Share this content
3
2442

Very interesting 2019 loan charge story

https://www.independent.co.uk/news/business/news/loan-charge-tax-bill-lcag-hmrc-legal-action-human-r

Didn't find your answer?

Search AccountingWEB

RVQC will of course inevitably lose this JR claim (this is after all primary legislation we are talking about and it would be pretty unprecedented for a court to be brave enough to declare it incompatible with HRA 1998) but I salute him & others for trying nevertheless as it's grossly unfair and comparable to what countries like Zimbabwe have done re confiscating people's assets (and at least Zimabwe does not try hard to pretend they are not robbing you in the process).

https://www.independent.co.uk/news/business/news/loan-charge-tax-bill-lc...

Replies

Please login or register to join the discussion.

avatar
03rd Oct 2018 14:01

Where is Annaccountant et al with their predictable self-righteousness I wonder?

https://www.hmrcloancharge.info/news/loan-charge-judicial-review/

Assuming it's not too pricey, I would recommend anyone with a life changing tax bill to sign up (HMRC usually stay the charge under JR - that could go all the way to the SC and from there to ECtHR and so can take a few years to resolve, but only named JR appellants can benefit from that).

https://gallery.mailchimp.com/4c2f593e19264b02339dc7ecd/files/127edac5-3...

Thanks (3)
By Ruddles
to Justin Bryant
03rd Oct 2018 13:35

Justin Bryant wrote:

Where is Annaccountant et al with their predictable self-righteousness I wonder?


Your response to your own post. Petty and utterly pathetic.
Thanks (1)
03rd Oct 2018 14:03

"like Zimbabwe"? Really?

You have become a parody of yourself and are no longer worth arguing with. I don't like retrospective legislation on principle, but I still think people living off "loans" they never expected to repay (and hence avoiding tax on what is clearly income in all but name) have been taking the mickey. Your continual defence of this practice is just sad.

Thanks (2)
avatar
to stepurhan
03rd Oct 2018 14:19

You have not been following this story. Even George Osborne who helped introduce this 2019 loan charge legislation admitted it was unfair in the Evening Standard the other day. BTW, welcome back! I had wondered where you had gotten to! (We just now need Annaccountant's tuppence worth, then we'll have a full house.)

Thanks (2)
to Justin Bryant
03rd Oct 2018 14:23

Tuppenys'!

Thanks (1)
avatar
03rd Oct 2018 15:01

I'm flattered to be called upon, Justin, but I'm not sure there is much point in my saying:

a) What I have said (and explained) at length in the past and/or

b) What you expect to me say.

I'm sure someone will provoke me to type something further over at least one coffee break between now and April, but not today.

Btw - It isn't that interesting. Tbh, I'm more than bored of all this stuff. Roll on April 2019 - the beginning of the end!

Thanks (1)
avatar
to AnnAccountant
03rd Oct 2018 15:36

You are normally a good substitute for Richard Murphy (whose nonsense arguments always prove the opposite of what he's trying to argue). Now what's happened to him I wonder?

Thanks (1)
03rd Oct 2018 15:45

Can anyone other than Justin explain how this is retrospective?

From my "tax thick" POV, the scheme turned income in a single tax year into a permanent loan to avoid paying taxes.

The loan stays open in perpetuity, thus leaving you completely open to changes in taxes on that loan in the future. I recall explaining this to a client who wanted to do one of these having been hard sold it by a now defunct tax scheme selling company.

The only retrospective bit, is HMRC allowing you to go back and pay the tax you should have paid at the time. Which is rather nice of them quite frankly, with the threat of whacking you with a new tax on the loan if you do not. So rather big on the stick, but hey ho.

All seems rather civil to me unless i am being even thicker than normal.

Thanks (0)
avatar
to ireallyshouldknowthisbut
03rd Oct 2018 18:06

That’s how I see it. The ‘loan’ doesn’t become income and taxable until next April. As in the future. As in not retrospective. Anyone throwing ‘retrospective’ around is defeating their own argument that it wasn’t income at the time.

Thanks (0)
avatar
to atleastisoundknowledgable...
04th Oct 2018 12:31
Thanks (2)
avatar
By gordo
04th Oct 2018 13:21

Taxpayer and tax authority are in dispute about whether loans are taxable. HMRC claim they are, but have been unable to demonstrate this in Court having been defeated on a number of occasions. HMRC open enquiries on individuals but no regulation 80's on end users or promoters/employers.

Then HMRC are tasked with 'maximise revenues'. HMRC seek powers of APN and claim to have 80%-90% record of success in Court. So Govt treat sums received from APN as income in Govt accounts with 10% provision for repayment. When a company is in trouble it accelerates income. HMRC expects to collect £7bn but taxpayers fight back with Judicial reviews, about £3bn collected, maybe £4bn now.

Matters remain in litigation regarding dispute about whether loans are taxable. HMRC delay litigation whilst pursuing Rangers FC.

In 2015 HMRC change their argument in order to obtain success in the Scottish Court of Appeal, but because that was different to what they had been arguing in the Courts until that date, they realised that they had not ticked the right boxes to raise Reg 80 on employers and that also meant they couldn't get to employees (who had received loans).

Hence loan charge was dreamt up in 2016.

(HMRC point out to Govt that Loan Charge would mean not having to pay back any APN cash collected and already treated as income.)

So HMRC ask Government to introduce a new law that effectively unilaterally rules on matter that is in litigation, rendering litigation of legitimate dispute pointless and rendering independent Judiciary redundant.

Some protest that this
"contravenes generally accepted notions of fairness and breaks the constitutional convention against retrospective legislation, imposing tax charges in cases where taxpayers already had legal certainty that none were due, "
https://ion.icaew.com/taxfaculty/b/weblog/posts/disguised-remuneration-p...

HMRC bypass submissions by publishing only a brief summary and go ahead and introduce Loan Charge anyway.

Rangers case proceeds to Supreme Court, but the Supreme Court decision in Rangers gave HMRC another problem. It was an inconvenient Victory because it meant that even their loan charge, which was already in the Finance Act and being debated, still didn't successfully capture individuals.

The Supreme Court ruled re-directed earnings before anything was paid to trusts, so any loans paid out of trust is not relevant.

So behind the scenes the Government made another (retrospective) change in November 2017 to bring 'loans' back within Part 7a of Finance Act already going through Parliament.

Further submissions are made by ICAEW and others, but Committee 'runs out of time' to consider submissions. Mel Stride congratulates committee for considering Bill in record time.

So for Companies HMRC happy with Rangers decision and pursue with Follower Notices on basis of re-directed earnings as per SC decision, but where they can't collect HMRC then manage to transmogrify re-directed earnings into Disguised Remuneration and pursue individuals for tax on a loan-almost in defiance of the decision of the Supreme Court.

Some think that's okay, after all these people deserved it, and believe that because Govt argue that loan charge doesn't come in until 5th April 2019 therefore it isn't retrospective. Govt claim that people had 3 years warnings and could repay loans. Of course to repay loans will trigger a PAYE liability...despite taxpayers having a legitimate ongoing dispute in the Court system.

Meantime HMRC claim that this is in line with what they have always argued.

Some professionals think all this is fine.

Meantime, HMRC publish consultation on 'Off-payroll working in the private sector'. HMRC introduction says 90% not compliant. Consolation document reads like previous consultations on APNs and then again on Loan Charge introduction. In regard to the latter HMRC published summary of responses rather than responses if full and their summary said "over 90%, disagreed with the fundamental policy objective", Govt & HMRC went ahead regardless.

I wonder what is coming in this months Budget?

Perhaps followed by APNs on IR35 cases then just ride it out for another decade or two whilst saying HMRC always argued....

Thanks (3)
avatar
04th Oct 2018 12:48

Thanks for this Justin and for the comments below the article.

Thanks (1)
avatar
25th Oct 2018 11:29
Thanks (0)
By Ruddles
to Justin Bryant
25th Oct 2018 11:50

"Anybody who is worried about being able to pay what they owe should get in touch with HMRC."

Very helpful indeed

Thanks (0)
avatar
25th Oct 2018 12:59

I apologise for lack of sympathy but is this the time to breakout the violin for those people who have paid a minimal amount of tax for the many years they have been members of these schemes.

Perhaps I would if most were contrite but as with most things in the current world 'personal responsibility' appears to be from a bygone age and not something witnessed in many of the posts on this subject.

Thanks (1)
avatar
By gordo
25th Oct 2018 13:59

You are correct that one must take responsibility for ones actions. It seems there may actually be a few who were coerced into something and didn't realise there was a risk, but most were aware they were entering into a tax avoidance strategy, on the understanding that it was fully disclosed and that the Courts, certainly prior to November 2015, had always dismissed HMRC argument as incorrect.

Those individuals knew there was an ongoing risk, but were also aware of the protections for taxpayers enshrined in the Tax Act. Some had exited tax strategies before December 2010 and had no open enquiries, so under the Taxes Management Act 1970 they would feel entitled to assume certainty that their tax affairs were concluded. The Loan Charge changes that, re-opens such cases and makes everyone chargeable to tax on a basis on which HMRC were unsuccessful in the Courts. It also captures all years including those years with no open enquiries. By happy coincidence it papers over HMRC failures to raise regulation 80 determinations on employers or on the end users who started the whole sorry tale.

If you think that is reasonable and that HMRC should be allowed to proceed on the basis that the end justifies the means, then I fear that the door is now open for HMRC to pursue all backdated IR35 cases for the last 18 years even where you may have felt that there were good legal grounds for claiming to be outwith IR35 and that you had case law on your side.

HMRC published 'consultation' on off-payroll working in the private sector said that for past 18 years 90% had failed to apply IR35 correctly. This has now been relabelled 'synthetic self-employment as a first step in the behavioural psychology campaign to convince the public that these are 'man made', 'not real' schemes. I expect that we will now see a blanket law to stop future 'abuses' (along the same lines as introduced for the public sector in April 2017), then HMRC will go back and pick off individuals. They will simply find a way to issue determinations or APN. They have opened the way to allowing them to argue in many cases that the failure to apply IR35 was 'concealed and deliberate', so there will be penalties applied. Those individuals will have no defence fund, no QC's opinion and no group to turn to.

HMRC new published objectives are 'maximise revenues'. I strongly suspect they are lining up their targets, they just need a nice big juicy case (the IR35 equivalent to Rangers to justify that the ruling applies to all- even where it doesn't). Now about these Television and Radio broadcasters.

HMRC will then write to every Accountant asking for a list of all PSC's acted for in the last say 6 years.

With the benefit of hindsight will some clients argue that the 'promoters' of PSC's must take the blame?

Thanks (0)
avatar
25th Oct 2018 16:10

'end justifies the means' - sadly probably right.

Thanks (0)
Share this content