Yep another one - Target Umbrella / Redstone Services - HMRC letter

[webberg]

None whatsoever. Other than they have written to me saying mine are caught, despite them not referencing any years. .

Not quite true.

At present there are perhaps two arguments HMRC has advanced in two separate places and upon which they may in due course place some reliance.

First, the loan charge legislation discusses "quasi loans". In essence this is a catch all phrase which could be taken to mean a loan that replaces another loan.

In most direct loan schemes the claim is that a loan from the employer is outside the definition in section 554A (1)(d). I think this is true.

If nothing else was done and the employer was still around and still held the loans, then I would say that prima facie, you had a great chance of avoiding the loan charge.

Almost inevitably however the loan made by the employer was moved on at some point (just before a company/tax year end normally) and the loan is now held by a third party. Perhaps a trust.

Is it now within the rules in 554A (1)(d) and/or quasi loan rules in Sch 11 F(No2)A 2017?

I would say that there is a very good chance that HMRC think so and a case to argue if you don't think so.

Further, there is a GAAR opinion from October 2018 in which a scheme which has the switch of loans from original lender to third party involved. HMRC persuaded the GAAR Panel (and no evidence was produced from the taxpayer side to refute it) that Parliament had intended that the situation should be caught within the rules of Part 7a, despite specifically not saying so, and therefore he rules could apply.

Now this is i think a long stretch for a Tribunal to make and I'd be surprised if - upon challenge - it would stand up. Unfortunately a GAAR opinion means that if you go to Court and lose, high penalties are automatically applied. So who will risk that?

The above is why I think HMRC hold the view they do.

Perhaps they have other grounds, but if so, they have not told me about them.

[lowpaidworker]

If nothing else was done and the employer was still around and still held the loans, then I would say that prima facie, you had a great chance of avoiding the loan charge.

So the loans made by Target/Redstone are still with them. They havent been transferred to a third party last I heard which based on their loan statements was at least Sept 2019 and based on a email a few weeks ago they assure me they are still being held by them. These date from aroudn 2012-15 and last i heard will still being issued in 2017. So I would assume there have been many FYE's. I have no idea how they have managed to keep them on their BS.

As also mentioned I have seen a redacted letter from HMRC confirming the loans are out of scope although I have not received one yet despite asking them to confirm on more than two occassions. I think on this last point my mail ends up with a case worker rather than one of the "experts" although I wouldn't want to try and second guess how HMRC work.

[Ian Richardson GT Leeds]

Not quite true.

At present there are perhaps two arguments HMRC has advanced in two separate places and upon which they may in due course place some reliance.

First, the loan charge legislation discusses "quasi loans". In essence this is a catch all phrase which could be taken to mean a loan that replaces another loan.

In most direct loan schemes the claim is that a loan from the employer is outside the definition in section 554A (1)(d). I think this is true.

If nothing else was done and the employer was still around and still held the loans, then I would say that prima facie, you had a great chance of avoiding the loan charge.

Almost inevitably however the loan made by the employer was moved on at some point (just before a company/tax year end normally) and the loan is now held by a third party. Perhaps a trust.

Is it now within the rules in 554A (1)(d) and/or quasi loan rules in Sch 11 F(No2)A 2017?

I would say that there is a very good chance that HMRC think so and a case to argue if you don't think so.

This is consistent with how HMRC have told me (as a liquidator appointed to insolvent scheme operators) they will calculate their claims

But (IMHO) avoiding the loan charge is not a good outcome for employees receiving loans, because when the employer fails (which it will, because it won't want to pay either the CT on the non deductible loans it has paid out, or the PAYE/NIC that is assessed when HMRC find out about a subsequent assignment) and the employer goes down, the administrator or liquidator will (at least try to) collect the loans in …..

So if you enter into a scheme where you are paid part of your salary by way of a loan, you're just storing up future trouble for yourself

[lowpaidworker]

This is consistent with how HMRC have told me (as a liquidator appointed to insolvent scheme operators) they will calculate their claims

But (IMHO) avoiding the loan charge is not a good outcome for employees receiving loans, because when the employer fails (which it will, because it won't want to pay either the CT on the non deductible loans it has paid out, or the PAYE/NIC that is assessed when HMRC find out about a subsequent assignment) and the employer goes down, the administrator or liquidator will (at least try to) collect the loans in …..

So if you enter into a scheme where you are paid part of your salary by way of a loan, you're just storing up future trouble for yourself

thanks Ian. One further question. What if the Tax jurisdiction of the loan provider/employer is outside HMRC's reach for the purpose of CT?

[Ian Richardson GT Leeds]

thanks Ian. One further question. What if the Tax jurisdiction of the loan provider/employer is outside HMRC's reach for the purpose of CT?

Not certain what you're getting at. The whole point of these schemes is that they profess to be tax compliant - they wouldn't bother if they were domiciled beyond HMRC's reach

If it's an overseas co that is employing in the UK, HMRC can use the Insolvency Act to wind it up here like a UK co

[lowpaidworker]

Not certain what you're getting at. The whole point of these schemes is that they profess to be tax compliant - they wouldn't bother if they were domiciled beyond HMRC's reach

If it's an overseas co that is employing in the UK, HMRC can use the Insolvency Act to wind it up here like a UK co

Sorry was not getting at anything really. I am trying to figure out why my old Employer feel so confident their loans are not captured by the 2019LC.

Your last comment appears to put beyond doubt they are out of reach.

[NeedTheSunshine]

Sorry was not getting at anything really. I am trying to figure out why my old Employer feel so confident their loans are not captured by the 2019LC.

Your last comment appears to put beyond doubt they are out of reach.

They're all confident or else we wouldn't sign up. Will they go to tribunal on their employees' behalf?

[lowpaidworker]

They're all confident or else we wouldn't sign up. Will they go to tribunal on their employees' behalf?

I get all that. I am no mug.... now..... Maybe was in the past but like everyone else I am not a tax expert and trusted way too many people for reasons not worth going into.

I want to keep all avenues open while I decide how to get out of this mess. Yes that includes finally getting a some serious advice from someone impartial (like GW or his firm), but when i sit down with the poor advisor that will help me I have a small understanding of how the **** I am in this situation/mess and how or what i can afford to get out of it.

[DealorNoDeal]

As also mentioned I have seen a redacted letter from HMRC confirming the loans are out of scope although I have not received one yet despite asking them to confirm on more than two occassions.

If you want to go down the route of not declaring the loans for the LC on your 2018/19 SATR, I'd keep pushing for this confirmation. Failing that, it would be worth getting a copy of that redacted letter if you can.

[lowpaidworker]

If you want to go down the route of not declaring the loans for the LC on your 2018/19 SATR, I'd keep pushing for this confirmation. Failing that, it would be worth getting a copy of that redacted letter if you can.

I've actually got a copy but probably more worrying is HMRC could or would happily say we got that wrong. Therefore I dont think it helps but then maybe a professional will say it does. Anyway onwards and upwards.