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HMRC's latest loan charge update

How duplicitous can HMRC get?

Didn't find your answer?

It says right at the top of the link below: "Disguised remuneration schemes are tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions (NICs) by paying scheme users their income in the form of loans. The loans were never intended to be repaid, so they are no different to normal income and are taxable."

You will see that it cites no court decision (or legislation) to justify that sweeping statement and that is certainly not what the SC decided in Rangers (HMRC's counsel sensibly decided not to even argue that point as the HoL had actually decided the contrary in Dextra, as had other courts e.g. Sempra). 

https://www.gov.uk/government/publications/hmrc-issue-briefing-disguised...

 

Replies (22)

Comments for this post are now closed.

Psycho
By Wilson Philips
10th Jun 2019 15:05

Why should it need legislation or a court decision when it's nothing more than a statement of fact?

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Replying to Wilson Philips:
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By Justin Bryant
10th Jun 2019 15:54

In case you were unaware you are only supposed to be taxed under the law and (ignoring the actual loan charge itself and any P7A schemes that never worked anyway) there is no such law that taxes such loans (as HMRC well know).

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By ireallyshouldknowthisbut
10th Jun 2019 15:09

How much have you got to pay Justin?

Your continued level of shrillness on this one speaks volumes.

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Replying to ireallyshouldknowthisbut:
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By Justin Bryant
10th Jun 2019 15:35

Nothing and neither I'm sure has Keith Gordon or the 150 MPs etc. who are all equally against this outrageous tax charge.

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By gordo
10th Jun 2019 20:04

Justin rightly points out the law and points out that HMRC are acting in a manner that is not supported by law, whilst they make sweeping statements as if they decide the law for themselves, rather than our independent judiciary, yet the response from others is to harass Justin.

Almost 200 MPs have voiced concerns over this either by signing the EDM1239 or signing the All Part Parliamentary Group letter, explaining that they did not know what they were led to vote for in the Finance Act in regards to the clearly retrospective nature.

There was a further vote in Parliament which was carried by all who voted yet because no one voted against it there was 'no division of the house', so the Minister (and Government) can just choose to ignore the vote.

The House of Lords spoke out strongly in their report stating that the Loan Charge was retrospective in it's effect. Lord Judge ex-counsel to the Inland Revenue spoke out strongly against HMRC behaviour and approach http://bit.ly/2LdjemM

But the responses on here from Accountants prefer instead to attack the writer of the post and make what appears to be ill considered and incorrect assumptions about his reasons for the post.

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Replying to gordo:
Psycho
By Wilson Philips
10th Jun 2019 17:59

Eh? Where was I attacking Justin? I was merely pointing out that, as a matter of fact, there was never any intention that the loans in question would be repaid and as such I agree with HMRC that they should be taxed as income.

Whether they should be taxed retrospectively is another question, but there was no mention of that aspect in Justin’s complaint.

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Replying to Wilson Philips:
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By gordo
10th Jun 2019 20:16

The Courts have examined the Loans on several occasions and concluded that these were legally enforceable, repayable loans.

HMRC themselves have written to me arguing that IHT is due on the basis that these are legally enforceable loans with a properly constituted trust. HMRC also know that in some cases loans have been repaid because I've had involvement with HMRC and liquidators over such matters. HMRC have also admitted in writing that no Tribunal has ever ruled on post DR schemes?

These people have a right, like every UK citizen, to have their dispute heard in a court of law, but the Loan Charge renders this pointless because, as HMRC have described it themselves, we win or we win.

If the citizen spend money to take the case to Tribunal and won then they would still face the Loan Charge. If they lost then they would face the higher of the outcome of the litigation as compared with the loan charge, along with the costs of litigating and possible adverse costs.

This is not justice. If it were anything other than tax then it would be referred to as extortion. Demanding money with menaces that have not actually been shown to be due.

To achieve this HMRC have had to override the protections in the Taxes Management Act that we all rely on to protect our clients and provide certainty.

So when you say you were merely pointing out the facts...I think that's actually what Justin was trying to do.

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Replying to gordo:
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By leeanthonyblackshaw
10th Jun 2019 20:41

Many of us protected our clients and provided certainty, by advising them not to do such schemes, due to the very high risks of failure, especially from around 2004.

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Replying to leeanthonyblackshaw:
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By gordo
10th Jun 2019 21:05

So your basis is that HMRC can rip up the Taxes Act and don't have to abide by it, so long as it doesn't impact your clients? What happens when HMRC start applying the same approach in regard to IR35? HMRC, according to their consultation document, believe that only 10% of those who should comply, have done so. Some of the 90% must be represented by Accountants. But the Accountant says I'm sure my client isn't within IR35. HMRC say doesn't matter what you think and no you cannot go to Tribunal to have an independent judge rule on the matter, we are HMRC and we think tax is due.

What happened in the Court cases between 2004 and 2016 when HMRC first proposed the Loan Charge? How many times did HMRC lose in Court? Who is the ultimate arbiter? Why is a new retrospective (in its effect) Loan Charge needed?

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Replying to gordo:
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By leeanthonyblackshaw
10th Jun 2019 21:13

I’m not saying retro tax is right or wrong, just that it was one of several known* risks with the structure of such loan schemes.

*to advisers, but not always their clients

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Replying to gordo:
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By johnt27
11th Jun 2019 14:08

gordo wrote:

Almost 200 MPs have voiced concerns over this either by signing the EDM1239 or signing the All Part Parliamentary Group letter, explaining that they did not know what they were led to vote for in the Finance Act in regards to the clearly retrospective nature.

All this demonstrates, unfortunately, is our elected members' ineptitude to properly read, review, interpret, understand and challenge laws as laid in the house. MPs on all sides seem to allow bad drafting to now be resolved in the courts rather than get it right first time.

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By bettybobbymeggie
10th Jun 2019 19:11

I shouldn't worry too much about the Loan Charge. HMRC made a right hash of APNs and FNs, collecting a fraction of the tax promised during the consulation, so I expect they will make a similar hash of enforcing the LC.

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Replying to bettybobbymeggie:
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By gordo
10th Jun 2019 20:19

HMRC will undoubtedly make a hash of this and sadly it is likely to cost lives. I don't that's a basis for not worrying too much about the Loan Charge, particularly if you are on the receiving end.

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By Vaughan Blake1
11th Jun 2019 09:22

So an employer says "we are not going to pay you a salary, instead we will lend you some money monthly, and this will be repayable at some point".

Mmmm.... not very tempted, I must admit.

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By justsotax
11th Jun 2019 10:04

I thought the word 'disingenious' was only reserved for MP's....

So go on, tell me, how many loans made within these schemes have ever been repaid (just as a matter of course)....is it even single figures?

Wow its like me saying I clearly never go above the speed limit because I have never been caught.

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By gordo
11th Jun 2019 11:25

How does the law apply to you if you have gone above the speed limit but never been caught?

How does the law in Class A drugs apply to Mr Gove when he admits to it 20 years later?

Why are we throwing out the TMA 1970 rules already laid down by Parliament, but only for this particular group?

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Replying to gordo:
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By meadowsaw227
11th Jun 2019 11:30

Just pay your tax like nearly everybody else !
Presumably you can use some of the money you have saved to pay off the loan ! .

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Psycho
By Wilson Philips
11th Jun 2019 13:32

We seem to have wandered away from the main point of the opening question again.

Whether the charge should be retrospective or not (ie tearing up the statute) is another matter. The question here is whether the 'loans' are, prima facie, taxable or not. Whether legally enforceable or not, and notwithstanding the fact that some of them might actually have been paid, the reality is that in the vast majority of cases there was never any intention of repaying them.

It's a bit like the criminal defence lawyer, finding whatever means possible - including technicalities - to get his client off the hook or mitigate the sentence, often to the outrage of the law-abiding public. Whilst I acknowledge that every tax barrister will do exactly the same (as he is entitled to do) to mitigate his client's tax bills, to the layman, and most professionals, those that got involved in such schemes deserve everything that comes their way.

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Replying to Wilson Philips:
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By bettybobbymeggie
11th Jun 2019 13:44

I don't think they deserve IHT.

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By gordo
11th Jun 2019 13:35

Thank you for your considered and obviously carefully researched response.

If only you had spoken up earlier we could have saved the Judiciary all that time that was spent in Dextra, Sempra and Murray Group all of which concluded that loans were loans and therefore not taxable as income.

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Replying to gordo:
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By johnt27
11th Jun 2019 14:17

If loans are loans - would the businesses involved prefer to pay back the corporation tax relief they gained and s419/455 tax avoided when entering these schemes?

From previous experience the DR always hit the P&L as remuneration rather than the balance sheet. Which is, IMO, perfectly acceptable if using EBTs, as intended, to provide widower pensions/DIS benefits in the late 19th or early 20th century.

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Francois
By Francois Badenhorst
11th Jun 2019 15:35

This thread has now been shut.

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