Settled in full with HMRC, loan written off. Now Ltd Co has tax enquiry??? Settled in full with HMRC, loan written off. Now Ltd Co has tax enquiry???
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  1. #1

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    Default Settled in full with HMRC, loan written off. Now Ltd Co has tax enquiry???

    Any thoughts from the experts on this one.

    I settled with HMRC in full some months ago. Paid all tax due with loan now treated as income, plus interest and IHT. The loans were then written off. Letters from the Trust to confirm loans are written off and letters from HMRC to say I have now settled my liability.
    Thank god i'm done with all this....

    Until today when I received a discovery assessment on my Ltd Co for the payments made to the tax scheme that I have settled. They claim the payments from Ltd Co to the scheme in question reduced Corporation Tax.
    Those payments to the scheme are not tax deductible and therefore additional corporation tax is now due (quite a hefty value).

    Has anyone else had this experience?

    Surely if those payments from my Ltd Co to the tax scheme have been settled as employment income with all taxes now paid in full. They do qualify as tax deductible when calculating Corporation Tax?

    How many more times are they going to screw us over to increase tax receipts

  2. #2

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    We have not seen this scenario and given the great play made by HMRC in their November 2017 paper on how to settle where a company is involved, I'm disappointed but not surprised.

    I suggest that you tell the person enquiring into the company that you have settled under the November 2017 terms and as such there should be no company enquiry.

    That may be enough to close this down.

    If not, you are entering deep waters and you will need advice.

    That advice might be possible from whatever bookkeeping firm you use for the company, but I suspect not. This is a niche area.

    I would though start with them.

    I confess that my biggest fear when I read the opening lines of the post was that HMRC was running an IR35 status review. We have been predicting this for a while but whilst their activity in that space is increasing it seems that there ready made list of contractor targets for a review (the settlement list) is not yet being used.
    Best Forum Adviser & Forum Personality of the Year 2018.

    (No, me neither).

  3. #3

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    Quote Originally Posted by Whysoserious View Post
    Has anyone else had this experience?
    Make sure that the person sending the letter knows that you've settled. Often HMRC are joined up between income tax and corporation tax but not always. If they do know you've settled then ask why they are taking a different position from that in OCO. OCO Ltd and Toughglaze (UK) Ltd v Revenue and Customs (INCOME TAX/CORPORATION TAX : Employment income) [2017] UKFTT 589 (TC) (04 July 2017) They may have a great reason for taking a different view based on your company's facts. Or they may not.

    In particular, I would mention this bit: OCO Ltd and Toughglaze (UK) Ltd v Revenue and Customs (INCOME TAX/CORPORATION TAX : Employment income) [2017] UKFTT 589 (TC) (04 July 2017)

    Corporation Tax issues
    350.This decision does not make any determination on the corporation tax issues because it was accepted that if the HMRC succeeded on their income tax / NICs issues the deductions for corporation tax the appellants sought would be allowed.
    One extra thing is that HMRC may be wondering if you've moved on from loans schemes to some other scheme and so may ask questions about other years.

  4. #4

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    Quote Originally Posted by webberg View Post
    I suggest that you tell the person enquiring into the company that you have settled under the November 2017 terms and as such there should be no company enquiry.
    I was not aware I could settle my personal tax bill from company funds. Clearly we are all missing a trick here.

  5. #5

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    Cake and eat it! On one hand HMRC are saying it has reduced CT liability and then they say it was income and should be taxed. Surely if the loan has now been settled as additional income from the company then there is no change on what is owed as CT. if they want to play that game why dont we all just pay 20% CT in the first place(and no interest /ni)

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    Quote Originally Posted by GreenMirror View Post
    I was not aware I could settle my personal tax bill from company funds. Clearly we are all missing a trick here.
    I think you are missing something.

    The op has paid money from his company to a trust which was loan back to him personally.

    HMRC have reclassified those loans as Salary and has paid all Tax due and IHT.

    Since they were reclassified as 'Salary' it should be an allowed expense for CT.
    Last edited by passerby; 24th January 2019 at 11:53. Reason: sp

  7. #7

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    Quote Originally Posted by GreenMirror View Post
    I was not aware I could settle my personal tax bill from company funds. Clearly we are all missing a trick here.
    For clarity. I settled my personally tax liability with my own money, not using my Ltd Co.

    I hope its just a case of HMRC departments not talking to each other.
    If not, it’s a very damming outlook on HMRC application of tax law.

  8. #8

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    Quote Originally Posted by Whysoserious View Post
    the payments from Ltd Co to the scheme in question
    Quote Originally Posted by Whysoserious View Post
    if those payments from my Ltd Co to the tax scheme
    Quote Originally Posted by Whysoserious View Post
    For clarity. I settled my personally tax liability with my own money, not using my Ltd Co.
    I am now very confused. When you say your own money do you mean from your own bank account? Or using the limited company bank account?

  9. #9

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    Quote Originally Posted by passerby View Post
    I think you are missing something.

    The op has paid money from his company to a trust which was loan back to him personally.

    HMRC have reclassified those loans as Salary and has paid all Tax due and IHT.

    Since they were reclassified as 'Salary' it should be an allowed expense for CT.
    I think this is why HMRC have included CT relief / deductions in some settlement calcs

  10. #10

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    Quote Originally Posted by passerby View Post
    I think you are missing something.

    The op has paid money from his company to a trust which was loan back to him personally.

    HMRC have reclassified those loans as Salary and has paid all Tax due and IHT.

    Since they were reclassified as 'Salary' it should be an allowed expense for CT.
    I am starting to understand now.

    Once salary and CT are settled, HMRC will go after CGT!

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