Reply to: Loan Charge review - in limbo

[patel]

Loan Charge in Self Assessment

All,

Is declaring ‘Loan Charge’ amount in Self-Assessment form involve only paying income tax on it? Reason being, gov.uk page also refers to paying NI and Tax as well.

{This means that loans outstanding on this date will incur an Income Tax and National Insurance contributions charge as if they were earnings or profits received in the tax year 2018 to 2019.}

Regards,

[Snooky]

I would not agree with that interpretation.

I would say that "you don't need to do anything" is a specific reference to the settlement process and NOTHING ELSE.

The settlement process is extra statutory. The tax return process is not - it is a legal requirement.

I cannot see that a blog post from HMRC can override statute.

I therefore regard your interpretation as unsupportable.

Just my opinion.

In case it helps anyone, following this discussion I contacted my tax advisers who have been helping me with getting a settlement arranged and they pretty much confirmed what webberg says above.

Their advice was to declare the outstanding loan amount in section 75.1 of form SA103F, not to pay the extra tax liability that would become due from that, but to include a note on the return explaining that the tax return will be amended following full and final settlement with HMRC.

[BrilloPad]

Just to confirm its all speculation around HMRC previewing the report.

I do believe that the review should be fully independent and that HMRC should see/comment at the same time the public/press get to do and it should be only the full and final published version.

Giving them a sneak preview or allowing them to remove or edit, if indeed any of this has happened, is effectively giving them a 2m start in potential negotiations or arse covering.

I am though... always sceptical about what I read on the internet so merely my original comment was just based on twitter feeds to be clear.

I would say though I have subsequently seen a letter LCAG have sent to Sir Amyas and agree totally with the points they have raised.

It was always going to be a whitewash.

[lowpaidworker]

Just to confirm its all speculation around HMRC previewing the report.

I do believe that the review should be fully independent and that HMRC should see/comment at the same time the public/press get to do and it should be only the full and final published version.

Giving them a sneak preview or allowing them to remove or edit, if indeed any of this has happened, is effectively giving them a 2m start in potential negotiations or arse covering.

I am though... always sceptical about what I read on the internet so merely my original comment was just based on twitter feeds to be clear.

I would say though I have subsequently seen a letter LCAG have sent to Sir Amyas and agree totally with the points they have raised.

[webberg]

I have no knowledge of the claimed sharing of the report with HMRC (although I did hear yesterday that one of the witnesses interviewed had been contacted by Sir Amyas to say this) and no sight of the LCAG letter. I was also a witness for the review and have heard nothing from them. I therefore find it difficult to understand why some witnesses have been advised of the claimed sharing and some not.

I also find it hard to understand why a report commissioned by the Chancellor should be sent anywhere expect to him. Given that the post of Chancellor is vacant at the moment, I fail to see why HMRC is seen as a substitute.

It may be of course that the report is critical of the loan charge and recommends changes. Perhaps in that case HMRC is being asked to evaluate the impact of those changes?

I stress however that all of the above is speculation as I actually know for sure, very little of the claimed actions.

In terms of APNs, HMRC's collection unit - Debt Management - has always been quite aggressive in thier tactics and trying to spread an APN over more than 12 months has always been hard. Furthermore, all legal actions against APNs have been lost and in the absence of new ones on new grounds, there is no defence from the source.

[lowpaidworker]

I've seen on Twitter that LCAG has written to Sir SAM expressing disgust that HMRC have already seen his review.

I guess when you put so many HMRC staff at his disposal to complete the review they may as well give them a sneaky preview. Plus allows them a lot more time to prepare to further bash.

Interesting as I have also heard from a friend that he is and a couple others are being pursued more vigorously for a recently issued APN. Read into that what you can

[DealorNoDeal]

I, like many others, are extremely stressed over this unfolding situation.

HMRC will be delighted to hear that.

In HMRC's eyes, scheme users are vermin.

In my dealings with them over the years, I've found them to be nothing short of vindictive. They don't like their position being challenged, and the Loan Charge Review is a challenge, to their authority, on steroids. How dare the vermin!

As a result, I have no doubt that they will be doubly determined to nail all users of loan schemes.

[webberg]

Are you telling me HMRC can deliberately ignore countersigning a settlement agreement document - an agreement that I have already signed and returned over 6 months ago and which they said would be agreeable to the Commissioners for Her Majesty's Revenue and Customs - forcing me instead to have to declare and pay a significantly higher sum under the the loan charge on my SATR?

If so, and I have no recourse to completing my settlement before I have to pay the loan charge, I think they are going to find another suicide on their hands.

Yes they are.

If you feel like that, get in touch with LCAG.

[webberg]

GW,

On the SATR, loans need to be entered as income for the 18/19 year, which means that we will have an instant tax liability that needs to be paid by 31/01. This of course will be impossible for almost everyone. Paying a £100k, £200k, £500k whatever tax bill just isn't going to happen by 31/01.

I'm sure HMRC haven't thought this through, and if we question them we know that their answer will simply be that they told us about this in 2016 and we had 3 years to sort this out etc etc. This of course belies the fact that many of us are trying to settle (at a lower amount than the LC), and settle over a number of years, but HMRC themselves have delayed the process - seemingly deliberately because I can't imagine any organisation would be so stupid to ignore settlement offers.

So anyway, there is very little chance of paying the LC on 31/01. And then we will be in trouble, because we have self-assessed, but can't pay.

I, like many others, are extremely stressed over this unfolding situation.

How do you see the LC deadline and subsequent demands for payment playing out?

It's an unholy mess.

Worst case scenario.

You complete the SATR with the loan details. You cannot and therefore do not pay the LC as it appears on your statement. The amount due passes into the tender mercies of Debt Management who with their usual combination of threat, innuendo and claims of powers they do not possess, start asking for money. You politely point them at HMRC statements saying that the liability may not be final and can they therefore back off. Cue utter confusion between HMRC/DM/you/your agent.

Upshot is that you are chased weekly and then daily for money you cannot pay: HMRC claims that their hands are tied: your agent is racking up fees. Non payment surcharges are applied.

Eventually the loan charge review is complete and settlement (if that is your choice) commences and requires perhaps 8 weeks to recharge and another 8 months to complete. All the while the "computer says pay" crew at DM work themselves into a frenzy and by then we will have the crazy situation of people who wish to settle and who have progressed that perhaps a long way, getting summons to appear in Court for insolvency.

Absolutely bonkers.

HMRC/HMT etc will deny that the above will happen and that the HMRC statement will "protect" you. Frankly I don't believe them.

Best case scenario

You declare the loans in the SATR in a manner that means HMRC have to issue an assessment that can be appealed. Or HMRC alter their processes so that loans disclosed are subject to assessment that can be appealed. The latter is outside the law as it presently stands.

The assessment is raised, appeal made and tax postponed.

There are a number of legal challenges in train (Judicial Reviews) and no doubt a number of tax based challenges arriving (FTT) once we see the charge. These may require some years to be resolved. HMRC decides that they will postpone the tax until they get a definitive decision in their favour.

In the meantime, you continue to settle (see above) and if you complete that process before the definitive case, then you withdraw your appeal and the assessment disappears. If not, you have the decision of the Court/Tribunal applied to your circumstances.

For a number of obvious reasons I cannot say here how our clients will be closer to "best case" than "worst case", but they will be.

[Tiger22]

HMRC delaying settlements to force people onto loan charge will cause tragedies

Are you telling me HMRC can deliberately ignore countersigning a settlement agreement document - an agreement that I have already signed and returned over 6 months ago and which they said would be agreeable to the Commissioners for Her Majesty's Revenue and Customs - forcing me instead to have to declare and pay a significantly higher sum under the the loan charge on my SATR?

If so, and I have no recourse to completing my settlement before I have to pay the loan charge, I think they are going to find another suicide on their hands.

[ChimpMaster]

Last time I looked HMRC statements were not law, could not be made law and did not override the law.

My clients are being advised that YES you need to complete the SATR regardless of the loan charge review.

YES it needs to include the loan details.

NO the HMRC statement does not remove that obligation.

Do I think an HMRC letter or blog post or statement sworn on his mother's life by the CEO overrides the law? Absolutely not.

Do I think a Tribunal would regard that letter as a reasonable excuse for not filing a return? Absolutely not.

GW,

On the SATR, loans need to be entered as income for the 18/19 year, which means that we will have an instant tax liability that needs to be paid by 31/01. This of course will be impossible for almost everyone. Paying a £100k, £200k, £500k whatever tax bill just isn't going to happen by 31/01.

I'm sure HMRC haven't thought this through, and if we question them we know that their answer will simply be that they told us about this in 2016 and we had 3 years to sort this out etc etc. This of course belies the fact that many of us are trying to settle (at a lower amount than the LC), and settle over a number of years, but HMRC themselves have delayed the process - seemingly deliberately because I can't imagine any organisation would be so stupid to ignore settlement offers.

So anyway, there is very little chance of paying the LC on 31/01. And then we will be in trouble, because we have self-assessed, but can't pay.

I, like many others, are extremely stressed over this unfolding situation.

How do you see the LC deadline and subsequent demands for payment playing out?

[webberg]

It's not a blog post, it is an official letter from HMRC which I understand many thousands of proposed "settlers" have received. As such it should surely carry some weight?

To be certain, HMRC should be contacted to check this point (does a SATR need to be completed for those in settlement discussions), with a request to put their response in writing.

Last time I looked HMRC statements were not law, could not be made law and did not override the law.

My clients are being advised that YES you need to complete the SATR regardless of the loan charge review.

YES it needs to include the loan details.

NO the HMRC statement does not remove that obligation.

Do I think an HMRC letter or blog post or statement sworn on his mother's life by the CEO overrides the law? Absolutely not.

Do I think a Tribunal would regard that letter as a reasonable excuse for not filing a return? Absolutely not.

[Dmac]

I would not agree with that interpretation.

I would say that "you don't need to do anything" is a specific reference to the settlement process and NOTHING ELSE.

The settlement process is extra statutory. The tax return process is not - it is a legal requirement.

I cannot see that a blog post from HMRC can override statute.

I therefore regard your interpretation as unsupportable.

Just my opinion.

It's not a blog post, it is an official letter from HMRC which I understand many thousands of proposed "settlers" have received. As such it should surely carry some weight?

To be certain, HMRC should be contacted to check this point (does a SATR need to be completed for those in settlement discussions), with a request to put their response in writing.

[webberg]

I take that to mean that, until the outcome of the review has been published I don't need to do anything - I don't need to put loan details in my self assessment return this January, I don't need to pay the loan charge, I don't need to chase up or complete on settlement.

What do others think?

I would not agree with that interpretation.

I would say that "you don't need to do anything" is a specific reference to the settlement process and NOTHING ELSE.

The settlement process is extra statutory. The tax return process is not - it is a legal requirement.

I cannot see that a blog post from HMRC can override statute.

I therefore regard your interpretation as unsupportable.

Just my opinion.

[DavidD]

I’m in exactly the same boat. Until I read this thread today I was ‘sitting tight’ as instructed. I assume they will write to everyone confirming the latest thinking.

Sorry to be so slow but does declaring the loan it on the tax return mean the tax actually needs paid by the PAYE deadline...and it can be claimed back if by some miracle the review recommends it?

I'm partway through settlement with HMRC and have a letter from them dated 7 October 2019, sent after the LC review was announced, in which they say:

What you need to do now
If you want to continue to settle your tax affairs now, please let us know.
If you prefer to put settlement on hold, there is nothing you need to do at the moment.

What will happen if you put settlement on hold
If you choose to put settlement on hold, we'll write to you again after the government's response to the review has been published.
.....choosing to put settlement on hold will not:

• affect the amount of late payment interest you'll have to pay
• mean you have to pay the loan charge
• mean you need to submit an additional information return as we already have the information we need

I take that to mean that, until the outcome of the review has been published I don't need to do anything - I don't need to put loan details in my self assessment return this January, I don't need to pay the loan charge, I don't need to chase up or complete on settlement. I just need to wait until they contact me again. I certainly don't need to scour their website for any alternative rules they decide to bring into play.

What do others think?