On 7 November 2017, HM Revenue & Customs (HMRC) issued revised Settlement Terms. It is unlikely that any future terms will be better – they are more likely to be worse. So is now the time to settle with HMRC?
What are the revised terms?
In summary, any loan will be taxed as remuneration. Interest will be chargeable and any corporation tax deduction for the initial contribution into the EBT/EFRBS and associated employers NIC will be given. There are strict rules to be followed in order to obtain any such relief.
Unless an individual’s PAYE and associated employees NIC is paid or effectively suffered by the individual then there will be a further grossing up charge on the company.
So why settle now?
HMRC have already announced that there will be a “loan charge” based on outstanding loan as at 5 April 2019. Exactly how that will be calculated and at what rate(s) has not yet been announced.
However, such a loan charge does not settle the matter so far as any individual or company is concerned.
For many participants, companies may already have been issued with PAYE Determinations under Regulation 80 and Section 8 decisions in relation to any NIC debt to HMRC. Both can be appealed against and all amounts postponed although court procedures in relation to the S8 decision will trigger follow up action by the Courts from time to time.
HMRC have issued Accelerated Payment Notices (APNs)
Unlike a Determination under Regulation 80 and a S8 Decision, participants are allowed to seek a judicial review. However, they cannot appeal or postpone an APN.
Most judicial reviews have now been concluded and have been found in favour of HMRC. Hence taxpayers are having to pay monies to HMRC and yet still not able to seek a full and final Settlement.
So what else is happening now?
There have been a number of initiatives that participants of such schemes may not be aware of:
- All trusts (including EBTs and EFRBS) had to be registered by 31 January 2018 in order to avoid penalties;
- HMRC had a consultation regarding “Requirement to notify HMRC of offshore structures”;
- Penalties for failing to notify HMRC of offshore structures that pass from the promoter to the participant;
- Anyone seeking to exit an EBT or EFRBS are to register their interest by 31 May 2018 to settle on the current stated terms;
- A requirement to correct by 30 September 2018;
- Penalties for failing to correct including an asset based penalty of 10% of the asset value;
- Follower Notices requiring payments of PAYE and NIC to be paid under an APN and corrective action by a specified date;
- The Common Reporting Standard has resulted in the automatic exchange of information for some in 2017 and again in 2018.
So is now the time to settle?
For some taxpayers enough is enough and they are now seeking the certainty from a full and final Settlement with HMRC. For others, having paid all the PAYE and NIC under an APN a Settlement can even result in a nominal refund of monies to the companies in relation to corporation tax relief on the employers NIC.
Anyone wanting to explore their options can contact me at firstname.lastname@example.org or Andy at email@example.com.