Paying off the Loan Paying off the Loan
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  1. #1

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    Schedule 17 3 (4) of the Finance Bill says:

    (4) A payment is to be disregarded ... if there is any connection (direct or in direct) between the payment and a tax avoidance arrangement (other than the arrangement under which the loan was made).

    Is pretty broad. Is there any way to repay the loan (in whole or part) and have access to the funds at a later date? I mean is moving abroad tax avoidance?

  2. #2

    Prof Cunning @ Oxford Uni

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    Quote Originally Posted by ReadyTainted View Post
    Schedule 17 3 (4) of the Finance Bill says:

    (4) A payment is to be disregarded ... if there is any connection (direct or in direct) between the payment and a tax avoidance arrangement (other than the arrangement under which the loan was made).

    Is pretty broad. Is there any way to repay the loan (in whole or part) and have access to the funds at a later date? I mean is moving abroad tax avoidance?
    If you paid off some or all of the loan, why would you have access to the funds at a later date?
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    Quote Originally Posted by WTFH View Post
    If you paid off some or all of the loan, why would you have access to the funds at a later date?
    Hmm, I wonder if they've overpaid and want to withdraw the capital at a later date? Pure speculation and in line with your question. Loan repayment (as repayment of accidental overpayment of dividends can be documented) could mean that they've paid more back than they should have done and now the accountant has sorted the books out they realise they've paid back, say 10,000 when they only need to pay back 8000?
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    Quote Originally Posted by WTFH View Post
    If you paid off some or all of the loan, why would you have access to the funds at a later date?
    The trust would have a credit. If the trust is discretionary and it is looking out for the best interests of the beneficiaries (like trusts are supposed to do) they will pay the money to one or all of the beneficiaries at some point in the future.

  5. #5

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    Say the Trust was an EBT...which had loaned you and three other people 100k each.15 years ago.

    Say the Trust also had a further 400k in it held for the beneficiaries of the Trust.

    If you were one of the four:

    You could repay the loan in full , so no settlement, no loan charge.

    The Trustees could then make distributions in the future to you and the other 3 members.

    There is no earmarking charge because the assets are held for all the beneficiaries and they have always been held as such.

    Assuming you were still UK tax resident when you received money you would have to declare it and pay tax at whatever rate prevailed at the time. Much like the non tax free element of a pension.

    If you had moved abroad you would pay tax in that other country or the UK depending on where you wanted/were allowed to be taxed.

    If your Trust was offshore it would not be UK tax if you were an overseas resident.... if it were the Cayman Islands there might be no tax at all if thats where you settled.

    The taxman cannot force you to pay UK tax if your not tax resident in the UK ( there are a plethora of rules on this) your destination country may or may not tax you according to its own rules.

    I think.

  6. #6

    Prof Cunning @ Oxford Uni

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    Quote Originally Posted by ReadyTainted View Post
    The trust would have a credit. If the trust is discretionary and it is looking out for the best interests of the beneficiaries (like trusts are supposed to do) they will pay the money to one or all of the beneficiaries at some point in the future.
    The trust would have been paid back for a loan, it is not a credit that you have deposited, but a repayment.

    The trust loaned you (an individual) some money. You have paid back that loan. Where is the credit?
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    If you repay the loans, you will still have to supply info on them to HMRC by 30/9/19.

    HMRC will suspect that any repayment is avoidance motivated* so both you, and the trustees, will receive a lot of scrutiny.

    * why else would anyone repay?

  8. #8

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    Quote Originally Posted by Loan Ranger View Post
    If you repay the loans, you will still have to supply info on them to HMRC by 30/9/19.

    HMRC will suspect that any repayment is avoidance motivated* so both you, and the trustees, will receive a lot of scrutiny.

    * why else would anyone repay?
    I dont think so....HMRC say repaying in cash is ok not avoidance.....you would have to pay tax on a drawdown in the future.Clearly they will be watching you in the future and they know where the money is.

    I know of people being advised legitimate,y to repay their loans so as they can do other things with the money on the future....it all depends on your scheme....probably no good for the majority here.

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    Prof Cunning @ Oxford Uni

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    Quote Originally Posted by Calmbeforethestorm View Post
    I dont think so....HMRC say repaying in cash is ok not avoidance.....you would have to pay tax on a drawdown in the future.Clearly they will be watching you in the future and they know where the money is.

    I know of people being advised legitimate,y to repay their loans so as they can do other things with the money on the future....it all depends on your scheme....probably no good for the majority here.
    If you repay the loan, are you expecting the Trust (or the company you paid) to then repay your Ltd (or whatever source the money came from that went to them)?

    There were two distinct flows:
    1. Invoice: Client/Agent - Your Ltd/Umbrella - Invoicing Company
    2. Loan: Trust - You

    So, if you repay the loan back to the Trust, then the only way to get your money back is if the invoicing company refunds your Ltd or the Umbrella.

    Unless the Loan company can get you to sign up to a new scheme where you repay them and they give you most of the money that went to the invoicing company.
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  10. #10

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    Quote Originally Posted by Calmbeforethestorm View Post
    I know of people being advised legitimate,y to repay their loans so as they can do other things with the money on the future...
    That sounds like earmarking to me.

    For HMRC to accept a repayment, as being outwith the DR rules, both you and the trustees would probably have to give a declaration that there was no intention for you to gain any future benefit from the money.

    If you subsequently did gain an actual benefit, even from only a small portion of the money, HMRC would almost certainly allege earmarking.

    I'm not saying it's impossible but I wouldn't trust any advice from a promoter.
    Last edited by Loan Ranger; 12th July 2018 at 07:51.

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