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Fortunes Hiding 6:09 Tue Feb 22
Loan Charge HMRC
One of my mates an IT contractor has received a bill for circa £100k, for using various Loan Schemes to get paid.

Any advice?
How does the HMRC arrive at figure?
If they know all the companies that he’s used, then surely they know what he’s been paid?

Thanks in advance.

Replies - Newest Posts First (Show In Chronological Order)

Stubbo 10:05 Thu Feb 24
Re: Loan Charge HMRC
This might be worth your mate listening to;

https://bit.ly/34XAbfa

All about a proposed settlement for dealing with the loan charge

Vexed 3:27 Thu Feb 24
Re: Loan Charge HMRC
Westside 9:57 Thu Feb 24

I can tell you from experience it's a lot less generous, depending on how much of your mortgage is interest and if you're basic rate or higher rate tax payer. I'm finding that it's made a large difference to the profits received. As a result rent goes up.

overbyyer 3:23 Thu Feb 24
Re: Loan Charge HMRC
One Flew wrote...

Re: Loan Charge HMRC

Equally for those that think that using a legitimate tax avoidance scheme (this one apparently isn’t) is somehow cheating the system, then they should ask themselves why the scheme is in place in the first place. The complaints usually come from someone on PAYE that is in a pretty secure job and is directed at those that have very limited if any employment protection.


Its no though is it - the day rate for sole bod Ltd Co's is far, far higher than the equivalent day rate of a PAYE employee, that is intended to make up for the lack of holiday pay, sick pay and notice/redundancy security.

A lot of those bods work in the same roles as PAYE bods and have the same job security as them, albeit not written in an employment contract.

It was convenient for the employer and it was convenient/lucrative for the bod.

These are the same bods that were whining about the lack of furlough payments, having chosen to pay themselves in dividends rather then salaries, further saving themselves income tax.

Westside 9:57 Thu Feb 24
Re: Loan Charge HMRC
Yes it's a tax credit, but in the scheme of things it's tiny compared to being able to write off all mortgage interest as it was previously.

Virtually no difference, for basic rate tax payers, unless, they were paying out more in interest and other costs, than rental income.

One Flew 2:02 Thu Feb 24
Re: Loan Charge HMRC
Despite Lee Trundle’s comment this has many times been a good place to come for advice. I’ve been pointed in the right direction on tax , employment law and dry rot, not to mention West Ham’s need for a striker.

In this instance, I’d follow the advice of getting a suitable accountant to advise and potentially support in responding to HMRC.

HMRC do have a duty to collect taxes and they also have a duty to be fair, so shouldn’t be made out to be the bad guys.

Equally for those that think that using a legitimate tax avoidance scheme (this one apparently isn’t) is somehow cheating the system, then they should ask themselves why the scheme is in place in the first place. The complaints usually come from someone on PAYE that is in a pretty secure job and is directed at those that have very limited if any employment protection.

Vexed 12:57 Thu Feb 24
Re: Loan Charge HMRC
Yes it's a tax credit, but in the scheme of things it's tiny compared to being able to write off all mortgage interest as it was previously.

Westside 12:54 Thu Feb 24
Re: Loan Charge HMRC
All landlords used to get tax relief on mortgage interest costs - this is no longer the case,

Not entirely true. Although not a deductible expense against rental income, you get a credit against your tax bill, for interest paid as a landlord, but restricted to 20%, basic rate tax.

So all landlords get relief, only half, if a higher rate tax payer.

Crassus 11:28 Wed Feb 23
Re: Loan Charge HMRC
Yep Miras
Remember it well, remember it finishing painfully
Definitely a thing

Westside 7:40 Wed Feb 23
Re: Loan Charge HMRC
Who was it legal for - your average PAYE bod, or for Ltd Co Landlords to claim back?

I can never remember getting any mortgage tax relief in all the time I had a mortgage whilst employed through PAYE?

it was legal and available to everybody on their main home. I don't know when you had a mortgage, but you didn't actually have to claim it, it was done "at source, " by your lender, from 1983. Abolished in 2000, by Gordon Brown.

Your monthly mortgage repayments, automatically had it applied, i.e deducted from your repayments. So you may not have even noticed.

Prior to that, you had to claim it (usually via your PAYE code).

Mike Oxsaw 7:38 Wed Feb 23
Re: Loan Charge HMRC
I guess then that a bunch of people are due for a six week tax rebate for over however many number of years it is.

Westside 7:29 Wed Feb 23
Re: Loan Charge HMRC
It turned out that it was roughly anything earned between January 1st and the 1st week of July all went on taxes of one sort or another. I doubt that has changed much.

"Tax Freedom Day" has never been later than the 31st May (2021), since data deemed reliable on this, in 1995 (4th May then).

Mike Oxsaw 2:41 Wed Feb 23
Re: Loan Charge HMRC
North Bank 2:24 Wed Feb 23

MIRAS - was that Mortgage Interest Relief At Source? Government departments DO love an acronym.

That's all I ever knew; I wasn't aware that it had ended - if it has.

For some strange reason, I've still got all my old payslips (no idea how they followed me around, given what I've been through) so I could probably go back through them and calculate when I qualified for the relief and how much it was worth....







...Nah! Me neither.

North Bank 2:24 Wed Feb 23
Re: Loan Charge HMRC
Sold same as, pretty sure it was the old MIRAS scheme

I've had my run ins with the Inland Revenue on all sorts, when I first set out back in 2002 I claimed as much as I could on my VAT, but then had a review in 2006 where they sat in our office for a week studying every sheet of paper that had a pound sign on it. They declared I had underpaid by just shy of £70,000.

I took it to court, as you do to delay things, but you eventually have to pay up, HMRC wanted it immediately but the Courts awarded me 3 months, I took that as a moral victory.

Mike Oxsaw 1:45 Wed Feb 23
Re: Loan Charge HMRC
The rules must have changed, then - I was getting tax relief on my mortgage payments right up until 1994 (when my ex- finally decided she didn't want the house after all, so it got sold) if I remember correctly.

I'm sure a lot of people (I worked with) swapped from repayment to endowment mortgages in the mid-to-late 80's as they got more tax relief.

Northern Sold 1:28 Wed Feb 23
Re: Loan Charge HMRC
Oxsnore… our first mortgage was an Endowment (1994)… certainly never got my tax code changed to give me relief on my payments… got totally screwed by the company as well so obviously lose lose for me….

overbyyer 1:11 Wed Feb 23
Re: Loan Charge HMRC
Vexed 12.48

Employers also benefit/benefited from the appointment of Ltd Co bods as they didnt have to pay any employer NI for them, and the bod didn't pay much Ni either.
When IR35 hit the Public Sector the umbrellas companies started deducting for for that as well - total deductions with their fee on top was in the region of 55% !

overbyyer 1:11 Wed Feb 23
Re: Loan Charge HMRC
Vexed 12.48

Employers also benefit/benefited from the appointment of Ltd Co bods as they didnt have to pay any employer NI for them, and the bod didn't pay much Ni either.
When IR35 hit the Public Sector the umbrellas companies started deducting for for that as well - total deductions with their fee on top was in the region of 55% !

Mike Oxsaw 12:58 Wed Feb 23
Re: Loan Charge HMRC
That date should read 1976, not 1997 - fuck knows what happened there - not even fat fingers could have caused that.

Mike Oxsaw 12:54 Wed Feb 23
Re: Loan Charge HMRC
overbyyer 12:36 Wed Feb 23

I was on PAYE when I was working for the GPO/PO/BT. I got my first mortgage in 1997 and both my employer and building society notified the government.

My tax code was duly adjusted to give me "relief" on the mortgage interest payments. This would have reduced each year for a "standard" mortgage as capital payments became more dominant in the pay pack sum. Everybody I worked with/knew at the tine qualified.

I believe that, for an endowment mortgage, as it was all interest payments, tax relief remained constant throughout the loan period. If I remember, part of the insurance premium also qualified for tax relief.

Stubbo 12:53 Wed Feb 23
Re: Loan Charge HMRC
My view on this (as a Ltd Company IT Contractor who remains outside IR35) is if you're working in that way, you have an onus on yourself to learn and understand the rules.

Many times in the past these loan companies have called me promising the earth in terms of take home...but 2 mins research soon shows they're all shady as fuck, and if you go down that road don't be surprised when the tax man comes calling.

IR35 rules and regs are tricky to understand but not beyond the whit of man, and if you want the benefits of working that way (more income) and are prepared to give up some of the PAYE perks (paid holiday, paid sick pay, etc etc) then it's on you to make sure you get it and stick within the rules.

I'd say your mate is fooked, and should be looking at transferring assets to someone they can't come after and then consider bankruptcy as an option...but a lawyer and an accountant are probably his best friends right now.

Vexed 12:48 Wed Feb 23
Re: Loan Charge HMRC
All landlords used to get tax relief on mortgage interest costs - this is no longer the case, the government have just made it so that cash buyers of property (MPs etc) have the edge over the little man once again - while simultaneously making sure that the cost of renting will rise sharply over the next few years as landlords compensate for the loss.

Similarly IT contractors being dicked for IR35 - one of the largest organisations that rely on these contractors is the government - independent contractors are considerably cheaper to employ than getting a contractor through a massive umbrella company or systems integrator - probably 50% cheaper on day rate a lot of the time. Now a lot of these contractors have been forced to leave and find employment elsewhere or join an umbrella firm what's the result? Government pays considerably more for the same, contractor gets less dough, but shareholders in big firms (MPs etc) do very nicely out of it. Funny that.

What a bunch of self serving cunts.

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