Payment of the loan charge is not the end of the matter for people who have used tax planning arrangements as HMRC will continue to
pursue the underlying litigation against the scheme. A delay in reaching settlement will cost more as interest and Inheritance Tax charges will continue to accrue.
It’s worth noting the loan charge may well be more expensive than settlement as the marginal rates of tax will be higher when all amounts are assessed in a single tax year. HMRC have advised us that if people register an interest to settle prior to 31 May 2018 and provide all necessary information by 30 September 2018, then HMRC will guarantee that the resources will be available to reach settlement prior to the loan charge.
The settlement of tax planning arrangements is complicated and it’s important to review the calculations carefully. We are working with a significant number of accountants and their clients to ensure that the technicalities are fully understood, and the lowest possible settlement figure is agreed.
Possibly due to the complexity of these calculations we are seeing mistakes made on a regular basis. We strongly recommend all calculations are checked by a suitably experienced tax adviser such as the Bedrock team. Typically, the tax in question is significant.
Things to look out for:
- Understated benefit in kind offset especially where overpayment relief claims have been submitted
- Incorrect s.65 / s.72 IHT calculations
- Incorrect application of s.222/223 ITEPA 2003
- Incorrect tax and NIC charges
- Failure to identify settlements which should be settled by way of voluntary restitution
- Incorrect application of s.55411zc overlap provisions
- Incorrect Corporation tax adjustments
- Key errors within the drafting of the settlement deed
- Incorrect taxation of EBT growth
These are just some of the considerations we take into account when we negotiate settlements with HMRC. Due to the volume of cases we are dealing with, the Bedrock team have a specific point of contact at HMRC to help keep the process efficient and streamlined for our clients.
Next steps
If you or your clients want to explore the settlement option we strongly advise that you talk to us before approaching HMRC. In our experience, the calculations prepared by HMRC, though technically correct, are unlikely to be the most advantageous as HMRC has no moral or legal obligation to prepare the calculation in the least costly manner for the person seeking settlement.
You can read our FAQ on HMRC settlements here. Or give us a call to discuss how we can assist you.
