Trust Fees for settling loans

[RickG]

Mainly to draw a line under the whole thing. However, if they insist on charging exorbitant fees to do it, I'll be doing exactly as you say.

[Dmac]

If you're paying tax on it, it isn't a loan

The thread below is helpful here:-

https://forums.contractoruk.com/hmrc...letter-66.html

I had PTS Settlements ask me for £250 just to provide me with my loan amounts - I refused and sent them a demand for all of my personal information to be provided free of charge within one month under the new data protection law, the GDPR. Failure to comply will mean a report to the office f the Information Commissioner.

I would say do not consider paying these people (AML / Knox / Principal, PTS / Vanquish, et al) another penny, ever!

[howcanigetyoualoan]

Can I ask why you feel the need to settle/waive/close the loan ? It is not a requirement of HMRC that you have the loan settled, as others have said it is simply an attempt by the scheme arrangers to extract more money, if they really thought that the loan could be recalled, would they be settling for 5% of the loan value ? I would suggest better to keep your money and if they do ever try and recall the loan in he future use it for the lawyers fees.

This is the reason I see for the release - it is / can be an HMRC requirement.

https://forums.contractoruk.com/hmrc...f-loans-2.html

[webberg]

For clarity.

HMRC do and can not insist on the loan being written off or otherwise released.

They have moved (In April 2017) to make a loan release or write off a taxable event. They also insist that a commercial situation in which the loan is repaid and the funds distributed in accordance with an agreement written long ago, might be "avoidance" for the purposes of the loan charge.

So there are some features that mean that the loan write off might attract another tax or at least the prospect of a long fight with HMRC to get them to see sense.

Perhaps the key reason for the need to remove the obligation to repay is where the loans end up in unfriendly hands. There have been a few instances of this and whilst I would hesitate to say that they are actively unfriendly, but certainly they are looking to make money by making some dubious claims.

It may be, as suggested, that you don't pay anybody anything and save your money for some form of legal resistance.

Be aware however that HMRC claim that the loan - if held by a trust - may attract some IHT either on settlement or later.

[RickG]

Is it right to say that the IHT charge is on the trust and therefore in their interest for you to settle this directly with hmrc?

[webberg]

Is it right to say that the IHT charge is on the trust and therefore in their interest for you to settle this directly with hmrc?

Not always on the trust.

Even if it were, that can cause some issues.

For example, if the trust has 100 loans and an IHT charge arises of say £1,000, how do they pay it?

If they try to collect £10 from each loan, chances are that they will not be able to. Some people may have disappeared, some will not be able to pay, some will not pay.

Does the trustee then go after those who are willing to pay for more than £10?

I have no idea what the legal ramifications of that might be.

[RickG]

Slightly off on a tangent here, but I was told that a trustee has to act in the best interests of the beneficiary. Therefore recalling the loan is going against that principle.

With regards to IHT, surely a beneficiary has no obligation to pay any fees related to a trust. It must be the original company which setup / engaged the trust which is liable for fees. Assuming that company still exists, of course. I don't see how the trust can make a beneficiary liable for anything. Except to recall the loan (which then violates their obligation in my first paragraph).

I don't expect an answer to any of the above. I understand trust law is very complicated and probably requires some legal expertise to answer.

[Dmac]

Loan

Many of the loan agreements have a transferability clause, meaning the lender (the trust) may assign the loan to another party. If this is NOT a trust, can that party demand repayment?

Also, Webberg, in your reply above you mention the loan and HMRC - however once a person has settled, would HMRC no longer regard it as a loan? If it is still a loan, there should be no tax due on it, and if is is Disguised Remuneration, then it is not a loan.

[webberg]

Many of the loan agreements have a transferability clause, meaning the lender (the trust) may assign the loan to another party. If this is NOT a trust, can that party demand repayment?

Also, Webberg, in your reply above you mention the loan and HMRC - however once a person has settled, would HMRC no longer regard it as a loan? If it is still a loan, there should be no tax due on it, and if is is Disguised Remuneration, then it is not a loan.

I'm not competent to comment on the transfer clauses and effects. I would have thought however that a trust transferring to a non trust would have some trust law implications and may not be permitted. Certainly where loans are now being administered by an entity other than the trust, there is no suggestion of an assignment or novation, just a transfer of admin duties. I've obviously not seen the agreements between those parties so cannot analyse it further.

In terms of whether settlement means that the loan still exists, it does.

The Rangers case held that at the point the employee became entitled to their remuneration, it was their money.

The only way in which the legal integrity of the transaction could be preserved after that is if the employee paid money to a trust and the trustee then loaned it back to the employee.

So the employee is taxable on the full amount as income and has settled money on a trust and received a loan.

Paying tax on the income does not mean that the loan has ceased to exist for tax purposes.

Sorry.

[RickG]

The only way in which the legal integrity of the transaction could be preserved after that is if the employee paid money to a trust and the trustee then loaned it back to the employee.

I've pondered this point over the last few weeks, having read some of your previous posts. On what basis would an employee pay money to a trust - ie. what advantage is there for an employee to do so, only to have the same money loaned back to them?

Just wondering how this point would play out in court when determining if the loan is enforceable or not.