Reply to: Anyone filing a 2018/19 tax return for the LC, based on the advice of a tax advisor

[ns1]

Oh it matters alright.

The longer it goes on, the more they earn in fees.

Aye, well that suits me just fine. Happy to keep paying the subs to keep HMRC at bay for as long as possible until I retire in 8 years time.

[stonehenge]

It's easy for HMRC, the lawyers and tax professionals; it's just a job. What does it matter if it drags on for 5, 10 or 20 years.

Oh it matters alright.

The longer it goes on, the more they earn in fees.

[DealorNoDeal]

You can and this in the present context is perhaps where the value of a professional starts to be felt.

It gives me a real sinking feeling just the thought of having to fight HMRC on both the LC and the underlying tax dispute.

Years and years of unending worry and uncertainty. That is going to leave its scars. You could easily spend a good portion of your adult life mired in this crap.

It's easy for HMRC, the lawyers and tax professionals; it's just a job. What does it matter if it drags on for 5, 10 or 20 years. It's a bit different if your way of life is hanging in the balance.

I really don't envy anyone who is caught between the rock (bankruptcy) and the hard place (fighting HMRC).

[webberg]

I guess you can't.

You can and this in the present context is perhaps where the value of a professional starts to be felt.

The general concepts of a defensive strategy are all here in these threads but to put them into a coherent plan that does not stumble at the first obstacle is where you need some help.

Here is where you should be questioning whichever tax adviser you speak with.

If you cannot understand what they are saying or you think it's all bulltulip then walk away.

you cannot go into what will be a rollercoaster of a ride with HMRC not understanding the risks as well as rewards because that is a sure fire way of you feeling by turns, stupid, foolish, angry, resentful, bitter and ultimately embarrassed. none of these are positive.

[lowpaidworker]

HMRC will point to GAAR opinions from last October which say that the third party requirement is "not what Parliament intended".

How do you argue that away?

and that is what I expect from HMRC when they do respond.

[DealorNoDeal]

HMRC will point to GAAR opinions from last October which say that the third party requirement is "not what Parliament intended".

How do you argue that away?

I guess you can't.

[lowpaidworker]

I'm guessing what you meant is, "will HMRC still expect you to pay the LC if your loans are direct from an employer".

I doubt HMRC will concede that such loans are outwith the LC even though, strictly speaking, the LC only applies to 3rd party loans.

If I had direct employer loans, I might be tempted to claim the LC doesn't apply and see what HMRC's response is.

I did that. Whilst i declared all loans last september as part of that reporting requirement and made clear who I was emplyed by and who the loans were from I also sent them a mail direct from my old emplyer that said the loans to me were outside the loan charge and therefore not in scope of the Loan Charge. I added I no longer work for this employer but can you HMRC opine on this please. That was nine months ago. no reply

[webberg]

I'm guessing what you meant is, "will HMRC still expect you to pay the LC if your loans are direct from an employer".

I doubt HMRC will concede that such loans are outwith the LC even though, strictly speaking, the LC only applies to 3rd party loans.

If I had direct employer loans, I might be tempted to claim the LC doesn't apply and see what HMRC's response is.

HMRC will point to GAAR opinions from last October which say that the third party requirement is "not what Parliament intended".

How do you argue that away?

[DealorNoDeal]

Will HMRC still expect LC settlement if your loans are direct from an employer and an employer that is still operating. I guess thats going to be interesting and I fully expect HMRC to directly challenge that even if the 2019LC wording indicated they were not caught

I'm guessing what you meant is, "will HMRC still expect you to pay the LC if your loans are direct from an employer".

I doubt HMRC will concede that such loans are outwith the LC even though, strictly speaking, the LC only applies to 3rd party loans.

If I had direct employer loans, I might be tempted to claim the LC doesn't apply and see what HMRC's response is.

[webberg]

I know some people who haven't needed to complete tax returns for a while now and therefore haven't and won't declare in 18/19 on the basis they haven't been told too, despite knowing they have too. Not sure I could sleep at night with that as my tactic !! I can only assume HMRC will go through all known DR users and check to see if an 18/19 SA has been submitted and if not, send them one out.

There is no such thing as "people who haven't needed to complete tax returns".

If you are liable then you have a legal obligation to file a return.

If they decide to ignore their legal obligation and are caught then the consequences will begin with penalties.

I suggest that HMRC will wait until 30/9/20. They will then check the list of returns received against the DR users.

Those DR users who have not filed will get a section 8 notice, requiring a return. That can be at any time until late 2022.

Failing to file carries penalties.

That's a lot of sleepless nights!

[webberg]

Will HMRC still expect LC settlement if your loans are direct from an employer and an employer that is still operating. I guess thats going to be interesting and I fully expect HMRC to directly challenge that even if the 2019LC wording indicated they were not caught

Yes. Settlement and loan charge operate on different definitions of chargeable loans.

Settlement is ALL loans.

Loan charge is loans within the legal definition.

Not sure what the "challenge" is.

if you've settled all years = no loan charge.

if you choose to settle just some years, then yes, you will need to argue those outside settlement and what I said above is applicable.

[regron]

Let me attempt a summary of a point and a thread that is spiraling.

Loan Charge

HMRC's default position is that if you have used what they call (but do not define) a disguised remuneration scheme and have not settled (i.e. paid the tax that HMRC think is due), then you are:

a. Obliged to disclose the value of unpaid loans as at 5th April 2019, no later than 30th September 2020, and#
b. will be obliged to pay the loan charge on 30th September which is calculated by adding the unpaid loans to your 2018/19 income and seeing what tax that produces
c. As an alternative, you can include one third of the loans unpaid in your 2018/19 tax return and one third in each of 2019/20 and 2020/21 and tax will be calculated for those years in the same way

If you do NOT include the loan value in the 2018/19 (and perhaps two later years returns) HMRC will certainly claim that the returns are incomplete and that may bring sanction.

If you do NOT include the loan value in the manner provided in the return, chances are that HMRC will also view that as some form of default.

Loan charge solutions

A number of former promoters and a few parties who were not selling these schemes prior to April 2019 offered a "solution" to the loan charge in the period running up to the 5th April 2019 trigger date.

These were of varying quality but in general were all based on some form of refinance or structuring which claimed to allow the non disclosure of loans.

All of them (we have on good authority) are seen by HMRC as being ineffective as a minimum and perhaps fraudulent at the other end of the scale. Back in February (I think) HMRC announced the arrest of some people for what they claimed was tax fraud in relation to the loan charge. If that ever gets to a Court I will be amazed.

Post 5th April 2019

There has been a lot of political lobbying and at least one JR. There has been a review of the loan charge. The latter produced some amendments and regardless of the now proven interference in that review by HMT/HMRC, further amendments via the Finance Bill failed to even be voted upon. You may deem that unfortunate or HMRC conspiracy as your taste dictates.

The final result of the legislation is now seen. Barring any epiphany on the part of Treasury the FB will now finish its passage and became law in the next couple of weeks.

Post FA 2020

Structuring to avoid the loan charge now is pointless as the charge arose on 5th April 2019.

Looking at your loan and determining if it is caught by the rules is worthwhile, especially if you have a "direct" loan (straight from employer) or some form of "break" scheme (payments into the scheme and payments from the scheme apparently separated and no connection) or a "double limited" version (where your PSC was part of the chain). These all offer the potential to be outside the specific rules of the loan charge.

If your loans do not meet the above, then you will need to decide:

1. To pay the loan charge and hope to get it back if ultimately you have no liability which bearing in mind the rules say a payment of loan charge is never refundable, could be a problem and we predict tax cases on this from mid 2022 onwards
2. Choose not to pay the loan charge based on a different analysis

Note. If you have paid APNs for earlier years, loans from which are included in the loan charge, then you can ELECT (not automatic) to have the APNs offset against the loan charge liability. However if you do that, they become non refundable.

The advisers

We and other advisers have our own strategies.

Some advisers may be counselling settlement so that no loan charge arises.

Others have strategies that as far as we can see are based on the same principles as the JRs that have been taken or on similar arguments as were tried in the political lobbying.

Others have ideas based in more fundamental principles.

ALL of them will produce a result that varies from HMRC's expectation (save settlement).

ALL of them therefore have a degree of risk and upon challenge may falter with the result that some penalty may fall due.

IF you are tempted by any of them, IT IS YOUR OBLIGATION TO ENSURE THAT YOU UNDERSTAND THE BENEFITS AND THE RISKS.

Remember, paying the loan charge is NOT settling the liability for years which have an open enquiry or discovery assessment. You will have to do that at some point.

Your options for settling are to take what HMRC offer you or to litigate.

Paying the loan charge is NOT an alternative or an option.

I know some people who haven't needed to complete tax returns for a while now and therefore haven't and won't declare in 18/19 on the basis they haven't been told too, despite knowing they have too. Not sure I could sleep at night with that as my tactic !! I can only assume HMRC will go through all known DR users and check to see if an 18/19 SA has been submitted and if not, send them one out.

[lowpaidworker]

Looking at your loan and determining if it is caught by the rules is worthwhile, especially if you have a "direct" loan (straight from employer) or some form of "break" scheme (payments into the scheme and payments from the scheme apparently separated and no connection) or a "double limited" version (where your PSC was part of the chain). These all offer the potential to be outside the specific rules of the loan charge.

Will HMRC still expect LC settlement if your loans are direct from an employer and an employer that is still operating. I guess thats going to be interesting and I fully expect HMRC to directly challenge that even if the 2019LC wording indicated they were not caught

[Paralytic]

How patronising. I see nothing in your post I, at least, didn't know already. You've basically just said what was said before but tried to make out nobody before understood anything in your inimitable fashion.

Can you please let everyone know what you already know so everyone knows what they can and cannot post?

TIA.

[DealorNoDeal]

Structuring to avoid the loan charge now is pointless as the charge arose on 5th April 2019.

Good point. I wonder how the Hamilton Rose "solution" gets around that.