Originally posted by Whysoserious
View Post
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.
Leave a comment: