Reply to: Can you still accept settlement offer after the 30days notice period?

[webberg]

Therefore paying the loan charge, then asking the lender/trustee to write off the loan will create a tax charge on par with settling.

Do you have faith in HMRC that they won't collect the full loan charge amount, and then on loan write off, collect the full tax amount as well? In theory paying almost double the amount of tax due.
Therefore no one who pays the loan charge would settle with HMRC. The loan will remain in existence until death and be open to further cash grabs whenever HMRC needs a cash windfall. Loan charge 2021 because those pesky contractors still haven't repaid the loan or settled and Brexit has bankrupted the country.

Again this is my own understanding, i'm not an accountant or lawyer. Just someone who has thankfully, but painfully been through the settlement process.

We were discussing this in the office yesterday.

If you write the loans off, that is a tax event. The tax due falls under Part 7A ITEPA and should "frank" i.e. cover the tax due on the loan charge.

The loan charge still arises of course because a write off is not a repayment in money.

So, if you do write off and have no loan charge the enquiries for earlier years remain open (I'm ignoring for now closed year complications).

So if eventually a liability is agreed for those earlier open years, would the Part 7A charge on the write off, frank that earlier liability?

At this stage I don't know or rather the research I have done is inconclusive and I need to do some more.

I do know that agents acting for a range of trusts are presently suggesting that a loan write off is a good idea (and to do that you need an expensive piece of paper that is required by nobody) and they do say that a tax charge arises. They do not say whether that tax charge will be instead of or additional to a further liability under the loan charge or settlement of earlier years' enquiries.

Given that I cannot answer that question yet either, I'll be fair and say that perhaps, like me, they are testing possible answers with HMRC.

What I'm not doing however is asking people to pay me a lot of money in order to put people into an uncertain place.

[Whysoserious]

I would respectfully disagree with the above.

There is no connection between HMRC and the lender.
- Yes I agree

You can settle and not have a loan written off.
- Yes I agree, but it would be foolish to do so

You can have a loan written off and not settle.
- Yes I agree, if the trustee believes it's in your best interest to do so (their legal requirement as trustee).

Be aware that the latter will create a tax charge courtesy of section 554(1)(ab) ITEPA 2003.

Therefore paying the loan charge, then asking the lender/trustee to write off the loan will create a tax charge on par with settling.

Do you have faith in HMRC that they won't collect the full loan charge amount, and then on loan write off, collect the full tax amount as well? In theory paying almost double the amount of tax due.
Therefore no one who pays the loan charge would settle with HMRC. The loan will remain in existence until death and be open to further cash grabs whenever HMRC needs a cash windfall. Loan charge 2021 because those pesky contractors still haven't repaid the loan or settled and Brexit has bankrupted the country.

Again this is my own understanding, i'm not an accountant or lawyer. Just someone who has thankfully, but painfully been through the settlement process.

[webberg]

Paying the loan charge is not settling with HMRC. Only after settling can the trustees write off the loan and close the trust. With settling you are agreeing the loan is actually disguised remuneration.

By paying the loan charge you are keeping the pretence that it is a loan and not income. The trustee has an obligation to keep it as a loan.

That's my understanding of it.

There may be an option of settling with HRMC after paying the loan charge and paying the difference between the loan charge value and settlement value.

Again i'm only using my experience of having gone through the whole painful experience.

I would respectfully disagree with the above.

There is no connection between HMRC and the lender.

You can settle and not have a loan written off.

You can have a loan written off and not settle.

Be aware that the latter will create a tax charge courtesy of section 554(1)(ab) ITEPA 2003.

[Whysoserious]

Sorry, why is it that you can't get a loan written off if you pay a Loan Charge?

Paying the loan charge is not settling with HMRC. Only after settling can the trustees write off the loan and close the trust. With settling you are agreeing the loan is actually disguised remuneration.

By paying the loan charge you are keeping the pretence that it is a loan and not income. The trustee has an obligation to keep it as a loan.

That's my understanding of it.

There may be an option of settling with HRMC after paying the loan charge and paying the difference between the loan charge value and settlement value.

Again i'm only using my experience of having gone through the whole painful experience.

[kryten22uk]

You can't get the loan written off when paying the loan charge. If it's the same cost to you, you would be better to do it in a manner that allows the loan to be written when you wish.

Sorry, why is it that you can't get a loan written off if you pay a Loan Charge?

[QUODM]

Can you expand on this?

HMRC claim that sending a COP8 pamphlet is opening an enquiry. We disagree.

Can you expand on this? I've checked and a cpl of my early enquiries were a 1 page letter saying
"... I intend to check this under Section 9A of the TMA 1970 ... ... and is being conducted under their Code of Practice 8 ... what I will be checking ..."

I've had 3 of these for 3 different years
2 say "I will be checking ... interest free loan .... I may find I need to extend my check ..." (letters dated Jan 2011 for years 2009/2010)
1 started the same but then asked for loan details. I think AML capitulated here and gave them all the info (to try and pass this onto me) and I got an actual "notice of assessment" for this one (currently suspended).

Are these the cop8 pamphlets you mention? I presume the first 2 are but the 3rd is more 'open'. Is that what you mean?
I'd be interested in why you think these are not 'opening an enquiry' ?

[kryten22uk]

You can't get the loan written off when paying the loan charge. If it's the same cost to you, you would be better to do it in a manner that allows the loan to be written when you wish.

Ah, bummer. Def want to get loans written off and have closure. I was hoping I could take my time and see what the Lord's review said, but that doesn't really give any time to accept settlement afterwards.

[webberg]

Having just received my calculation from HMRC for 2009 and 2010, they refer to both protected and unprotected years

Should I have been notified previously if one of my years was protected as I was expecting both years to be closed?

Yes, you should have had an enquiry notice.

If you have not, then it is closed.

If you doubt you have, ask HMRC to prove they sent it to the right place at the right time.

[Whysoserious]

You can't get the loan written off when paying the loan charge. If it's the same cost to you, you would be better to do it in a manner that allows the loan to be written when you wish.

With a DR loan, you'll become a cash cow for any Government that needs a cash boost. Imagine a Loan Charge in 2020 because you still haven't paid the loan off...

Sounds ridiculous but so does paying retro tax without legal precedence, paying IHT on salary, settling in full and then getting asked for more tax in the form of increased Corp Tax... the list of ridiculous actualities is ever growing.

NOTHING IS BEYOND THIS CORRUPT ORGANISATION.

[Albert49]

Pension Offset

For the LC , you can make a pension contribution to offset some or all of the tax due, you cannot do this for settlement.

[kryten22uk]

Quick sanity check on this one. I didn't end up accepting the settlement offer, yet. But i'm now thinking there's no rush in my case.

- All loans in one tax year, 2008/2009.
- Is a closed year. No open enquiries.

It seems to me that a Settlement taxes it as if the income arose in 2008/09 and the Loan Charge taxes it as if the income arose in 2018/19. So ignoring any difference in my other earnings in 2008/09 vs 2018/19, then my Loan Charge should be the same value as my Settlement figure? Is that right?

Is there anything else I'm missing?

[blueswiry]

The phrase "open" is one we use. HMRC refer to "protected" and "unprotected" years.

A protected year is open.

AN unprotected year is closed.

A year is open/protected if:

A valid enquiry notice has been issued, i.e. made within time - usually 12 months from submission of a tax return.

A discovery assessment has been made. Usually within 4 years of the year end. HMRC may argue that this could be 6 years although we have seen only one of those.

HMRC claim that sending a COP8 pamphlet is opening an enquiry. We disagree. Until this morning I would have said that this matter remains undecided. This morning however we had a settlement calculation in which we argued that COP8 was not sufficient notice. The settlement regards the years as closed.

Now that is either an error on HMRC's part, an admission that we are right or a practical means of getting a settlement over the line. Anything other than an error is a win (and �20k less for the client).

Having just received my calculation from HMRC for 2009 and 2010, they refer to both protected and unprotected years

Should I have been notified previously if one of my years was protected as I was expecting both years to be closed?

[webberg]

Agree with all of the above.

[EBTContractor]

The clowns will hit you with the loan charge for the closed years.

Let's hope this loan charge and its retrospective b0ll0cks go away. If not they can go swivel.

[Delendog]

Thanks webberg, if just open years, would certainly make it cheaper for me.

I've not read anywhere or heard from anyone until know that you can settle on just open years.

What will the clowns do with the closed years then?

The clowns will hit you with the loan charge for the closed years.