Well done to Nicky Morgan MP. See:
https://www.parliament.uk/business/committees/committees-a-z/commons-sel...
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If it is income treated as loans then in my humble opinion it is a "fiddle" and as I said HMRC should go back to the start to unwind it.
Then the people in question would only be paying the correct amount of tax on their INCOME
I have not had a single client enter into this sort of tax "planning"nor would I stay as their accountant should they want too.
HMRC incompetence or not if people brazenly fiddle they deserve to be caught.
No sympathy here at all.
I guess it would help if those with these scheme arrangements acknowledged that they indeed have a loan that is repayable....(because if they did presumably they would be at least making some provision for the repayment). I could then perhaps find a way of being sympathetic to the cause....
When you started this thread, I quilled (as a response to Jennifer’s contribution):
“If you set up a financial arrangement that cannot be resolved before you die, except either by unwinding the structure (e.g. repaying a loan) or by way of a tax charge (e.g. a loan being formally waived), then you lay yourself open to a change in the law. This is nothing new, it’s happened to other schemes.
What distinguishes these pseudo-loans from some of those other schemes is there was more than one party to (and that benefited from) the arrangements but in many cases there is only one left carrying the whole of the can. To that extent, it is unfair – but I don’t think that that’s Justin’s point. I would agree with him if it was.
I think Justin is saying there should not be a can – and in that assertion, I for one think he is wrong. Why should the legacy loan structures escape charge while other schemes get ‘retrospective’ tax charges?
I thank him for the updates.”
I decided not to continue my involvement with this slow-motion dispute, so did not post the comment.
In view of your comments about retro-charges being unique to legacy loans, I have changed my mind. (I’m not 100% sure I stand 100% behind what I wrote the other day, but I’m letting you see it as written anyway.)
ah the crux of the matter, the "repayable loan"....or in the case being argued, we shouldn't have to repay in 2010 (and indeed it should never have to be repaid as the scheme doesn't work otherwise)….
I think that statement sums up where your arguments fail. (Remember too that, as well as the legacy loan(s), there is – presumably – a legacy trust.)
The real point of the legislation is to push people into settling before the tax charge bites. Settling means saying “fair cop, we were no more going to repay the loan than we were any of our other remuneration.” I get that settling is retrospective.
The April 2019 charge itself is not retrospective (and I thought Nicky Morgan had conceded that).
Therein lies my ambivalence. Whilst on a strict interpretation the April 2019 charge may not be retrospective, the outcome is effectively the same - the taxpayer is facing a charge on "income" received many years ago.
The issue is not whether the charge is retrospective - it is the degree of retrospection.
I don't know the ins and outs of every loan scheme in question and, frankly, have no need or desire to have such knowledge. But if HMRC are able to demonstrate that the taxpayer's behaviour fits the 20-year window, so be it. The problem is that HMRC do not appear to have been able to so demonstrate, offering only woolly statements in support of their stance.
What is
But if HMRC are able to demonstrate that the taxpayer's behaviour fits the 20-year window, so be it.
getting at? What behaviour?
The extended 20-year window applies, as I am sure you know, only if there has been fraud, deliberate concealment etc. If HMRC are able to successfully demonstrate, to the satisfaction of the courts, that the taxpayer has so behaved then I don't have a problem with the 20-year 'retrospective' charge. But if such behaviour is not demonstrably evident, HMRC's powers of assessment should be restricted to the 'normal' time limits. That, I believe, is the point that Justin is making - that HMRC have yet to satisfactorily explain why they think the 20-year rule should apply in this case.
That question pre-supposes that the charge is retrospective (taxing past income rather than a current loan). If the charge is not retrospective, the question is irrelevant - were HMRC to answer it, they would give it credence.
The argument when the loan was made was that it wasn't income. If that argument is right, the charge is not retrospective.
There is thus subterfuge on both sides of the debate. Where HMRC's wicket sticks is that they are simultaneously arguing that the loan was income when made (and taxpayers should settle on that basis) and that the charge is not retrospective. It seems to me to be one or the other. At least, that's the logical (to me) position. Justin is quite happy taking the "if I'm wrong there I'm right here" approach - but doesn't like HMRC doing so, out of court.
Agreed. But in my view the charge is retrospective. HMRC have effectively said "we consider that the loan made was income. We're asking you to settle. If you don't, the legislation will ensure that you have to cough up."
Nicky Morgan might have conceded that the charge is not retrospective. I do not.
That question pre-supposes that the charge is retrospective (taxing past income rather than a current loan). If the charge is not retrospective, the question is irrelevant - were HMRC to answer it, they would give it credence.
Personally, I believe that the operation of the required voluntary restitution makes it abundantly clear that the loan charge is a disguised retrospective charge, and in fact Harra's response confirms this when he says the taxpayer will pay far more settling via the loan charge than voluntary restitution.
The impetus is that the two are analogous, and as such, the loan charge must be retrospective.
Suppose the new charge had come in without folk having the chance to settle on a retrospective basis. HMRC's logic would stand up better, but (as you say) people would be worse off.
My apologies, justso, I thought you were Justin. I must have read the first few letters of your name and my brain autofilled the rest...
no worries tax dragon, my issue is never minding the rights and wrongs of the HMRC approach, the reality is for these schemes to work the loans were never intended to be repaid (whatever the paperwork says!). And for that reason alone I have little sympathy...
Two wrongs don't make a right.
Those that took 100s of 1000s out and controlled what they got have benefitted from tax-free, interest-free loans. They've won, whatever happens next.
Those that were paid this way so that, basically, their employer could pay them less have lost.
That's the real unfairness.
I'm caught between a rock and a hard place. I agree with Justin that HMRC are, at best, being somewhat disingenuous in trying to justify their approach.
On the other hand, I have precious little sympathy for those that got themselves involved with such schemes. I take Justin's point about transactions entered under 'professional advice', but I would have to question just how professional that advice was - my professional advice to any client thinking about a marketed scheme would be, and is, to avoid them like the plague.
And then, right in the middle, is the issue of retrospection. I'm not convinced that the charge is actually retrospective - but then again I'm not convinced that it isn't.