Reply to: What will the Loan Charge Figure actually be?

[cojak]

Here’s one.

1) Will this be taxed at 35% (if I agree to settle) or will this be less? Reason I ask is that on the example scenario on The Knox trust website (link below) shows that £180,000 loan had a tax payable of £50,000 which is approximately 27.7%. I have never claimed any form of expense and have paid NI etc on previous tax returns. Use this tax calculator to work it out. For each year, enter your total income (salary + loans). Then take the amount calculated and subtract any tax you already paid.
https://www.uktaxcalculators.co.uk

2) Do I have to declare all loans before 2016? I heard that it's only loans after 2016 that need to be declared and that are affected. All loans back to Apr 1999

3) What are unprotected versus protected loans and how does it affect me in my particular case? protected years are ones where HMRC opened an enquiry or raised an assessment. Yours all sound like they're unprotected.

4) What is the worst case scenario regarding tax on my loan versus being subject to the loan charge? You'll have to do the calcs yourself. For the LC, all loans will be treated as income in this tax year 2018/19

5) 40,000 people are estimated to be affected on SP Management and a further 200,000 affected in the UK. I have to ask why should I even declare now, perhaps I should wait until HMRC come to me? I have no open enquiries and have never been queried by HMRC. Assuming you don't settle, if you don't disclose loans by 30 Sept 2019 you could get penalties if they eventually catch up with you. If you don't pay the LC by 31 Jan 2020, penalties could be even worse.

6) How do I know if my scheme has a DOTAS or promotion reference number? The number would have been on your tax returns. I think this is unlikely otherwise you'd have had enquiries and APNs.

7) I have been told by SPM that loans paid through SPM Malta are not taxable. Is that correct? Don;t know but it sounds a bit suss

[Hero1234]

Where is the calculator?

Thanks for that where is the calculator I can’t find it on your site?

Am I safe to assume there shouldn’t be interest added as they are charging it as income for 2019?

Also why do people keep seeing ‘they will come back for more’ - how and why will they come back for more? I thought it was a choice between settlement amount plus interest or loan charge at 45%? What else is there?

It is quite annoying that the question regarding the calculator on their site was well avoided. WHERE IS THE CALCULATOR?

[Groundhogdays]

Sorry to ask a stupid question, what do HMRC officially need to send one, to ‘protect’ / open a year? Is it only a 9A enquiry. Does a Discovery Assessment count as well?

Not a stupid question - I don't know all the types of enquiry that would protect or open a tax year, but I would have thought so with a Discovery Assessment, though only if a valid discovery has been identified. Whatever type of enquiry it is, then HMRC would have to inform you when it is opened.

[Iter]

Sorry to ask a stupid question, what do HMRC officially need to send one, to ‘protect’ / open a year? Is it only a 9A enquiry. Does a Discovery Assessment count as well?

[Groundhogdays]

I saw that posting too. However I have not seen any mention of it being the case anywhere else. Maybe to do with an earlier settlement opportunity?

But yes, would make a significant difference.

I've been following up on the NICs inclusion/exclusion point, and it appears to be something HMRC has shifted position on consistently (according to a tax adviser whose company has had many dealings with them). First they said they were out of time to include NICs, then later claimed that they could include them. Current advice is that if loan schemes are older than seven years, then NICs will be excluded from settlement, while NICs are not mentioned anywhere in the loan charge context.

That would seem to chime with my CLSO1 agreement, where only tax and interest were applied for the 'voluntary payment' (the latter due to it being an open or protected tax year).

So, presumably if one only had closed years by now (after CLSO1), then neither NICs or interest are applicable and there is only the tax on your net loan amount. For settlement, then the only other concern is whether the loan amount in addition to other income for the tax year(s) in question, puts you in the higher tax band or not. And in turn whether that would reduce the personal allowance available for that year also. Then there is the question of Benefit in Kind tax for the loan, as already paid for the tax year. That may be ignored for loan charge, but still part of the calculation for settlement.

It can be difficult to know all the different factors applicable to one's 'loan portfolio's and therefore what is a realistic calculation of liability, but much better to open settlement dialogue with HMRC having done one's homework and being able to produce figures derived from supporting documentation (tax returns, HMRC tax calculation summaries, P60s, loan advices and/or bank statements)

I nearly forgot the IHT. HMRC will probably push for that too, as the other end of their tax pincer movement, if they can't get NICs or interest. So overall, what passes for 'final settlement' could be just as expensive - and wanted sooner (with no chance of later redress) than the loan charge itself.

I haven't begun to put a figure to the IHT yet. A few potential variables there too, depending on the type of loan, how it was discharged (if at all) and when.

[TooBlue]

lc calculator

Hi,
Please can you send me a link to the lc calculator and the settlement calculator if there is one.
Thanks,
Tooblue.

[Calmbeforethestorm]

There seems to be a lot of talk about the LC "hitting in Apr 2019", about it being a charge on the loan and not related to the tax which is due, and that hmrc can come back for more later.

However, if you read the government's own page on Disguised Remuneration, whilst it is deliberately vague on many points, it does indicate that there is a due process which is followed when applying the loan charge. It talks about going after employers. It talks about transferring liability. It talks about open and closed years.

I think there's a deliberate attempt to portray the loan charge as something which is outside normal tax law and is applied without any of the usual rules you'd associate with other taxes. And I believe the deception is aimed at trying to obtain as many settlements as possible.

Of course they want settlements....these cannot be undone afterwards....if they lose in court on the loan charge there wont be any refunds.

Not saying they will lose in court or the law might be amended anyway through pressure on mp's but you never know.

[Groundhogdays]

There seems to be a lot of talk about the LC "hitting in Apr 2019", about it being a charge on the loan and not related to the tax which is due, and that hmrc can come back for more later.

However, if you read the government's own page on Disguised Remuneration, whilst it is deliberately vague on many points, it does indicate that there is a due process which is followed when applying the loan charge. It talks about going after employers. It talks about transferring liability. It talks about open and closed years.

I think there's a deliberate attempt to portray the loan charge as something which is outside normal tax law and is applied without any of the usual rules you'd associate with other taxes. And I believe the deception is aimed at trying to obtain as many settlements as possible.

All the more reason to obtain a legalfreeze on the charge, until it can be properly challenged on its emerging weak points, whatever they may be...

...so, settlement, loan charge, or a 'third way'. I'm not saying the latter doesn't carry risk, as HMRC will pull out every trick in the book, including more legislation, to protect the bounty they've promised Tory High Command.

[RickG]

I'm still not 100% convinced that it has to be a case of only settlement or loan charge, if there was just a way to freeze the effect of the latter, until it can be challenged fairly.

There seems to be a lot of talk about the LC "hitting in Apr 2019", about it being a charge on the loan and not related to the tax which is due, and that hmrc can come back for more later.

However, if you read the government's own page on Disguised Remuneration, whilst it is deliberately vague on many points, it does indicate that there is a due process which is followed when applying the loan charge. It talks about going after employers. It talks about transferring liability. It talks about open and closed years.

I think there's a deliberate attempt to portray the loan charge as something which is outside normal tax law and is applied without any of the usual rules you'd associate with other taxes. And I believe the deception is aimed at trying to obtain as many settlements as possible.

[Groundhogdays]

It might feel like the difference between being reversed over, when you've already been run over, but I'd 'settle for that' if there was no other way...

I'm still not 100% convinced that it has to be a case of only settlement or loan charge, if there was just a way to freeze the effect of the latter, until it can be challenged fairly. Right or wrong, there should be an outcome that doesn't destroy people's livelihood or retirement, nor put families at risk. If HMRC are so damned keen on charging IHT, then for those who cannot pay under any current circumstances, why can't these liabilities at least be paid as part of someone's estate upon death?

Oh, I forgot - no charge, if one shuffles this mortal coil. That wouldn't do.

* On another note, for those who are really suffering I can only say that I have experienced worse life circumstances than this with a loved one quite recently, and we came through. No way am I advocating to do something rash - every life matters.

[Groundhogdays]

I saw that posting too. However I have not seen any mention of it being the case anywhere else. Maybe to do with an earlier settlement opportunity?

But yes, would make a significant difference.

It might feel like the difference between being reversed over, when you've already been run over, but I'd 'settle for that' if there was no other way...

I'm still not 100% convinced that it has to be a case of only settlement or loan charge, if there was just a way to freeze the effect of the latter, until it can be challenged fairly. Right or wrong, there should be an outcome that doesn't destroy people's livelihood or retirement, nor put families at risk. If HMRC are so damned keen on charging IHT, then for those who cannot pay under any current circumstances, why can't these liabilities at least be paid as part of someone's estate upon death?

Oh, I forgot - no charge, if one shuffles this mortal coil. That wouldn't do.

[dammit chloe]

Yep, that's the sort of thing that can bring out hidden costs if one goes in blind to settlement. And if one is pushed into the higher tax band overall, apart from upping the income tax does that also affect personal allowance for that year (or years) in question?


Someone on this forum also mentioned that pre-2011 loans might not require NICs inclusion for some reason to do with when prospective legislation was brought in at that time. I'm trying to find that post again, but does anyone else know anything about the context for that - is that a correct interpretation in terms of settlement and/or loan charge? It could make a big difference if one only had to contemplate the additional income tax.

I saw that posting too. However I have not seen any mention of it being the case anywhere else. Maybe to do with an earlier settlement opportunity?

But yes, would make a significant difference.

[webberg]

I'll check with the mods and if they are OK, I'll put up a link to the calculator.

I also recall that another poster put up a settlement calculator a few months ago which was pretty good.

[Groundhogdays]

When working out the income/ tax already received and paid in a particular year, would dividends also be counted? Part of the time using a scheme was when I was LTD. When giving figures should I even mention this, they would have rec all the returns anyway. If divi is included in income originally received then it may mean the loans are taxed at 40% rather than at a proportioned 20%....

Yep, that's the sort of thing that can bring out hidden costs if one goes in blind to settlement. And if one is pushed into the higher tax band overall, apart from upping the income tax does that also affect personal allowance for that year (or years) in question?


Someone on this forum also mentioned that pre-2011 loans might not require NICs inclusion for some reason to do with when prospective legislation was brought in at that time. I'm trying to find that post again, but does anyone else know anything about the context for that - is that a correct interpretation in terms of settlement and/or loan charge? It could make a big difference if one only had to contemplate the additional income tax.

[Iter]

When working out the income/ tax already received and paid in a particular year, would dividends also be counted? Part of the time using a scheme was when I was LTD. When giving figures should I even mention this, they would have rec all the returns anyway. If divi is included in income originally received then it may mean the loans are taxed at 40% rather than at a proportioned 20%....