Self Assessment Tax Return 2018/19 and Loan Charge

[DealorNoDeal]

I may have missed it in the thread....my loans straddle the December 2010 cut off point (with no known open HMRC enquiries for the preceding years). Do I declare only the post December 2010 loans on my SATR?

Yes but, as others have said, wait until September to declare them.

[demby]

Loan disclosure deadline is now Sep so there’s no reason you can’t submit your normal SA without loan details by jan 31. The obligation to declare any other normal income and pay by 31/1 is still required. I’ve been told to do SA now and then allow for legalisation to be confirmed, then disclose if required by Sep.

Disguised remuneration: guidance following the outcome of the independent loan charge review - GOV.UK

What you need to do for Self Assessment

You can either:

submit your 2018 to 2019 tax return by 31 January 2020, including a best estimate of your outstanding loan balance, taking account of any of the loan charge changes that affect you....

or

submit your 2018 to 2019 tax return no later than 30 September 2020, if you need more time to consider what the changes to the loan charge mean for you...

For both options, late payment interest will not be payable for the period 1 February 2020 to 30 September 2020 as long as a return is filed, and tax paid or an arrangement made with HMRC to do so, by 30 September 2020. We will provide more guidance on this in early 2020.

[philinlondon]

Disguised remuneration: guidance following the outcome of the independent loan charge review - GOV.UK

What you need to do for Self Assessment

You can either:

submit your 2018 to 2019 tax return by 31 January 2020, including a best estimate of your outstanding loan balance, taking account of any of the loan charge changes that affect you....

or

submit your 2018 to 2019 tax return no later than 30 September 2020, if you need more time to consider what the changes to the loan charge mean for you...

For both options, late payment interest will not be payable for the period 1 February 2020 to 30 September 2020 as long as a return is filed, and tax paid or an arrangement made with HMRC to do so, by 30 September 2020. We will provide more guidance on this in early 2020.

Thank you all for replying, the above is what I had read which triggered my initial question whether HMRC needed to be notified if I decide to submit the SA with he Sep deadline instead.

It seems like we have 3 possible ways now, the two above and submiit it before the Jan deadline and then amend it later on if required based on the answers above. If I was to amend it has anyone have any experience in how to do it? Is it simply login online? Or I need to call them? I can't imagine is that easy since we are dealing with HMRC here.. Haha

[webberg]

First, there is presently no statutory or legal provision that allows you to delay submitting the SATR beyond 31st January.

Second, a submission after that date WILL trigger a penalty and the HMRC systems are geared to generate these without human interference.

Third, assuming that legislation will be produced to reflect the statements above and assuming that this will make no difference to the penalty engine in HMRC, you may well find yourself contesting penalties.

What we have so far is a couple of statements. One from a non tax specialist in Sir Amyas Morse who makes recommendations as to allowing people to consider the impact of the loan charge changes and make a filing FOR THAT ELEMENT OF THEIR AFFAIRS by 30th September.

The other is from the Treasury which we have to assume was prepared with the guidance and/or help of HMRC. The two options above are very imprecise. We will not know how the process will work until we see legislation.

I for one do not trust HMRC to be able to translate into law the intentions honestly and in good faith. I remain unconvinced that the policy makers and political operators in HMRC are able to overcome the zealots at lower levels who still consider contractors to "have got away with it" to quote a Counter Avoidance officer over the phone yesterday.

Perhaps the problem is with the policy/political types, but you would hope that the sting of the loan charge review is enough to at least start them on the path to redemption?

Back to tax returns.

My advice is that the safest way to approach this - until we see the legislation - is to make a return of all normal income and claims but to exclude references to loan charge values. These can be added later.

Whilst I do consider that delaying a return to September (and remember that is not anything other than the last posible date) can be defended, I am convinced that the computer will churn out penalties automatically and that dealing with the final submission of the full SATR and the subsequent shuffling of payments will be a frustrating and if you use an agent, fee incurring, exercise.

[eek]

I for one do not trust HMRC to be able to translate into law the intentions honestly and in good faith. I remain unconvinced that the policy makers and political operators in HMRC are able to overcome the zealots at lower levels who still consider contractors to "have got away with it" to quote a Counter Avoidance officer over the phone yesterday.

Totally off-topic - but they only ended up in this mess due to HMRC not doing anything about the issue for 20 odd years and even now they aren't doing anything to close these cowboys down. Heck it took them 15 years to put a badly phrased webpage up warning people of the risk (and that doesn't tell you how to identify if something is dodgy).

As for the rest of your comment - for anyone reading this remember HMRC's systems are fully automated. Get your return in by January 31st to avoid being moved into a different pile and update the return later when things are clearer.

[webberg]

Agreed that the rant was off topic.

Agreed that the safest solution is a SATR submitted before 31st January 2020.

[DealorNoDeal]

My advice is that the safest way to approach this - until we see the legislation - is to make a return of all normal income and claims but to exclude references to loan charge values. These can be added later.

I think most people on this thread said they were going to file a SATR this month, excluding loans, and then amend in September.

Strictly speaking (in law), until any legislation is passed to amend the LC, not declaring loans on this month's SATR would incur penalties. Hopefully, though, even HMRC wouldn't stoop so low as to penalise people for following their guidance on the new September deadline.

[Jedi007]

Agreed that the rant was off topic.

Agreed that the safest solution is a SATR submitted before 31st January 2020.

If anyone cane give some guidance on the below would be much appreciated. I have contact HMRC but no response and SATR deadline fast approaching.

I have outstanding loans all of which were taken between, 2010 and 2015.
Two of the years are open I.e. HMRC have open enquiry.
I applied for early settlement under CLSO2, I have received figures from HMRC but have not settled yet as was awaiting outcome of the parliamentary review.

1- Will declaring the outstanding loans on me SA and paying the tax due take care of the open enquiries. ? I ask as that now that the loan charge liability can be split over three years, and the fact I have stopped working makes paying the loan charge via self assessment more attractive.

2- Will HMRC charge penalty or interest on outstanding loans declared on SA? How is it calculated?.

3- I saw somewhere that paying the loan charge will not take care of the underlying tax dispute? What does it mean?

4- I have loans spanning over 4 years, should I divide the total amount by 3 and enter figures on the SATR? And then provide next 3rd in next year return and so on?

Many thanks all..

[webberg]

If anyone cane give some guidance on the below would be much appreciated. I have contact HMRC but no response and SATR deadline fast approaching.

Go and get advice from a competent adviser rather than rely upon anonymous posters here. I have answered as best I can but in the absence of a proper review of the situation including reading all correspondence with HMRC, it cannot and should not be relied upon.

I have outstanding loans all of which were taken between, 2010 and 2015.
Two of the years are open I.e. HMRC have open enquiry.
I applied for early settlement under CLSO2, I have received figures from HMRC but have not settled yet as was awaiting outcome of the parliamentary review.

1- Will declaring the outstanding loans on me SA and paying the tax due take care of the open enquiries. ? No. To do that you need to remove any appeals you have made and ask HMRC to assess you to the loans in the year received -or - complete the settlement. I ask as that now that the loan charge liability can be split over three years, and the fact I have stopped working makes paying the loan charge via self assessment more attractive. This is NOT a choice between settling via the usual means and loan charge. The loan charge is essentially a payment on account system and DOES NOT settle anything. IN yous case, the open years will need to be settled and the others may be outside the scope of any further tax adjustment. Go and get advice.

2- Will HMRC charge penalty or interest on outstanding loans declared on SA? No. How is it calculated?. See many, many threads on the subject of interest here. Interest is due on late paid tax. If you owe tax for say 2012/13, the due date was 31/1/14. That tax paid now will attract close on 6 years interest (around 18% of the tax due).

3- I saw somewhere that paying the loan charge will not take care of the underlying tax dispute? What does it mean? That is true. The loan charge does NOT settle the liability for a year in which loans were received as income. This has been said time and again by the adviser community here and pretty much everywhere else.

4- I have loans spanning over 4 years, should I divide the total amount by 3 and enter figures on the SATR? And then provide next 3rd in next year return and so on? Nobody knows until we see the legislation. I suggest declaring ALL the loan values and saying in the white space that you want to divide them in three.

Many thanks all..

You should go and speak with an adviser.

[webberg]

You should go and speak with an adviser.

Let me explain the loan charge/settlement situation with an example.

You had a loan in 2012/13 of £50,000.

If that was taxed in that year, you would owe HMRC say £20,000 tax.

HMRC has opened an enquiry into that year and raised an assessment showing that tax due.

You have appealed the assessment and asked for the tax to be postponed.

The loan charge will apply to that £50,000. It is taxable in say 2018/19, 2019/20 and 2020/21. Because you have no significant other income let's say the loan charge sum due is £15,000, falling due 31/1/20, 31/1/21 and 31/1/22 in equal instalments.

At some point, you will need to agree the liability for 2012/13.

That might be via just removing your appeal; using some form of formal settlement process; going to litigation and applying the final decision of a judge.

If you elect for the first, removing your appeal, tax falls due of £20,000 on 31.1.14. Presumably (I'm guessing) this is paid £5,000 on 31/1/20, 2021 and 2022 respectively and the balance around 30 days after you have removed the appeal. Interest will be calculated on the amounts from the due date to the date paid.

(It may be that if you remove your appeal prior to the spread of the loan charge - we call this LC3 - then the loan charge is adjusted to NIL but the whole of the tax in 2012/13 falls due 30 days from removing the appeal. I'm sorry but I don't know quite how this will work).

If you sign a settlement, then I think that the loan charge will be removed and the tax falls due 30 days from settlement contract date. Again interest is calculated from the due date.

If you decide to litigate, the loan charge may fall due as above, UNLESS you have an argument to resist it backed by a process of declaration etc that allows the loan charge tax to be postponed. then once the decision is final, if tax is due, interest is again calculated from original due date to date tax is paid.