Reply to: Settled in full with HMRC, loan written off. Now Ltd Co has tax enquiry???

[jazzyg]

Speak to WTT or DSW. They should be able to help you.

[sunilthakur007]

Settled in full with HMRC, loan written off. Now Ltd Co has tax enquiry???

You really need to get in touch with a tax advisor, and one that is fully versed in this whole shambles. There are a few about. A simple google or search of this forum should point you in the right direction. Think of it as a bit of money spent now, saving a lot of money further down the line.

Thanks a lot for reply , Yeah ...This is what i was thinking as well and googled it also ....Trying to find a good tax advisor who can handle this and who has knowledge of these type of cases.

Thanks and Regards,

[NeedTheSunshine]

"Whysoserious" , can i be in touch with you ?I am not very good in accounts and my Accountant just moved to Australia ...Need to get some knowledge on " Settled in full with HMRC, loan written off".

You really need to get in touch with a tax advisor, and one that is fully versed in this whole shambles. There are a few about. A simple google or search of this forum should point you in the right direction. Think of it as a bit of money spent now, saving a lot of money further down the line.

[sunilthakur007]

Settled in full with HMRC, loan written off

"Whysoserious" , can i be in touch with you ?I am not very good in accounts and my Accountant just moved to Australia ...Need to get some knowledge on " Settled in full with HMRC, loan written off".

[here4beer]

Any update on this?

Can you not argue that just because you've classed your loan as income, doesn't automatically incriminate your company deductions? Do they not need to prove a connection? I don't know - innocent till proven guilty, etc...

if you pay into a business trust that gives your ltd co perks, you have paid for something and have got something? What that trust does isn't your concern, surely?

[webberg]

Webberg does it help if my the Ltd Co in question was closed down around 3 years ago with full agreement from HMRC and no tax debt at the time of being struck off from Companies House?

Also HMRC have been informed I've settled personally. No response yet.

Honestly?

I don't know.

I would hope that HMRC having settled and nothing being hidden will realise that they may have made an error but you have not. They should take no further action.

Ten years ago, I would have said that would have happened.

Today, I'm not so confident.

I think it would be very difficult for HMRC to take further action in the circumstances you mention, but then nobody really saw the loan charge coming.

[Whysoserious]

Webberg does it help if my the Ltd Co in question was closed down around 3 years ago with full agreement from HMRC and no tax debt at the time of being struck off from Companies House?

Also HMRC have been informed I've settled personally. No response yet.

[webberg]

With hindsight, the whole saga is ridiculous, hence most people coming forward and asking HMRC to settle. I'm just disappointed to hear from the OP that their settling with HMRC didn't take care of both sides of the scheme. I for one am just coming to terms with the large personal settlement bill, the thought of more incoming tax is frightening.

I think you summed it up in the first comment - the promoter told you.

Well that advice was debatable in 2005 (Dextra) and even more so in 2007 (Sempra). Those cases are often cited by promoters of the time as "proof" that payments to a trust are tax deductible.

Later, when law arrived to say for an EBT such payments would not be a CT deduction without tax on the employee being paid, those schemes using "business trusts" (sometimes called "remuneration trusts" - another made up name without legal definition that I can find) the RT/business trusts claimed that as you were not an employee and the trust was unconnected with your work, it was not caught.

That is a line that is repeated a lot by these people.

I'm sure we all have an opinion on them and the claim.

I know mine is perhaps at the end of the scale that is opposite the promoters.

[here4beer]

Who told you that?
promoter (salesman), and accountant.

HMRC? Probably not. The Sempra and dextra cases touched and explored this matter. The taxpayers won, but that view was held to be probably incorrect by the Supreme Court, at least where an EBT was concerned.

Difference between an EBT and "business trust".

As far as I can see, "business trust" is not a legally defined term. It's a name made up in a book from an alleged expert.

The theory is that a business can pay something to a trust and the trust can benefit people who can benefit the business. For example, suppliers, business providers etc.

Yes, that's how it's sold to us. The payment to the B Trust gives the Ltd Company access to a network of contractor... 'stuff'. Jobs, networking, advice, fellow contractors for substitution Ir35 compliance things, etc.

The expense is said to be allowable, but as what?

To be allowed as an expense it has to be spent, not held in suspense until you decide what to do with it.

Once it's in the Business Trust, it's out of the Ltd Co hands. It's gone and spent.

Also, as is stated above, the EBT versions had the law changed to say that the CT deduction was available only when the money was subject to tax at the personal level.

Advising on deductions is not my area, but prima facie I would not be telling clients whose companies made such a contribution that it was deductible for CT purposes.

With hindsight, the whole saga is ridiculous, hence most people coming forward and asking HMRC to settle. I'm just disappointed to hear from the OP that their settling with HMRC didn't take care of both sides of the scheme. I for one am just coming to terms with the large personal settlement bill, the thought of more incoming tax is frightening.

[webberg]

Ltd Co earns 100k.
Ltd Co pays 90k into tax deductible business trust.
:

Who told you that?

HMRC? Probably not. The Sempra and dextra cases touched and explored this matter. The taxpayers won, but that view was held to be probably incorrect by the Supreme Court, at least where an EBT was concerned.

Difference between an EBT and "business trust".

As far as I can see, "business trust" is not a legally defined term. It's a name made up in a book from an alleged expert.

The theory is that a business can pay something to a trust and the trust can benefit people who can benefit the business. For example, suppliers, business providers etc.

The expense is said to be allowable, but as what?

To be allowed as an expense it has to be spent, not held in suspense until you decide what to do with it.

Also, as is stated above, the EBT versions had the law changed to say that the CT deduction was available only when the money was subject to tax at the personal level.

Advising on deductions is not my area, but prima facie I would not be telling clients whose companies made such a contribution that it was deductible for CT purposes.

[webberg]

Only estimates. But coming forward to settle of your own accord, it can't be worked so that you pay MORE tax than a PAYE employee?

Go and read the terms of the November 2017 settlement.

[QUODM]

Corporate tax deductability for DR contribution change

Wasn't there a change (possibly in the Finance bill 2017 itself in a different section) that specifically excluded corporate tax deductibility of a contribution to a DR scheme? I remember reading about it but reading that it was applied from March 2017 onwards (sorry my memory is fuzzy on dates and this may not be right and I can't remember where I read it...). (I had stopped using schemes by then so thought it didn't apply to me).
It wasn't retrospective in application like the Loan Charge though and clearly stated it was from the date xx/xx forward.
Does this ring a bell with anyone?

I'd imagine if you're still on a DR scheme (aka crazy...) you might get hit by this but not for older dates prior to that start date?
Possibly also if you are still using a limited company that was using a DR scheme internally before it became a normal limited (i.e. you switched to pay divs and salary instead of these expense contributions) it is an investigation that would have a valid case from a given date forward. Maybe that was the breadcrumb HMRC followed?

Also what happens if you closed down your limited company like others have said here - surely a CT correction can't be passed to you (if it was actually closed)? The Reg 80/81 applies only for PAYE income ? And there are time limits on Reg 80/81 (other than in the case of the loan charge) anyway are there not?

[here4beer]

Ltd Co earns 100k.
Ltd Co pays 90k into tax deductible business trust.
Ltd co pays 10k salary to director.
corp tax bill, 0.

Director personally receives 75k loan (note, not 90k)
Director personally receives 10k salary.
Director settles with HMRC, and pays £28k tax and NIC.

HMRC now want the 90k recorded as company profit. So after settling, director is then issued with 17k tax bill (plus interest).

Ltd Co director, pays total tax of £45k, from £100k earned.
A PAYE permanent employee, all the perks/ guaranteed income/ zero risk, only pays £34k in tax.


Only estimates. But coming forward to settle of your own accord, it can't be worked so that you pay MORE tax than a PAYE employee?

[here4beer]

If you settle and accept that the £90 is remuneration, then the £90 gets allowed for CT purposes.

The question is when.

If the payment was in 2014/15 and is disallowed, the 14/15 CT bill goes up.

If the relief is in 18/19, the unless the company has profits, that's not much use.

If you settle, the settlement terms from November 2017 should allow a sensible position to be reached, but as I said HMRC have an issue converting principle to practice.

If you do not settle on those terms then the situation can get "interesting".

Does this mean negotiate with HMRC? Or it's a simple 20% of all payments sent to the 'business trust' as Corp tax, and that's that?

Surely they still need to prove the payments were part of a disguised remuneration scheme? Registering loans on your self assessment as income, surely doesn't incriminate your ltd company's payments to a seperate entity?

Neither me as an individual or ltd Co has ever paid the promoter a penny.

[webberg]

So from the £90 that was previously claimed as an expense to reduce company profit, are HMRC saying that 'settled people' will only be able to actually claim £75 as the deductible expense, so theres extra Corp tax to pay on the £15 left?

Or am I reading what I want to see with rose tinted specs.. and HMRC want Corp tax on the full £90? (Even though the person has settled already)

If you settle and accept that the £90 is remuneration, then the £90 gets allowed for CT purposes.

The question is when.

If the payment was in 2014/15 and is disallowed, the 14/15 CT bill goes up.

If the relief is in 18/19, the unless the company has profits, that's not much use.

If you settle, the settlement terms from November 2017 should allow a sensible position to be reached, but as I said HMRC have an issue converting principle to practice.

If you do not settle on those terms then the situation can get "interesting".