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[uplock]

I've said it before but I'll say it again.

Settling the tax liability does NOT mean that the loans are unenforceable.

Further, a loan agreement is usually governed by contract law and the rights and obligations of the parties are subject to the same law.

I'm not a lawyer but from what I've learnt from speaking with a number of firms, is that you have to deal with the legal facts in the agreement and that assumptions as to the source and purpose of the funds in the hands of the lenders are usually to be disregarded.

In other words, you may regard the money as "yours" that has been recycled via a lender, but a Court will not.

A Court is unlikely to ask where or how or in what capacity or by what route a lender had funds. A Court will start from "lender had funds that it agreed to lend".

Harsh as it seems, as soon as you start using phrases such as "effectively it was my money already" or "essentially it was earnings", you know you have strayed into territory that a Court will disregard in determining the rights and obligations of lenders and borrowers.

That is not to say that there are not defences against repayment claims, simply that recharacterising the transaction as something a Court says it is not or is unable to contemplate because of contract law, is not a valid defensive strategy.

As I said, defence is available but it is based on legal concepts rather than arguments about the true nature of the transaction.

And will I share those defences and concepts in a public forum? No.

Happy to pick up PMs or I'm sure you can find out info email account easily enough.

Hi - I don't think it is as clear cut as describing this as a commercial loan. The scheme users will have the HMRC Tax Avoidance scheme number which will indicate this was a tax avoidance scheme. If HMRC gives you access to the scheme submission document by the original promoter (unless you have copy of technical arguments before yo joined the scheme) it will say the artificial nature of the transaction and what was intended...etc. Which will add additional documentary evidence.

Also HMRC will be testing these scheme's in court shortly to decide trust loan agreement is a genuine loan or remuneration. If HMRC win, the court decision will likely add to arguments as additional case law on the true nature of these trustee loan agreements.

I would also add, that the Trustees have a fiduciary duty to act only in the interest of the beneficiary (ie trustees should not profit from their role). They will need to justify to the Court how recalling the trust loan from the beneficiary is in the interest of the beneficiary? Lets say the loan is paid back to the trust, as ultimate beneficiaries the trustees would need to redistribute back to the beneficiary again the funds. It becomes a meaningless circular transaction - which the Courts will likely recognize.

[webberg]

Now I'm a bit confused about one of the details and wonder if anyone knows the answer?

I read in HMRC's settlement guidance that settlement will be on a net basis:

"Settlement will be on a net basis - Income Tax will be applied on all the DR loans, or other payments made for your client’s benefit, rather than the gross amount paid by the client. This means that the fees deducted from the gross amount by intermediaries (scheme expenses) will not be taxed as part of income or profits."

I took this to mean that if I repaid 5% (which I have) then under the settlement, income tax would be applied to the 95%.

My current position is:
- I've registered to settle but not heard a think from HMRC in nearly six months
- I've engaged with THL to get the loans written off but not yet received the deeds

But now HMRC are saying:

"Any payment will not reduce the amount of earnings or income to be included in the settlement."

These statements seem contradictory. I suppose I shouldn't be surprised at HMRC making apparently contradictory statements but does anyone know either what I've failed to understand or which is correct?

Thanks in advance.

You are comparing apples with oranges (and dropping in - again - a plug for THL).

HMRC settlement terms are based on the loans received being taxed as income. HMRC claims (in my view, incorrectly) that the earnings subject to tax should be the gross payments made to the lender/connected party as the fee paid was for a tax avoidance scheme and is not allowable. By concession however, they will allow you to settle on net amounts. Very simple and obvious from the statement and context.

The settlement terms were made BEFORE the prospect of loans being written off PRE SETTLEMENT was available.

The latest statement (Spotlight 48) simply says that the original settlement terms are unchanged and that no reduction in the taxable amounts will be made for the 5%/10% that is required to be paid this time around. I am assuming that this is because HMRC see the 5%/10% as a fee to exit a loan and again is not an allowable deduction from income. If that is correct, than I would tend to agree with them.

In my opinion, Spotlight 48 is very clear.

It basically says that the position "offered" by THL is based on a flawed understanding of what HMRC actually want.

Read the words - they are clear and only by dint of the most twisted logic can they be taken to mean anything other than they say.

[Dozy Bastard]

However, in this instance THL are saying on behalf of the trustees that they will write-off 100% of the loan

Hmm, well not quite, no. They say the trustees will write off 95% of the loan, not all of it.

(2) 5% or 10% of the loan value to DOR Ltd who I assume will take the funds as their processing fee. (I am assuming this money goes to DOR not the trust as if it went to the trustees it would be funds sitting in the Trust which you as beneficiary would have entitlement to.)

Ah! The point you're making here suddenly makes the deed of release baffling. I can't make sense of it. It reads: "The Trustee is willing to agree to release the Borrower from his Remaining Obligation in return for the Borrower paying the Repayment Amount prescribed in this Deed, to the Nominated Bank Account, quoting the Payment Reference."

The "Remaining Obligation" works out at 95% and the "Repayment Amount" is 5%. The clear implication is that the 5% is a partial repayment. But as you say, the bank account belongs to DOR and at the same time, the wording leaves open the possibility that the 5% is a fee, that only 95% has been written off, and that 5% of the loan remains outstanding. Ugh, it's impossible to make sense of.

As 5/10% is not a loan repayment but a processing fee to a 3rd party DOR, HMRC may not allow you to pay tax only on the 95% (ie not give you relief for the 5%) but insist you pay tax on the 100% of the loan.

HMRC apparently agree with you about this. I just spoke to them about it. As part of the write-off process, you also get a deed of exclusion, which means you're not a trust beneficiary any more. According to HMRC that means that whether the sum paid contractually reduces the outstanding amount isn't relevant. For tax purposes, they consider it a fee, not a repayment.

That seems unreasonable to me, but it's what they said.

[Dozy Bastard]

You are comparing apples with oranges (and dropping in - again - a plug for THL).

It's a bit frustrating. I mean, it was your firm who originally told me in a phone call (back in, I think, September 2018) that I needed to contact THL. I then rang Baker Tilly and they said the same thing, so I did. Now that I've actually decided to get my loans written off I'm "plugging THL". You do a lot of good work around here for which I'm grateful but I think you should have a quick look in the mirror on this particular point.

I am assuming that this is because HMRC see the 5%/10% as a fee to exit a loan and again is not an allowable deduction from income. If that is correct, than I would tend to agree with them.

Apparently they do - they just told me exactly that in a 'phone call. Oh well. It makes a bit more sense now, at least.

[neveragain]

My thinking on IQ/THL, a bit more...

I mailed THL with a few questions, which they didnt answer most of them, but replied with a partial answer to one question.

"We have been engaged by the trustees and your former employers to administer the communications process – for them to advise you of the impending legislation and suggest some courses of action. They have employed us because they are not equipped to deal with the sheer volume of communications that are needed. Part of the process includes sharing your loan statement (their records of the loans you have had), and we hope you can appreciate that we need to confirm that your identity matches their records before distributing such information.

The information has been passed to us by the trustees so that we can communicate with you. Their offer of you repaying 5% and them writing off 95% will mean you have completely collapsed your whole loan structure and will never have any remaining obligations. If you would like to see the Deeds, please contact [email protected], quoting your user ID."

So we should now know, THL, DOR resolutions, IQ, Winchester contracts etc.. seem to be all run/owned by BAKER TILLY ISLE OF MAN FIDUCIARIES LIMITED IOM, so loans seem to be on their books.

FYI HMRC, the Loan Charge, is only applicable if you have NOT paid the taxes on the whole loan.
If you have settled with HMRC, then there is no loan charge. Call them to confirm the situation.
Paying THL/BT the fee/5%/10% etc. will not lower your tax burden.
The 'loan' is not their concern, only the tax you should have paid on it.

[webberg]

It's a bit frustrating. I mean, it was your firm who originally told me in a phone call (back in, I think, September 2018) that I needed to contact THL.

I have said before and I repeat for the record.

NOBODY IN MY FIRM WILL HAVE ADVISED YOU TO CONTACT THL.

[Dozy Bastard]

NOBODY IN MY FIRM WILL HAVE ADVISED YOU TO CONTACT THL.

Putting it in red capitals doesn't make it true. The call was scheduled by <mod snip>, was with <mod snip> and took place in early September 2018. I have a recording of the call but I'm not going to share it here because it identifies me personally and I don't particularly want my name all over the Internet in connection with tax avoidance.

Maybe you could increase the font size a bit?

[cojak]

Putting it in red capitals doesn't make it true. The call was scheduled by <mod snip>, was with <mod snip> and took place in early September 2018. I have a recording of the call but I'm not going to share it here because it identifies me personally and I don't particularly want my name all over the Internet in connection with tax avoidance.

Maybe you could increase the font size a bit?

Good for you, maybe you could share it with admin to prove to him you are legit?

Because I certainly have my doubts and will be keeping an eye on this thread.

[webberg]

Putting it in red capitals doesn't make it true. The call was scheduled by xxx, was with <mod snip> and took place in early September 2018. I have a recording of the call but I'm not going to share it here because it identifies me personally and I don't particularly want my name all over the Internet in connection with tax avoidance.

Maybe you could increase the font size a bit?

Naming my junior admin staff is unacceptable. Please amend your post.

[administrator]

Dozy Bastard has requested their account be deleted from the site so I have now done this. I was not offered the chance to listen to the recording of the phone call to confirm its existence.