Guide to using pension contributions to mitigate LC19

[starstruck]

Yes, I think you're right.

Tried to PM you but I think your inbox might be full.

[Delendog]

Pension

Is there a timing risk here?

You make pension payment before 6th April 2019.

Loans get reported after that date. LC is initially against the employer by the time the charge gets transferred to individuals could HMRC class it in the next tax year so making the pension payment invalid?

[Loan Ranger]

Is there a timing risk here?

You make pension payment before 6th April 2019.

Loans get reported after that date. LC is initially against the employer by the time the charge gets transferred to individuals could HMRC class it in the next tax year so making the pension payment invalid?

The charge arises in 2018/19, no matter when it's actually collected.

In any case, unless you had a UK employer and the employer still exists, the LC will fall immediately on you.

April 2019 Loan Charge – Transfer of liability to employees | C3Insight

[Delendog]

pension

So from another thread if the LC gets HMRC less revenue that settlement + interest would have then they will come after you for the interest. I'd assume this would therefore be the case if you reduce the LC by making a pension contribution. Calculation should perhaps also include interest that HMRC could chase.

[Loan Ranger]

So from another thread if the LC gets HMRC less revenue that settlement + interest would have then they will come after you for the interest. I'd assume this would therefore be the case if you reduce the LC by making a pension contribution. Calculation should perhaps also include interest that HMRC could chase.

Depending on the size of loans, it is possible to make a big enough pension contribution to reduce LC tax to zero (see example 1 in the PDF guide). IE. HMRC don't collect any tax, never mind interest.

I don't know what their reaction would be to that.

However, if there was even a hint of vindictiveness, I'd be off to see my Member of Parliament. After all, you would have fully complied with the law (LC19) that Parliament had passed.

[Kais]

Pension guide, download failure

I've knocked up a PDF which covers pension contributions and a few other things.

Download here:

Download LC19 - Pension Contributions v2.pdf | Files.com

Let me know if I've got anything plain wrong, made any errors or if you have any comments.

Loneranger many thanks for compiling, I'm confused how pension contributions could be used to lower LC and hoped this guide might provide that insight.

I'm unable to download from files.com - not sure if this is a temporary problem with the website? If someone has the file is it possible to reissue on Google drive or Dropbox, thanks.

[Loan Ranger]

Loneranger many thanks for compiling, I'm confused how pension contributions could be used to lower LC and hoped this guide might provide that insight.

I'm unable to download from files.com - not sure if this is a temporary problem with the website? If someone has the file is it possible to reissue on Google drive or Dropbox, thanks.

Yes, there seems to be a problem with files.com at the moment.

Try this instead:
LC19 - Pension Contributions v3

This is the latest version, which corrects the self-assessment amount in Example 2 as pointed out by starstruck above.

[Kais]

LC after 2018/19

Yes, there seems to be a problem with files.com at the moment.

Try this instead:
LC19 - Pension Contributions v3

This is the latest version, which corrects the self-assessment amount in Example 2 as pointed out by starstruck above.

Thanks Loan Ranger I've downloaded and read through. I think I'll need to review again as I understand the numbers but can't grasp the principle of how making a pension contribution would reduce the LC.

Once pension contribution is made and LC is mitigated 2018/19 what happens in following tax years or is the legislation only for a one of charge?

I have one non-protected year 2006/2007 and one protected year 2007/2008. I'm trying to work out what path to take. I ultimately want the loans gone and think settlement with IHT would deliver this. The approach to use pension contributions is creative though the loans would still be outstanding and could be caught by a future legislative change - I think?

Thanks again Loan Ranger and others who contribute on these forums.

[Loan Ranger]

(1) Thanks Loan Ranger I've downloaded and read through. I think I'll need to review again as I understand the numbers but can't grasp the principle of how making a pension contribution would reduce the LC.

(2) Once pension contribution is made and LC is mitigated 2018/19 what happens in following tax years or is the legislation only for a one of charge?

(3) I have one non-protected year 2006/2007 and one protected year 2007/2008. I'm trying to work out what path to take. I ultimately want the loans gone and think settlement with IHT would deliver this. The approach to use pension contributions is creative though the loans would still be outstanding and could be caught by a future legislative change - I think?

(1) With pension contributions, you still need to come up with a large sum of money. But that money will go into your pension, rather than to the taxman.

(2) It's a one off charge. There's no way Parliament would pass a law to tax the loans again.

(3) Settling 2006/7 is certainly worth considering because there would be no interest to pay. On the other hand, once you've paid the LC, HMRC can't touch that year. With 2007/8, you'd need to pay about 30% interest on top of the tax to settle.

[Runster]

Asking for a friend....

Say someone had a loan value of £600K over 6 years, had a private pension for that period set up and hadn't contributed for say 4 of those years, what would the scenario be for that situation in terms of LC19 regards pension contribution offset?