Reply to: Yep another one - Target Umbrella / Redstone Services - HMRC letter

[NeedTheSunshine]

September? There is an earlier deadline after the financial year end for paper returns but that's 31 October. I think that used to be September but can't remember.

You wouldn't get more than a year to do your SATR, 10 months ought to be sufficient for most people.

Regarding the loan charge the latest from HMRC is that you can file in Sept 2020 and not suffer penalties if you are subject to the loan charge. Or file by end Jan (now gone) and then amend with the loan amounts by end Sept. I think most people have taken the latter option as the late filing penalty is automated and it would be a hassle to get HMRC to sort it out. Not worth it. Plus you do have to pay owed tax on all non Loan Charge related income by the usual deadline.

Disguised remuneration: guidance following the outcome of the independent loan charge review - GOV.UK

Scroll down to the bit about the Self Assessment

[DealorNoDeal]

I've actually got a copy but probably more worrying is HMRC could or would happily say we got that wrong. Therefore I dont think it helps but then maybe a professional will say it does. Anyway onwards and upwards.

Sure, HMRC could later change their mind but it comes down to whether it was reasonable, at the time you filed your SATR, for you not to declare the loans.

Of course, your defence would be much more solid if you had a letter addressed to you.

[ladymuck]

I thought that you have until September to declare the Loans on the SATR. It's all a confusing mess.

I'm surprised that you have seen a letter saying that the Loan Charge doesn't apply. Good that you have a copy.

September? There is an earlier deadline after the financial year end for paper returns but that's 31 October. I think that used to be September but can't remember.

You wouldn't get more than a year to do your SATR, 10 months ought to be sufficient for most people.

[NeedTheSunshine]

I've actually got a copy but probably more worrying is HMRC could or would happily say we got that wrong. Therefore I dont think it helps but then maybe a professional will say it does. Anyway onwards and upwards.

I thought that you have until September to declare the Loans on the SATR. It's all a confusing mess.

I'm surprised that you have seen a letter saying that the Loan Charge doesn't apply. Good that you have a copy.

Send a request for the same for you in writing via recorded delivery. Although I do agree with your worries about HMRC saying that they got it wrong.

[lowpaidworker]

If you want to go down the route of not declaring the loans for the LC on your 2018/19 SATR, I'd keep pushing for this confirmation. Failing that, it would be worth getting a copy of that redacted letter if you can.

I've actually got a copy but probably more worrying is HMRC could or would happily say we got that wrong. Therefore I dont think it helps but then maybe a professional will say it does. Anyway onwards and upwards.

[DealorNoDeal]

As also mentioned I have seen a redacted letter from HMRC confirming the loans are out of scope although I have not received one yet despite asking them to confirm on more than two occassions.

If you want to go down the route of not declaring the loans for the LC on your 2018/19 SATR, I'd keep pushing for this confirmation. Failing that, it would be worth getting a copy of that redacted letter if you can.

[lowpaidworker]

They're all confident or else we wouldn't sign up. Will they go to tribunal on their employees' behalf?

I get all that. I am no mug.... now..... Maybe was in the past but like everyone else I am not a tax expert and trusted way too many people for reasons not worth going into.

I want to keep all avenues open while I decide how to get out of this mess. Yes that includes finally getting a some serious advice from someone impartial (like GW or his firm), but when i sit down with the poor advisor that will help me I have a small understanding of how the **** I am in this situation/mess and how or what i can afford to get out of it.

[NeedTheSunshine]

Sorry was not getting at anything really. I am trying to figure out why my old Employer feel so confident their loans are not captured by the 2019LC.

Your last comment appears to put beyond doubt they are out of reach.

They're all confident or else we wouldn't sign up. Will they go to tribunal on their employees' behalf?

[lowpaidworker]

Not certain what you're getting at. The whole point of these schemes is that they profess to be tax compliant - they wouldn't bother if they were domiciled beyond HMRC's reach

If it's an overseas co that is employing in the UK, HMRC can use the Insolvency Act to wind it up here like a UK co

Sorry was not getting at anything really. I am trying to figure out why my old Employer feel so confident their loans are not captured by the 2019LC.

Your last comment appears to put beyond doubt they are out of reach.

[Ian Richardson GT Leeds]

thanks Ian. One further question. What if the Tax jurisdiction of the loan provider/employer is outside HMRC's reach for the purpose of CT?

Not certain what you're getting at. The whole point of these schemes is that they profess to be tax compliant - they wouldn't bother if they were domiciled beyond HMRC's reach

If it's an overseas co that is employing in the UK, HMRC can use the Insolvency Act to wind it up here like a UK co

[lowpaidworker]

This is consistent with how HMRC have told me (as a liquidator appointed to insolvent scheme operators) they will calculate their claims

But (IMHO) avoiding the loan charge is not a good outcome for employees receiving loans, because when the employer fails (which it will, because it won't want to pay either the CT on the non deductible loans it has paid out, or the PAYE/NIC that is assessed when HMRC find out about a subsequent assignment) and the employer goes down, the administrator or liquidator will (at least try to) collect the loans in …..

So if you enter into a scheme where you are paid part of your salary by way of a loan, you're just storing up future trouble for yourself

thanks Ian. One further question. What if the Tax jurisdiction of the loan provider/employer is outside HMRC's reach for the purpose of CT?

[Ian Richardson GT Leeds]

Not quite true.

At present there are perhaps two arguments HMRC has advanced in two separate places and upon which they may in due course place some reliance.

First, the loan charge legislation discusses "quasi loans". In essence this is a catch all phrase which could be taken to mean a loan that replaces another loan.

In most direct loan schemes the claim is that a loan from the employer is outside the definition in section 554A (1)(d). I think this is true.

If nothing else was done and the employer was still around and still held the loans, then I would say that prima facie, you had a great chance of avoiding the loan charge.

Almost inevitably however the loan made by the employer was moved on at some point (just before a company/tax year end normally) and the loan is now held by a third party. Perhaps a trust.

Is it now within the rules in 554A (1)(d) and/or quasi loan rules in Sch 11 F(No2)A 2017?

I would say that there is a very good chance that HMRC think so and a case to argue if you don't think so.

This is consistent with how HMRC have told me (as a liquidator appointed to insolvent scheme operators) they will calculate their claims

But (IMHO) avoiding the loan charge is not a good outcome for employees receiving loans, because when the employer fails (which it will, because it won't want to pay either the CT on the non deductible loans it has paid out, or the PAYE/NIC that is assessed when HMRC find out about a subsequent assignment) and the employer goes down, the administrator or liquidator will (at least try to) collect the loans in …..

So if you enter into a scheme where you are paid part of your salary by way of a loan, you're just storing up future trouble for yourself

[lowpaidworker]

If nothing else was done and the employer was still around and still held the loans, then I would say that prima facie, you had a great chance of avoiding the loan charge.

So the loans made by Target/Redstone are still with them. They havent been transferred to a third party last I heard which based on their loan statements was at least Sept 2019 and based on a email a few weeks ago they assure me they are still being held by them. These date from aroudn 2012-15 and last i heard will still being issued in 2017. So I would assume there have been many FYE's. I have no idea how they have managed to keep them on their BS.

As also mentioned I have seen a redacted letter from HMRC confirming the loans are out of scope although I have not received one yet despite asking them to confirm on more than two occassions. I think on this last point my mail ends up with a case worker rather than one of the "experts" although I wouldn't want to try and second guess how HMRC work.

[webberg]

None whatsoever. Other than they have written to me saying mine are caught, despite them not referencing any years. .

Not quite true.

At present there are perhaps two arguments HMRC has advanced in two separate places and upon which they may in due course place some reliance.

First, the loan charge legislation discusses "quasi loans". In essence this is a catch all phrase which could be taken to mean a loan that replaces another loan.

In most direct loan schemes the claim is that a loan from the employer is outside the definition in section 554A (1)(d). I think this is true.

If nothing else was done and the employer was still around and still held the loans, then I would say that prima facie, you had a great chance of avoiding the loan charge.

Almost inevitably however the loan made by the employer was moved on at some point (just before a company/tax year end normally) and the loan is now held by a third party. Perhaps a trust.

Is it now within the rules in 554A (1)(d) and/or quasi loan rules in Sch 11 F(No2)A 2017?

I would say that there is a very good chance that HMRC think so and a case to argue if you don't think so.

Further, there is a GAAR opinion from October 2018 in which a scheme which has the switch of loans from original lender to third party involved. HMRC persuaded the GAAR Panel (and no evidence was produced from the taxpayer side to refute it) that Parliament had intended that the situation should be caught within the rules of Part 7a, despite specifically not saying so, and therefore he rules could apply.

Now this is i think a long stretch for a Tribunal to make and I'd be surprised if - upon challenge - it would stand up. Unfortunately a GAAR opinion means that if you go to Court and lose, high penalties are automatically applied. So who will risk that?

The above is why I think HMRC hold the view they do.

Perhaps they have other grounds, but if so, they have not told me about them.

[lowpaidworker]

Have HMRC given any actual reason why the loans are caught by the LC?

None whatsoever. Other than they have written to me saying mine are caught, despite them not referencing any years. To add to the confusion I have seen a letter from HMRC to a scheme member confirming the Target/Redstone loans are not caught by the LC19.

Anyway per my comment above they need proper tax adivce and not just just rely on the ramblings and hearsay on these forums.