The opportunity to disclose loan settlements has been extended to 30 June with HMRC stating that any settlement “should be agreed by 30 September 2015 at the latest."
Originally open until 9 January 2015, the opportunity to disclose has been extended to 30 June with HMRC stating that any settlement “should be agreed by 30 September 2015 at the latest”. They have also stated that “if you have taken advice and do not want to settle, please contact us. You do not have to wait until September 2015 before you can progress a case to First Tier Tribunal.” HMRC have made it clear that it holds the view that where payments made under a loan scheme make use of a discretionary trust or trusts then as well as being subject to income tax many schemes will also give rise to an IHT liability. They state that this “is a reflection of the more general position where taxed or untaxed income is settled into discretionary trusts which is then subject to ‘relevant property’ trust charges for IHT”
There are two main charges which apply:
The following is an example of a s86 Inheritance Tax Act 1984 (IHTA) Trust with sub trusts provided by HMRC:
Ali wants to take advantage of the settlement opportunity and arranges through the remuneration company and trustee to provide him with written confirmation that the loans have been written off on 10 January 2015.
Broadly the IHT computation is based on the value lost by the trust and the length of time from April 2007 to March 2011 the loans have been held as relevant property and takes into account the nil rate band. The total IHT due is £2,801.25.
You can find out more contractors loan settlement opportunity via this link to the GOV.UK website.