tax so repaying really is never and option for anyone in the UK

What if you are now outside of the UK - does that make a difference?

[Theythinkitsallover]

Loan repayments to avoid LC

This is a contractor forum where contractors have got loans instead of getting paid. From a contractor's perspective, you'd be foolish to repay the loan because you wouldn't repay wages.

Oh I see because you are a pesky contractor repaying your loan is foolish because it really is/was wages. You sure about that Iliketax ??

Alright for one set of people to be able to repay but not for those pesky contractors. Those monies were really wages that the employer should now be paying tax on - but tell you what because we are out of time to collect that tax we will just now invent a new legislation to make it a taxable loan which we will "pretend" you can repay but really you can't - wow that would make interesting reading for a few MPs I am sure. Especially in light of the narrative coming from a Mr Stride to MPs and the HMRC PR machine and why its not retrospective.

[GUD]

sign petition

Worth signing this petition if you oppose the 2019 Loan Charge. We need minimum 10,000 signatures.

https://petition.parliament.uk/petitions/218582

The personal data of petitioner will not be published. Please do not worry about your details, a big IF, shared with HMRC. Don't forget that the scheme provider is going to pass your details anyways in Sep 2019.

[me206et]

It's interesting.
I know someone who was given a loan, maybe more than one, by a small business they worked for. Was really a bonus. Not sure how it was written off, but it was never to be repaid.
Technically they should be caught, but as it was a small company I would guess nobody will ever tell HMRC.
Does piss me off that this person also thinks the rest of us are getting our just deserts.

[Iliketax]

It's there as an "option" because otherwise they would never be able to argue it isn't retrospective. Remember the option to "repay" stops the retrospective argument and one Mel Stride continually refers to.

Iliketax confirms its retrospective in everything he says - ie. earmarking caught by tax so repaying really is never and option for anyone in the UK. I am sure this will be flagged to the courts in time as an outright lie by HMRC to push the legislation through.

They should be worried about such blatant lies to parliament - it will all come out in time.

This is a contractor forum where contractors have got loans instead of getting paid. From a contractor's perspective, you'd be foolish to repay the loan because you wouldn't repay wages. So a contractor would say it is retrospective. But the April 2019 loan charge is much wider that just contractors. So for others [see example below], they may have a loan that is caught by the April 2019 loan charge. They can, for example, just refinance it by going to the bank and getting the loan on exactly the same terms that you or I can get. Such a person would say it is all a bit of faff having to refinance, but they would not say it is retrospective. So retrospective is very much in the eye of the beholder.

An example of someone else may be a business owner who took a loan pre-2011 from a bank, on favourable terms because of their wider business relationship, to buy a house. There are lots more.

[Theythinkitsallover]

Loan repayments to avoid LC

Seriously, people need to forget any idea of repaying loans. The legislation makes that a complete non-starter. In fact, it's an utter joke that this is even provided as an option for avoiding the charge.

Repaying loans = fecking elephant trap

It's there as an "option" because otherwise they would never be able to argue it isn't retrospective. Remember the option to "repay" stops the retrospective argument and one Mel Stride continually refers to.

Iliketax confirms its retrospective in everything he says - ie. earmarking caught by tax so repaying really is never and option for anyone in the UK. I am sure this will be flagged to the courts in time as an outright lie by HMRC to push the legislation through.

They should be worried about such blatant lies to parliament - it will all come out in time.

[Loan Ranger]

Just to be clear, if the trustee was not going to be earmarking it for you (or your family, etc) why on earth are you repaying it?

[HEAVY IRONY]Well, for me personally, it's because I'd rather pay £1 in the £1 back to some tossers in the IoM than give 40p in the £1 to HMRC.[/HEAVY IRONY]

[Loan Ranger]

Is there a possibility of people repaying loans, never to see the money again?

Yes, and never seeing the money again would be a result because you wouldn't have to pay tax on it.

Seriously, people need to forget any idea of repaying loans. The legislation makes that a complete non-starter. In fact, it's an utter joke that this is even provided as an option for avoiding the charge.

Repaying loans = fecking elephant trap

[WTFH]

Is there a possibility of people repaying loans, never to see the money again?

I think that's a very real possibility.

If it were me, I'd want to make sure that any decision on what someone does about the tax must include a guarantee that either they get their money back when they repay the loan, or that the loan is written off and cancelled as part of the settlement.

[cojak]

Is there a possibility of people repaying loans, never to see the money again?

[Iliketax]

So, if for example I have £400,000 of loans, and had/could borrow the cash, could I repay the loans and have the trust pay it back to me over 10 years at £40k per year, and make a pension contribution of £40k each year and thus in effect transfer all of the loan into my pension ? IE similar to the idea of using a large pension contribution in 2018/19 to reduce the LC, but is not limited to the annual pension limits.

You can do that. But there will be a tax charge on £400,000 when the trustee earmarks the funds for you. The exemption is s554R(1)(c) ITEPA 2003 does not apply because the sum that the trustee received came from you. Mention that when you take your own independent, professional tax advice.

With an upfront earmarking charge there would not be a tax charge when the money is eventually paid to you (so you would not get pensions tax relief in later years).

Just to be clear, if the trustee was not going to be earmarking it for you (or your family, etc) why on earth are you repaying it?

[Iliketax]

Earmarking is fine as long as "tax is paid" on the redistribution of the funds.

No. Earmarking creates a tax charge under the normal DR rules.

[Albert49]

Pension ?

Earmarking is fine as long as "tax is paid" on the redistribution of the funds. Where that tax has to be paid is a question that still remains unanswered - and probably one that will only be able to be tested through the courts.

So, if for example I have £400,000 of loans, and had/could borrow the cash, could I repay the loans and have the trust pay it back to me over 10 years at £40k per year, and make a pension contribution of £40k each year and thus in effect transfer all of the loan into my pension ? IE similar to the idea of using a large pension contribution in 2018/19 to reduce the LC, but is not limited to the annual pension limits.

[Theythinkitsallover]

Earmarking

Well, therein lies the problem. Any money in the trust would ordinarily be for the benefit the beneficiary (you), which is why repaying the loan could be caught by the earmarking provisions of LC19.

Earmarking is fine as long as "tax is paid" on the redistribution of the funds. Where that tax has to be paid is a question that still remains unanswered - and probably one that will only be able to be tested through the courts.

[Loan Ranger]

So if the funds are not intended to benefit those who put into the fund, where is the money supposed to go?

Well, therein lies the problem. Any money in the trust would ordinarily be for the benefit the beneficiary (you), which is why repaying the loan could be caught by the earmarking provisions of LC19.