Trustees for repaying loan (satisfy loancharge)

[INeedHelp]

Hi, can anyone advise of a trustee that is willing to act for some Qubic planning. Want to repay the loan but Qubic want to charge a minimum fee which is out of proportion with the planning. They have said a new trustee can be put in place to give the advice and act.

[webberg]

A scheme to solve a scheme is never a good idea.

[Hitchphil]

Hi, can anyone advise of a trustee that is willing to act for some Qubic planning. Want to repay the loan but Qubic want to charge a minimum fee which is out of proportion with the planning. They have said a new trustee can be put in place to give the advice and act.

From my research on this; my trustees were willing to receive the loaned sums back & then reinvest them (with a broker of my choice) & then 'act in the best interests of 'me' the beneficiary' ........... later.

In effect avoid any tax or loan charge now & move the issue to later in time. Later being when retired (in my case a reasonable time) when you would only pay 20% paye & no NI. However there are trust taxes on making a distribution, dividend taxes, fees & IHT to take into consideration & the net cost of them & broker/dealing fees makes the investment disadvantaged from birth.

Re assigning the trust to the kids is a better possible way but my trustees didn't respond to critical questions on that so eliminated them selves from the option.

You also have to 'trust the trustees' ........ & in this scheme of mess, that's a bit of an ask!

Better then to settle, take the hit at bank - & then use spare cash to recover the settlement via SIPP tax rebates ~25% & if you are a higher PAYE rate payer with current & relevant earnings the 20% PAYE rebate too & recycle them as well into the SIPP. (that may take a number of tax years to do) Leave it invested for growth, then on retirement take 25% back out as cash to an ISA. you need to invest ~£20k to recover ~£10k & so end up with £30k.

An added advantage is SIPPs are not liable for IHT till age 75 & you can draw them down add-hoc, regularly, not at all till that age (so use a number if pension / ISA / House / Equity income streams to generate a minimum income Tax /IHT income generating fund over time) .... ............ or if you have lost your marbles already - buy an annuity!

That's not a "scheme to manage a scheme" but using existing pension & tax laws to your own best effect & outcome. You can do all that today with or without an EBT. Having an EBT does not exclude you from using AIM shares, SIPPS & the tax concessions they currently have... just the availability of funds to invest.

[webberg]

Be careful.

If you give the trustee/lender money and that money is earmarked for you, now or in the future, I think that there is a very good chance that HMRC will see that as a taxable event.

This has been covered in some detail by us and other posters and a search on "earmarking" might be a useful way to spend a couple of hours.

[Iliketax]

Be careful.

If you give the trustee/lender money and that money is earmarked for you, now or in the future, I think that there is a very good chance that HMRC will see that as a taxable event.

This has been covered in some detail by us and other posters and a search on "earmarking" might be a useful way to spend a couple of hours.

Definitely be careful.

On that last point though, getting techy I don't know when I wrote what I originally wrote (so I don't know whether s554RA ITEPA 2003 was mentioned). If it is not mentioned, then it can be helpful-ish. But this last thing you want is for there to be an earmarking "relevant step" immediately after the cash is repaid.

The other thing that is mentioned somewhere on the threads is that I would expect anyone who repays the loan after March 2016 (which still needs to be reported) will get a letter from HMRC asking for proof of repayment and will then want to understand what has happened thereafter. While I thought that was very likely before, with all the dodgy schemes that are around it must be a near certainty that they will ask now.

[Hitchphil]

Be careful.

If you give the trustee/lender money and that money is earmarked for you, now or in the future, I think that there is a very good chance that HMRC will see that as a taxable event.

This has been covered in some detail by us and other posters and a search on "earmarking" might be a useful way to spend a couple of hours.

Quite Agree - but what was advised was HMRC cannot back date the tax due, only tax it in accordance with the tax rates due at the time the funds are released / granted by the trustees & the step kicks in. The thought was if you took it out when retired even if that was only £12k ~ i.e. the current tax free allowance then because of earmarking / relevant step etc it would all be taxable - so take it & some pension & expect to be able to use the PAYE allowance vs pension ~£12k-pp drawdown & pay PAYE on a trust distribution say £20k ~£4k tax (currently that would only be 20% basic rate) - so a pension of £28k in that example.

however there are other taxes due from the trust itself & the costs / fees to trustees make it pointless. Together the investment grows at a stunted pace & the combined tax take on it is nearer ~30% (could be 36%) not 20% basic PAYE. So whilst possible, its not a great outcome. (well unless the ftse goes exponential after Brexit?)

Hence my settle (subject to the review in 30th) then use other funds to recover that settlement cost if possible via pension planning, but that will only be possible for some ~ who have less than £40k settlement in say 1 year as that's the pension contribution limit for most & who actually have £XXXk to do that with in the bank! & who have relevant earnings paying 40% & not the 50%? higher rate tax. That works for me, but may not for others.

[Calmbeforethestorm]

Definitely be careful.

On that last point though, getting techy I don't know when I wrote what I originally wrote (so I don't know whether s554RA ITEPA 2003 was mentioned). If it is not mentioned, then it can be helpful-ish. But this last thing you want is for there to be an earmarking "relevant step" immediately after the cash is repaid.

The other thing that is mentioned somewhere on the threads is that I would expect anyone who repays the loan after March 2016 (which still needs to be reported) will get a letter from HMRC asking for proof of repayment and will then want to understand what has happened thereafter. While I thought that was very likely before, with all the dodgy schemes that are around it must be a near certainty that they will ask now.

So presumably then, you are saying that its Ok to repay the loans.The Trustees can then invest the cash and as and when they make payments back to you those amounts are taxed as and when they are made.

[stonehenge]

So presumably then, you are saying that its Ok to repay the loans.The Trustees can then invest the cash and as and when they make payments back to you those amounts are taxed as and when they are made.

No, he's saying it may NOT be ok.

Let's say you have £100k in loans.

If you repay them, you can bet your bottom dollar HMRC will investigate and they will try to nail you with the earmarking provisions. If they succeed, you'll be taxed on the whole £100k there and then. The onus will be on you to prove there was no earmarking.

[webberg]

My view is that if you repaid the loans the money was ring fenced by the trustees/lenders so that it would find its way back to you, minus fees, then as Iliketax says, it becomes taxable pretty much as soon as that ring fencing happens.

The OP says that he is advised that HMRC will tax it only when it becomes available.

I have to say that on general principles I would not agree with that position.

I think HMRC will try to tax it as soon as it becomes apparent that it is ring fenced/earmarked and that I see nothing in the brief description given that would enable such a view to be incorrect.

[stonehenge]

I think HMRC will try to tax it as soon as it becomes apparent that it is ring fenced/earmarked and that I see nothing in the brief description given that would enable such a view to be incorrect.

You'd have a hell of a fight on your hands to prove that it hadn't been earmarked.

After all, why would anyone repay a loan if there was no prospect of benefiting from the money at some point in the future?

Now, if the trustees could show they had spent the money (casinos, hookers etc) then you'd probably be ok.