HMRC say the loan is taxable, therefore it cannot be a loan. Right? WRONG

[lowpaidworker]

I've no skin in this game, but if you do, then repeating the above ad-nauseum is as good as shouting at the moon and will not make either HMRC, or those that are now attempting to coerce money out of the scheme users, go away. You need to remove the emotion from your thinking and come up with a plan for how to get out of this mess.

Whilst webberg obviously does have some commercial interest in how people extricate themselves from said mess, he has provided a *lot* of free information/advice on these boards, and I suggest arguing against his points are not the best use of your time or effort.

For christ sake i am not criticising or arguing his knowledge or commenting on tax law. I know who Graham is and admire his efforts immensley so please get off your high horse.

I am pointing out in accounting a payment in your account cannot be loan and also be income/salary. Maybe there is some arguement here that can be investigated.

[webberg]

For christ sake i am not criticising or arguing his knowledge or commenting on tax law. I know who Graham is and admire his efforts immensley so please get off your high horse.

I am pointing out in accounting a payment in your account cannot be loan and also be income/salary. Maybe there is some arguement here that can be investigated.

Personality aside (and please, I'd rather an honest debate that questions principles rather than unquestioning acceptance of what you think might be BS) you have started from the wrong end of the transaction chain.

The tax analysis does not care or take account of what label is attached to money in your bank account. Our tax system does not work by looking at your bank statements each year and deciding what is income, what is capital and what is pie in the sky.

It starts with the SOURCE of the money.

For tax purposes there is an additional step in that SOURCE must be one that falls within a defined taxable "pot".

An employer is a SOURCE and the money they pay is in the taxable remuneration "pot".

As soon as those two are established you have taxable income and tax obligations.

The label that is attached to how the net amount appears in your bank account is entirely irrelevant.

A loan has as its SOURCE a lender. Where the lender makes a loan based on credit worthiness and ability to repay and security and all the usual things that a commercial lender would consider, that is not a taxable "pot".

[DealorNoDeal]

So...

The money paid into the contractor's bank account was a loan.

But it's not this payment which is being taxed.

The tax liability arose, well before this, when the Employer received money from the agency, which should all have been subject to PAYE. (HMRC argue this liability should now fall on the contractor)

Is that correct?

[webberg]

So...

The money paid into the contractor's bank account was a loan.

But it's not this payment which is being taxed.

The tax liability arose, well before this, when the Employer received money from the agency, which should all have been subject to PAYE. (HMRC argue this liability should now fall on the contractor)

Is that correct?

That is exactly what I believe to be correct.

After the tax point arose the money may well have been used to make a loan but it's not the same money.

[Iter]

That is exactly what I believe to be correct.

After the tax point arose the money may well have been used to make a loan but it's not the same money.

Are we saying any transaction of money from a trust to contractor is deemed as a ‘loan’. Can this not just be regarded as a transfer of money from the trust to the beneficiary/contractor? Sorry if seems a stupid question. Many people say there is no ref or loan agreement (and I know this has been discussed before and doesn’t mean it wasn’t a loan) but what legal requirement states that the money is a loan and is repayable.

[Paralytic]

Are we saying any transaction of money from a trust to contractor is deemed as a ‘loan’. Can this not just be regarded as a transfer of money from the trust to the beneficiary/contractor? Sorry if seems a stupid question. Many people say there is no ref or loan agreement (and I know this has been discussed before and doesn’t mean it wasn’t a loan) but what legal requirement states that the money is a loan and is repayable.

If no loan agreement exists, then the contractor should not have to pay back the monies. But (from reading the posts here), it seems that (legally) a loan agreement was place for the vast majority of the schemes that operated, despite what the recipient of those monies may think (or may have thought at the time).

However, whether there was or was not a loan in place does not alter the view that tax is due (in the eyes of HMRC, by the contractor) on the original payment from the client to the employer/scheme operator.

[DavidD]

As I've stated many times I wont ever pay the 'loan' back in any circumstances and I agree with many posters on here that attempts to get the loans back are just scams that will come to nothing.

Regardless of the minutia of current tax law vs. current contract law vs. trust law etc - In my humble opinion, you will never see a final ruling that agrees that HMRC taxes £500 as remuneration and the very same £500 (because it is!) is found in court to be a loan that needs to be repaid in full. One of the key principles of the legal system is that of reasonableness and no fair minded person could ever consider this reasonable.

[lowpaidworker]

That is exactly what I believe to be correct.

After the tax point arose the money may well have been used to make a loan but it's not the same money.

thank you. I understand now we are talking about two different transactions and not the same one. I was merely speaking about the credit into ones bank account. The reason for this assumption is that when HMRC are working our the tax position they often ask for your bank account statements to show the credits. You're saying the credit into the end users bank account is not actually the taxable transaction.



Its all a mucking fuddle... surely someone would have challenged these are different transactions.

[webberg]

Are we saying any transaction of money from a trust to contractor is deemed as a ‘loan’. Can this not just be regarded as a transfer of money from the trust to the beneficiary/contractor? .

No.

Money moving from a trust to a beneficiary can be:

an income distribution (taxable)
a capital distribution (has IHT implications)
a gift (Has IHT omplications)
all of the above.

Can also be a loan of course. Prima facie most transfers of money from trust to beneficiary we see are loans in which some form of loan agreement is present.

[webberg]

If no loan agreement exists, then the contractor should not have to pay back the monies. That is just not true. If there is the fact of money moving from A to B but there is no papered transaction, a Court will examine the circumstances. If a court decides that the transaction has the characteristics of a loan then it will decide that there is either a verbal agreement or a tacit agreement that a loan and ergo - a repayment obligation - exists. But (from reading the posts here), it seems that (legally) a loan agreement was place for the vast majority of the schemes that operated, despite what the recipient of those monies may think (or may have thought at the time).

However, whether there was or was not a loan in place does not alter the view that tax is due (in the eyes of HMRC, by the contractor) on the original payment from the client to the employer/scheme operator.

Your second point is correct.