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Five things for those facing the loan charge

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Meredith McCammond looks at some of the main changes being made to the loan charge and clears up a few areas of confusion. 

18th Feb 2020
Technical Officer LITRG and Chartered Tax Adviser
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Following the independent review of the loan charge by Sir Amyas Morse in December 2019, new guidance and draft legislation have now been published.

If you have clients who are facing the loan charge there are five important things to note:

1. The tax return deadline

Taxpayers can file their 2018/19 tax return and pay the loan charge and any other tax due (or arrange a payment plan) by 30 September 2020 (rather than by 31 January 2020), without penalty. This also applies to those settling or not paying the charge but with ‘loan charge’ issues, such as those whose charge now falls away following the review.

HMRC’s original guidance was not clear that this meant all tax (as opposed to just loan charge related tax), but HMRC has confirmed that they do, indeed, mean all tax. Taxpayers may, however, receive auto-generated interest charges and penalty notices, which can be dealt with by calling 03000 599110.

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Replies (12)

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By petestar1969
19th Feb 2020 10:53

I need help with this for the only client I have left who got involved in a loan scheme.

Some time ago HMRC assessed his company (now ceased trading) to PAYE and Class 1 NIC alleging the amount he put through the loan scheme should have been salary through his company.

We agreed the amount due with HMRC last October and were ready to settle and pay the amount in one go (my client just wanted it done) by contract.

HMRC then contacted me and mentioned the upcoming review (Morse report) and that we may want to wait, which we did. My client was still happy to pay the whole amount but getting a few more months to pay with no extra interest, well why not?

The review made no difference to my client so the tax and NIC's are still due. I have contacted HMRC to say ask them to send out the settle by contract paperwork for the client to sign off and pay but so far, nothing!

Do I need to amend the 2018/19 self-assessment return I did in June last year? I would rather not. If I call the number in this article will they be helpful?

Any guidance/help would be appreciated.

Thanks

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Replying to petestar1969:
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By petestar1969
25th Feb 2020 13:30

Anyone?

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By gordo
19th Feb 2020 12:01

‪So Meredith, actually the 3 year spreading of the loan charge is a trap for the unwary. It achieves nothing, indeed it can leave people in an even worse position than settlement now. So the unwary & unrepresented will ultimately feel tricked by the Loan Charge Review.‬

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By Moo
20th Feb 2020 09:27

Interesting though the intricacies of the HMRC loan charge arrangements are I would just like to add a note of sympathy/caution for the naïve punters who entered into some of the EBT arrangements, often with offshore schemers in foreign jurisdictions.
The whole point of the 'loans' is that they were (at least on paper) loans and therefore repayable.
Some people, having settled the UK tax with HMRC, are now facing the very real prospect of having the EBT trustees assigning the loan to a third party who then ask for the loan to be repaid.
Has anyone out there seen this happening yet in practice? Is there a source of legal advice that can be recommended to people in this situation?

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Replying to Moo:
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By Justin Bryant
20th Feb 2020 09:59

They need to contact the trustee’s regulator to block this transfer before it happens and warn the solicitors that they are potentially assisting with a breach of trust and will be reported to the SRA if they continue with it. See also:

https://wttconsulting.co.uk/%EF%BB%BFwtt-statement-on-iq-consultants-iq-...

https://www.etctax.co.uk/felicitas-solutions-fs-capital-letter-calling-i...

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Replying to Justin Bryant:
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By Moo
20th Feb 2020 10:21

Thank you Justin, very helpful.
Our client has indeed been approached by Felicitas but he has also received a letter (apparently unsigned) from the trustees confirming assignment of the loan.
The trustees are based in IOM and the notice from Felicitas is from their IOM branch.

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Replying to Moo:
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By Justin Bryant
20th Feb 2020 10:39

The whole thing sounds totally dodgy to me and should be reported to the trustee's regulator in IoM and also the SRA (if no redress is had from the trustee or the English law firm acting for the alleged new creditor).

I expect there may be a group action you can join to sue the trustee for breach of trust.

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Replying to Moo:
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By petestar1969
27th Feb 2020 09:30

One of my clients used an offshore trust via Guernsey about 4 years ago and has been called by someone in Guernsey trying to get him to pay back his loan. He was lucky, HMRC never tumbled the loan scheme or enquired into his personal or company tax affairs so I don't want to rock the boat.

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By Christine Marsh
20th Feb 2020 15:43

What happens to those who dispute they were paid under the loan charge? Client received notification from HMRC in November 18 that they believed he'd been paid under the disguised remuneration loan charge scheme in 2015, which we've disputed as client claims he was paid under PAYE. However, client was unable to provide payslips as they were sent electronically and stored 'on the phone' which has subsequently been replaced. Contractor has ceased trading. We provided all bank statements showing receipts, which were under the threshold for the tax year. We received a holding letter from HMRC in October 19 advising there would be a review, but nothing has been received since - presumably just await HMRC, unless anyone else has experience and advice on this?

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Replying to Christine Marsh:
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By Rammstein1
20th Feb 2020 16:38

Christine Marsh wrote:

We provided all bank statements showing receipts, which were under the threshold for the tax year. ?

Under the threshold for what if you don't mind me asking?

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By moshestrugano
17th Nov 2020 09:04

Moshe Strugano (Owner of Moshe Strugano and Co. Law firm) says, you have to be open about complexities you are facing while dealing with HMRC. Its good to be open so that they can both assess whether you require professional help and understand more specifically if there are any especial issues of yours which they have to take into account when resolving your loan charge.

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