The LC is like a Payment on Account

[webberg]

OK, let's think about that.

(Obviously the following only applies to open years. Once you've paid the LC for a closed year, that's the end of the matter.) Not sure I follow the logic here?

Let's assume you pay the LC and then do nothing. Your tax appeal is just left dormant.

What could happen to change this dormant state? The only two things I can think of are:
1) HMRC issues you with a Closure Notice No. A closure notice is the end of an enquiry - and the start of the litigation process if you chose it to be - and I very much suspect/know that HMRC is gearing up for this right now.
2) HMRC issues you with a Follower Notice because your scheme has been defeated at tribunal Entirely possible

(1) doesn't seem very likely, given that they'll be focusing their attention on pre-2010 open years which aren't covered by the LC I disagree. HMRC is organised internally into two units, one if "legacy", by which they mean pre Dec 2010 and one is post legacy. Both have been tasked with closing loan schemes following the review debacle. There was the announcement made that HMRC would be funding a team to challenge all years. In my view we will be seeing action here at the end of the summer.

(2) could be many years into the future Again I disagree. Hoey has been heard and decided in favour of HMRC. I understand that case will be back to UTT this Autumn. A decision pre Christmas will see FN's in Q1 2021.

I do get what you're saying - I really do.

However, we are in the end days of enquiry etc and it's time to face some harsh realities.

HMRC has been humiliated by the loan charge review. Any HMRC policy maker involved in that mess should, if they had any honour or integrity, resign. They won't. Instead a new team has been tasked with the clean up and whilst that might mean slightly better terms on the next settlement offer (CLSO 3), I'm not holding me breath. Instead we will see an acceleration of the process required to bring all enquiries to an end.

So to all those out there who see LOAN CHARGE as an ALTERNATIVE to SETTLEMENT or agreement - it's not.

Do the timing/cost equation above and decide if one or either is affordable.

if not, understand that the alternative is litigation (which may or may not win).

[DealorNoDeal]

HMRC has been humiliated by the loan charge review.

Yes, and if they're out for revenge, it will be all those who've escaped the LC who will be firmly in their sights.

You're probably on their black list too as an "enabler" of the resistance.

I'm sticking with my prediction. Anyone who pays the LC will be way down on their list of priorities.

[webberg]

Whilst I think HMRC has been humiliated by the LC debacle, my reading of internal changes they are making is that they have decided to stop digging the hole deeper and instead the new team looking at this have been instructed to end the embarrassment as quickly and quietly as possible.

So I think revenge is not on their agenda.

Indeed I'm expecting a new settlement "opportunity" which will take us to 30 September 2020.

How generous that may be, remains to be seen.

I like "enabler of the resistance". I may put that on my business cards.

We will continue to disagree on whether HMRC can ignore their legal obligations and not pursue open enquiries.

[DealorNoDeal]

We will continue to disagree on whether HMRC can ignore their legal obligations and not pursue open enquiries.

Not ignore but leave them "pending". They're not breaking any statute if enquiries are left open for 20/30/50 years. I bet you have some members, who were in schemes in the early noughties, who have open enquiries dating back 15 years or so.

Goverment would be well pissed off with them if they wasted time/resources on people who'd paid the LC.

[DealorNoDeal]

Indeed I'm expecting a new settlement "opportunity" which will take us to 30 September 2020.

How generous that may be, remains to be seen.

If they want to encourage mass settlement, they need to think outside the box, be radical and flexible.

Eg. how about collecting it through a special tax code?

Tax codes - GOV.UK

[Albert49]

Offset LC with pension

Webberg, I know pension offset was mentioned previously as an option for the LC for closed year, now that it only applies to open years, can it still be used ?
eg £240k of loans , received over 4 years post 2011, settlement cost is £80K, if LC is calculated over 3 years and is in addition to a salary, so is all charged at 40% it would be £80k * 40% X 3= £32k X 3 = £96K.

So since you have paid more in LC than settlement, you could settle for nothing.

If you were to make an £80K pension contribution in 2018/19, 2019/20 and 2020/21 (I realise it is now too late fore 2018/19), and so in effect offset the £96K loan charge, could you still then finalise settlement for nothing ?

[DealorNoDeal]

Webberg, I know pension offset was mentioned previously as an option for the LC for closed year, now that it only applies to open years, can it still be used ?
eg £240k of loans , received over 4 years post 2011, settlement cost is £80K, if LC is calculated over 3 years and is in addition to a salary, so is all charged at 40% it would be £80k * 40% X 3= £32k X 3 = £96K.

So since you have paid more in LC than settlement, you could settle for nothing.

If you were to make an £80K pension contribution in 2018/19, 2019/20 and 2020/21 (I realise it is now too late fore 2018/19), and so in effect offset the £96K loan charge, could you still then finalise settlement for nothing ?

If you've paid the LC, then:

Cost to subsequently settle = Settlement tax - LC tax already paid

The question is, how does HMRC calculate "LC tax already paid"?

If you've used pension contributions to wholly relieve the LC, then have you paid any LC tax at all? Does "LC tax already paid" = 0?

[webberg]

Webberg, I know pension offset was mentioned previously as an option for the LC for closed year, now that it only applies to open years, can it still be used ?
eg £240k of loans , received over 4 years post 2011, settlement cost is £80K, if LC is calculated over 3 years and is in addition to a salary, so is all charged at 40% it would be £80k * 40% X 3= £32k X 3 = £96K.

So since you have paid more in LC than settlement, you could settle for nothing.

If you were to make an £80K pension contribution in 2018/19, 2019/20 and 2020/21 (I realise it is now too late fore 2018/19), and so in effect offset the £96K loan charge, could you still then finalise settlement for nothing ?

1. Loan charge is NOT settlement.

2. Loan charge paid is eventually offset against tax due for the year in which loans were received.

3. If the loan charge paid is LESS than the final tax plus interest due, then more money will be due.

4. Loan charge cannot apply to years prior to 9th December 2010, not to years between then and 5th April 2016, which were disclosed but HMRC took no action. therefore the "net relevant earnings" for pension relief purposes should be calculated including just years in charge.

5. If your loan charge payment is MORE than the final tax plus interest due, there is a real risk that you will NOT be able to recover the excess.

6. Ultimately the MINIMUM tax due if you settle is the tax and interest (and perhaps NIC in some cases) that is attributable to the years HMRC has validly got under enquiry, after taking into account all relevant tax reliefs.

In your case I suggest you go and speak to an adviser who is knowledgeable.