Paid LOAN SETTLEMENT in 2015 and now have to pay a LOAN CHARGE?

[ConfusedEasily]

I have a mail from our friends at HMRC saying that CLSO as was the end of it for me including unprotected years.


"If you have been involved in any other tax avoidance schemes that HMRC were not aware of when you settled with us under CLSO then you may fall in to the scope of the April 2019 loan charge"

Would you care to post the redacted text of that email here, because what I have seen in writing from HMRC says that if you settled a scheme and did not explicitly declare the other years (from the same scheme) as part of that settlement (i.e. they were aware of those years) then you will be hit by the loan charge. I have seen settlement agreements that explicitly list closed years (from the sane scheme) as part of the agreement. - I guess these are ok.

If you used other schemes not covered by your settlement, then you will definitely be hit by the loan charge. For example , you could not settle Sanzar and then expect Edge (unprotected) to escape the Loan Charge.

It's HMRC they make the rules up.

[webberg]

In discussions with HMRC we have been advised that their position is as follows.

If you used CLSO 1 and all schemes used in all years to 2010/11 were disclosed or are clearly part of the audit trail leading to settlement, then the loan charge will not apply to those years.

If you used CLSO 1 and some schemes were not mentioned, then they are potentially liable to the charge.

Unfortunately, none of this is in the legislation so I'm fully expecting a "I told you - no you didn't" playground spat in due course.

[MostlyHarmless]

In discussions with HMRC we have been advised that their position is as follows.

If you used CLSO 1 and all schemes used in all years to 2010/11 were disclosed or are clearly part of the audit trail leading to settlement, then the loan charge will not apply to those years.

If you used CLSO 1 and some schemes were not mentioned, then they are potentially liable to the charge.

Unfortunately, none of this is in the legislation so I'm fully expecting a "I told you - no you didn't" playground spat in due course.

I was involved in a single scheme in 2007/08 & 2008/09. The CLSO 1 settlement was for 2008/09. From your HMRC discussions so far, would the loan charge likely apply to 2007/08 in my case?

[webberg]

I was involved in a single scheme in 2007/08 & 2008/09. The CLSO 1 settlement was for 2008/09. From your HMRC discussions so far, would the loan charge likely apply to 2007/08 in my case?

Did HMRC ask you about 07/08?

If so, was it agreed that the year was closed?

Does the agreement mention 07/08?

If the answer to above are all "yes", then I would say good chance of no loan charge.

If the answer to one or more is "no", much less certain.

[MostlyHarmless]

Did HMRC ask you about 07/08?

If so, was it agreed that the year was closed?

Does the agreement mention 07/08?

If the answer to above are all "yes", then I would say good chance of no loan charge.

If the answer to one or more is "no", much less certain.

At the time of the settlement HMRC told me (verbally, unfortunately) that there were not investigating years prior to 2008/09. I assumed this was because of a 7 year limit to open an enquiry, but am not sure. So in my case, it's uncertain. I've been trying to get through to them on the phone for days, without any luck.

[webberg]

At the time of the settlement HMRC told me (verbally, unfortunately) that there were not investigating years prior to 2008/09. I assumed this was because of a 7 year limit to open an enquiry, but am not sure. So in my case, it's uncertain. I've been trying to get through to them on the phone for days, without any luck.

It seems to me that you have a prima facie case that you were enticed to enter a contract on the basis that the 7/8 year was included and that if HMRC subsequently deny that, then the contract can be revoked.

It may be that the threat of that alone would be enough to have 7/8 excluded.

get advice.

[Iliketax]

Unfortunately, none of this is in the legislation

That's strange. Just checked and it's in my copy.

[jbeer]

That's strange. Just checked and it's in my copy.

Is ALL (both points) in your copy ?

[Iliketax]

Is ALL (both points) in your copy ?

The legislation doesn't word it in that way. This is something you want to chat with your tax adviser, referring to your agreement with HMRC and with your facts. The legislation is written in a clumsy way as it was designed for a different purpose (i.e. well before the April 2019 loan charge was thought about) and then amended three times after (e.g. to deal with closing of CLSO 1, changes to double tax relief and the April 2019 loan charge). It is far from the easiest to read but for it to apply you do need (i) an agreement to have been made with HMRC under which it was agreed that the pre-DR step was to be treated as giving rise to earnings before then, and (ii) tax to have been paid as a consequence of that agreement. But there is nothing that says that tax paid must equal 40% (or whatever) of the amount that was agreed to give rise to earnings. But without an agreement in relation to the pre-DR loan, it does not stop the April 2019 loan charge.

[webberg]

How I wish that the HMRC officers we spoke to had discussed this with Iliketax first!

Seems that they have not and in the meantime, continue to include pre 2010/11 years that were part of the CLSO 1 operation, even though closed and no tax paid.

I think that most of the front line officers have been told to push their luck in the hope that the clumsy wording is too difficult for most to follow and perhaps will then argue, that the intent of the law is not as described.

This whole exercise is hampered by legislation that is unclear and which can be interpreted in several ways and as most front line HMRC officers have little interest in straying from their checklists and whenever we contact them, little ability to understand the tax situation or consider anything other than their checklists, I predict many taxpayers will pay too much.

I understand that a literal reading of the law might (not definitely will) lead to a conclusion that closed years from CLSO 1 should be excluded from the LC,

but

a) HMRC has no interest in allowing that
b) HMRC officers cannot follow the legislation
c) their checklist approach does not permit deviation
d) the senior officers, deny the effect of the legislation
e) most taxpayers cannot afford the sort of forensic analysis and hours of argument required to make HMRC comply with a poorly written law that is arguably not intended for this purpose.