Loan charge review - Government response is here

[BrilloPad]

I am worried that they may try, regardless, just because that is how they operate. Hence bit like a good slasher film, you have to keep fighting until the monster is decapitated, salted and burned.

This.

[ChimpMaster]

I have no idea what HMRC will do and I doubt if they will know yet.

It will probably be a lot easier now to find people with old loans because of the April 2019 loan charge disclosures that have been made concerning the individual directly (e.g. by the individual, the lender, the employer) or indirectly (because they now know the PAYE scheme reference number of the employer who used the schemes and so can identify all the other employees with the same employer).

In terms of time limits, extending the discovery from four years to six years would probably be quite easy where nothing was disclosed on the tax return. But 9 December 2010 is a lot more than six years ago. Extending the discovery period to 20 years may be too much of a challenge in most situations. But it will be a question of understanding the right facts. If, for example, HMRC came across an email chain where:

1. the individual was told by their adviser to include something on their tax return about the loans but decided that that would be way too risky and so chose to not even bother completing a tax return then despite their adviser saying that was wrong then HMRC may well want to take the point.

2. the individual was told by their adviser to include the loan benefit in kind on their tax return, and did, then absent anything other facts I can't see HMRC being able to go back, or wanting to go back, 20 years.

So this was something I was thinking about too.

The whole loan charge fiasco has been a huge exercise in data collection by HMRC. One would have been better off not disclosing anything at all to HMRC (for LC I mean), but the timing did get a bit too tight what with Jan 31st just a few weeks ago, and given HMRC's monumental failure in processing settlements.

But it means that HMRC have all the loan data they need, to be able to go back and say, hey Mr. Smith we know you were in a XYZ loan scheme from 2003 - 2009 and your loan balance is £xxxxxx. So we're going to be checking your (Unprotected/Closed) tax returns for all those years because we believe you did not provide us with a DOTAs number (or any other excuse).

Now I don't know what reasons HMRC can use to open up Returns from > 6 years ago, and I would like to think that it's a real long shot for them to attempt this, but you just don't know. It seems the only way you can have certainty is to wait 20 years. Which is pretty much a life sentence. Except they just won't let you live. Death and taxes come to mind.

It's easy to see why there is such a hatred of HMRC.

[BrilloPad]

It seems the only way you can have certainty is to wait 20 years.

Of course, if they have opened an enquiry in that time, they have forever. I expect them to increase the 20 year window. And to be able to claim back monies from your estate, even when distributed.

[dammit chloe]

So this was something I was thinking about too.

The whole loan charge fiasco has been a huge exercise in data collection by HMRC. One would have been better off not disclosing anything at all to HMRC (for LC I mean), but the timing did get a bit too tight what with Jan 31st just a few weeks ago, and given HMRC's monumental failure in processing settlements.

But it means that HMRC have all the loan data they need, to be able to go back and say, hey Mr. Smith we know you were in a XYZ loan scheme from 2003 - 2009 and your loan balance is £xxxxxx. So we're going to be checking your (Unprotected/Closed) tax returns for all those years because we believe you did not provide us with a DOTAs number (or any other excuse).

Now I don't know what reasons HMRC can use to open up Returns from > 6 years ago, and I would like to think that it's a real long shot for them to attempt this, but you just don't know. It seems the only way you can have certainty is to wait 20 years. Which is pretty much a life sentence. Except they just won't let you live. Death and taxes come to mind.

It's easy to see why there is such a hatred of HMRC.

All but one of mine were pre-DOTAS. I think settlement figures are possibly moot as they just need one submission to flag a scheme.

My understanding is that it has to be egregious for the 20 year bar to be met. So deliberate fraud, collusion, hiding of assets etc. I would like to think being on a payroll scheme used by hundreds of contractors and marketed in plain sight, backed by prominent QC opinion would not be close to that.

If they did would they not be compelled to tackle the employer/accountants first?

As I say above, my biggest fear is that they may try just because it is public money and they can or at least use it as a threat to try and coerce another settlement.

[DealorNoDeal]

My understanding is that it has to be egregious for the 20 year bar to be met. So deliberate fraud, collusion, hiding of assets etc. I would like to think being on a payroll scheme used by hundreds of contractors and marketed in plain sight, backed by prominent QC opinion would not be close to that.

I think they would really struggle to persuade a tribunal that the 20-year window was justifiable.

I'm sure that they will simply write off pre-2010 closed years. In fact, the Goverment guidance implicitly gives them the nod to do this.

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

[NotSoCompliant]

I think they would really struggle to persuade a tribunal that the 20-year window was justifiable.

I'm sure that they will simply write off pre-2010 closed years. In fact, the Goverment guidance implicitly gives them the nod to do this.

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

I wouldn’t be too sure about this. The following is an Extract of HM Treasury’s response to the recommendations from the LC report..

Loan Charge design
3 The Loan Charge should not apply to loans entered into before 9 December 2010.
2.10 The Government accepts this recommendation. HMRC have always maintained these schemes did not work, and tax was due. The legislation introduced in 20112 put the matter beyond doubt. Loans taken out from 9 December 2010, when the legislation was announced, will remain subject to the Loan Charge. Loans taken out before 9 December 2010 will not be subject to the Loan Charge.
2.11 The Government estimates that around 15,000 individuals could be affected by this change, of which around 10,000 individuals could be taken out of paying the Loan Charge completely.
2.12 While loans made before 9 December 2010 are removed from the scope of the Loan Charge, the underlying tax liability for loans made prior to this date remains. HMRC will continue to pursue those liabilities through enquiries and assessments, and where necessary through litigation. HMRC will publish updated settlement terms for all taxpayers in this position as set out above.
2.13 The Government will also invest in a new HMRC team to conclude enquiries and bring in the tax due from people who in the past have used DR schemes, and other forms of tax avoidance. The team will engage positively with those who wish to settle their affairs and will have the resources and skills to pursue cases to tribunal and through the courts where that is necessary to collect what is due. This will ensure people who entered into DR avoidance schemes before 9 December 2010 still pay the tax due

To me it seems HMRC will still pursue Pre 10 December 2010 liabilities (I have 2 such years) through their existing powers rather than the LC (eg 20 year time limits or the section 95 12 year time limits for offshore matters). The LC was just an easier (and lazier) method of capturing all of these historical years. So in my case I think they will refund my monies from pre 10 December 2010 and then another unit will be following up to claim it back again on the pretext of the 20 year time limit rule applying (because I didn’t disclose sufficient details of the use of the scheme on my tax returns), so I think it will be a case of giving in one hand and taking again from the other. In one of those years I did disclose the BIK from the loan in the appropriate box but they will no doubt threaten me that this wasn’t sufficient disclosure and I would have to take it to court to decide otherwise.

[webberg]

But my loans are all closed years pre-2010 - why are you saying the loan charge still applies? You should be posting this on the BG forum because on there people are thinking their closed years pre 2010 are now out of scope.

And I would agree that a loan from before 9/12/10 and where there is no valid open enquiry, is now beyond HMRC's reach.

However, your initial post neglected to mention the VITAL piece of information, that you had no enquiries.

My assumptions was that as you were discussing the "depreciation" elements, your years were all open.

I suggest that I cannot be blamed for making an assumption that if you mentioned a feature of a loan from pre 9/12/10, you had a real and pressing concern.

I can work only with facts and reasonable assumption. I cannot guess.

[webberg]

It sounds like SonOfLoanCharge will be worse than LoanCharge. I expected the review to have no impact - not make it worse. Amyas is a total traitor.

I would have to observe that the above is, in my opinion, unfair.

There is a lot of detail in the 83 pages of the report and the 19 pages of Government response.

Some of it is entirely on the "side" of taxpayers. Some of it is entirely on the "side" of HMRC.

He has however sought to find a balance and I for one think that once the noise and knee jerking settles down, most commentators would find that he has broadly achieved this.

[webberg]

I am also not aware of the "magic" (other than the LC reviving these loans and making them "outstanding"!). I believe Webberg believes they never purchased the actual foreign currency so it was all paper based depreciation. But I have seen no evidence either way and have stacks of paperwork detailing my loans in ccyX and the depreciation of ccyX, which matched real rates published at the time - so I have no reason to doubt the workings of the scheme and there is certainly no reason for me to challenge it either.

Have a look at the Boyle case for the hurdle of evidence required.

In that case it was clear that unsupported assertions from taxpayer and promoter were deemed to be not enough to prove that foreign currency played any part in the transaction, other than book entries. The Judge rejected the bookkeeping evidence as not good enough.

[dammit chloe]

I would have to observe that the above is, in my opinion, unfair.

There is a lot of detail in the 83 pages of the report and the 19 pages of Government response.

Some of it is entirely on the "side" of taxpayers. Some of it is entirely on the "side" of HMRC.

He has however sought to find a balance and I for one think that once the noise and knee jerking settles down, most commentators would find that he has broadly achieved this.

I think you are right ( although I don't believe balance needs to be an objective ; Fairness and accuracy do )

Where I have a concern is that no one on the HMRC or Treasury side is paying any sort of price. If anything they are being rewarded handsomely ( more powers, staff and the odd bauble or two thrown in ). Where are the repercussions for the other parties involved? Why are too many taxpayers still under the jackboot of the Loan Charge?