If anyone could provide some assistance with the following that would be most helpful.
A client (UK individual, sole director/shareholder in UK company) sets up an EFRB in 2011. His Limited company pays £100k in the trust, the money flows through to the sub-trust then as a loan to the individual.
£100k shown on the Limited company P+L in 31/03/11 year end and corporation tax claimed (no addback).
HMRC have now (2017/18) treated the £100k as income on the individual, asked for £60k PAYE plus £12k interest. Penalties to be determined.
The Limited company has settled the £60k PAYE and £12k interest with HMRC and is waiting for closure.
I am hoping someone can explain how ITEPA 2003 s222 may be relevant (hopefully not). The way I am reading the legislation is that the client (the individual) must pay the £60k back to the Limited company with 90 days of the Limited company paying the £60k to HMRC. Am I correct or have I misunderstood this completely? If I am correct the client received £100k orignally, is now due to pay £60k to his Limited company and therefore effectively only received £40k net? I thought the HMRC calculation was based on £100k being the net amount, this then being grossed up to £160k gross, therefore £60k PAYE due?
Could anyone also please briefly explain the IHT consequences when the trusts are closed.
Thank you in advance for your help.