Reply to: Recovering loans?

[Aki1]

Butterfly I would speak to Webberg or phil - both on this forum - they are both trustworthy

[Butterflyball]

has happened to us,

We have in the past few days been passed a letter sent to a client, from a law firm.

The law firm claims to be acting on behalf of a liquidator of a scheme that closed a while ago.

The gist of the letter is that the loans made some years ago are assets and that they will be seeking to realise those assets, i.e. ask our client for repayment of the loan.

There is a lot in the letter that is unclear.



The legal basis for a claim; who the law firm's client is; the implication that HMRC is driving the action - or perhaps not; the interaction (if any) between this action and settlement; who is paying their fees or is it a no win, no fee?

We are taking professional advice on this.

Our concern is that if this is the first of the ambulance chasers then we will see more and therefore it would be sensible for us to understand the basis of the claims and how they can be resisted.

This particular scheme is well known but we have relatively few clients involved in. We have reached out to other advisers who may have clients in this scheme in order to share information and perhaps in due course come up with a joint defence.

In the meantime, given that this is the first such we have seen, I'd be interested to know (anonymously in terms of your name and scheme name) how widespread this sort of activity might be.

Yes I can confirm this has happened to us. Letter received yesterday. We have a young family and are really struggling to deal with the stress of this. They have given us 3 weeks to respond.... letter only received yesterday yet dated beginning of August. Who can advise?

[dammit chloe]

I so far read two things into the responses here.

One. Nobody has yet indicated that they have seen such a letter and that tells me that either I've got one of the first, or the promoter in question has clamped down hard on the former clients.

Two. The implications for the loan charge and the integrity of our parliament need more work.

Somebody has reported this on the LCAG forums. Apparently a firm with a lack of ethos.

[allbutbankrupt]

I so far read two things into the responses here.

One. Nobody has yet indicated that they have seen such a letter and that tells me that either I've got one of the first, or the promoter in question has clamped down hard on the former clients.

Two. The implications for the loan charge and the integrity of our parliament need more work.

Surely point 2 was clear a long time before this thread.

[webberg]

I so far read two things into the responses here.

One. Nobody has yet indicated that they have seen such a letter and that tells me that either I've got one of the first, or the promoter in question has clamped down hard on the former clients.

Two. The implications for the loan charge and the integrity of our parliament need more work.

[webberg]

Good to see HMRC going after the promoters. Though the liquidators should be forced to sue the promoters and their insurers.

I'm not sure that they are.

If the liquidator is forced by HMRC or the prospect of fees to realise assets, those assets are the loans and you are the borrower.

Therefore you pay and not the promoter.

[webberg]

If the lender is a trust, it is difficult to see how a liquidator would be involved in seeking reimbursement of the loans. If the company has indemnified the trustee for some expenses then I could see why the liquidator would want the the loans repaid as it reduces the company's liability under the indemnity. But it's going to be some very unusual situations where there would be such an expense (e.g. EBT borrowed from a bank).

The scheme ran for a long while and I think (in the absence of better data) that the employer company was the lender for part of the time and a trust was used at other times either to make a loan or to warehouse a loan initially made by another.

The letter is (deliberately?) vague on this point.

[webberg]

Are you sure it is a pukka law firm (i.e. regulated by the SRA)? SRA | Bogus solicitors | Solicitors Regulation Authority

https://www.theguardian.com/money/20...care-customers

Yes they are, quite a large firm with a multi disciplinary practice.

[webberg]

fair enough, but its interesting that HMRC seem to want their cake and eat it....my MP may be interested to know that they want to collect tax by way of the loan charge from " employees" whilst also claiming the same tax from the assets of a defunct company.

Possibly. At this stage i don't know that it's HMRC driving the claim or the law firm chasing a fee.

[Calmbeforethestorm]

As I said, take proper advice mentioning the bits I set out above. If your counsel considered those points, explained why what I said was not right, gave you a written opinion on them based on your facts and you think the counsel is good then great. But your comment:



suggests otherwise. The FURBS has an asset (the loan receivable). Repay the loan and it has cash. They are two different things. Section 554R makes clear that in normal circumstances there is no new earmarking charge. But if the cash comes from you, that is not something that s554R gives relief for.

Just to be clear, the date that the FURBS was set up and that the contributions were made by the employer makes no difference.

lets wait and see then... but if you're right then Stride and HMRC are lying if they say repaying a loan in an option.

Despite everything, this I find hard to believe.

[Iliketax]

I will, but in previous Counsel's opinion I had a few years ago he confirmed the point about buying a house or any similar transaction with a related party.A loan is an asset, repayment simply changes the asset for a different asset which is like a reinvestment if you like. It is no more or no less earmarked than it was before.If an annuity were then purchased for a beneficiary this would obviously be an earmarking like buying the house in your example.Simply holding the cash isnt I believe. Inevitably a FURB, being a defined contribution scheme holds assets " earmarked" for each beneficiary from day 1. This is something I have already sought clarification on.Perhaps it may ultimately depend on when the scheme was set up, when contributions from the employer were made etc

As I said, take proper advice mentioning the bits I set out above. If your counsel considered those points, explained why what I said was not right, gave you a written opinion on them based on your facts and you think the counsel is good then great. But your comment:

It is no more or no less earmarked than it was before

suggests otherwise. The FURBS has an asset (the loan receivable). Repay the loan and it has cash. They are two different things. Section 554R makes clear that in normal circumstances there is no new earmarking charge. But if the cash comes from you, that is not something that s554R gives relief for.

Just to be clear, the date that the FURBS was set up and that the contributions were made by the employer makes no difference.

[GammaMadrid]

Good to see HMRC going after the promoters. Though the liquidators should be forced to sue the promoters and their insurers.

[Calmbeforethestorm]

It will be a question of fact. But a FURBS will normally drafted in a way that means that s554B(1)(b) will apply. Section 554R was deliberately drafted so that FURBS could reinvest without a Part 7A tax charge (and s554Q was deliberately drafted so that a FURBS's income was not taxed under Part 7A). But HMRC also deliberately drafted s554R so that the FURBS could not buy a house from a member tax-free. When you ask your adviser about this, ask them why s554B and s554R focus on a "sum of money or asset" rather than the "fund". Ask they think it does mean "fund" (your implied interpretation) then (i) why is s554R required in the first place, and (ii) what is the point of limiting the s554R exemptions in certain circumstances? And just to labour the point, the FURBS's asset, the loan receivable, is "S", the FURBS is "P", you are "A" and "T" is the sum of money is that you would be paying the FURBS when you repay the loan.

I will, but in previous Counsel's opinion I had a few years ago he confirmed the point about buying a house or any similar transaction with a related party.A loan is an asset, repayment simply changes the asset for a different asset which is like a reinvestment if you like. It is no more or no less earmarked than it was before.If an annuity were then purchased for a beneficiary this would obviously be an earmarking like buying the house in your example.Simply holding the cash isnt I believe. Inevitably a FURB, being a defined contribution scheme holds assets " earmarked" for each beneficiary from day 1. This is something I have already sought clarification on.Perhaps it may ultimately depend on when the scheme was set up, when contributions from the employer were made etc

[Iliketax]

Will take this up with my advisor, if this is correct then how can HMRC and Mel Stride be saying that you can avoid the loan charge by repaying the loans....bit of a whopper if all it does is trigger a different tax charge.

It will be a question of fact. But a FURBS will normally drafted in a way that means that s554B(1)(b) will apply. Section 554R was deliberately drafted so that FURBS could reinvest without a Part 7A tax charge (and s554Q was deliberately drafted so that a FURBS's income was not taxed under Part 7A). But HMRC also deliberately drafted s554R so that the FURBS could not buy a house from a member tax-free. When you ask your adviser about this, ask them why s554B and s554R focus on a "sum of money or asset" rather than the "fund". Ask they think it does mean "fund" (your implied interpretation) then (i) why is s554R required in the first place, and (ii) what is the point of limiting the s554R exemptions in certain circumstances? And just to labour the point, the FURBS's asset, the loan receivable, is "S", the FURBS is "P", you are "A" and "T" is the sum of money is that you would be paying the FURBS when you repay the loan.

[Calmbeforethestorm]

In my day job, that is not a moot point. Section 554R would be pointless if that is the case. And repaying a loan cannot be within the s554R exemption. It will then be a question of fact whether the sums are actually earmarked, and that can be active or passive.

Will take this up with my advisor, if this is correct then how can HMRC and Mel Stride be saying that you can avoid the loan charge by repaying the loans....bit of a whopper if all it does is trigger a different tax charge.