In recent years we have seen many professionals become involved in various tax planning arrangements, many of which included trusts. Therefore, if you have and you don’t know what to do here is a quick update and the steps you should seriously consider taking.
Firstly, HMRC has introduced legislation that will bite upon loan balances from a Trust that remains outstanding on 05 April 2019. These fall into two categories. This is an important date, and less than one year away, so consideration of this issue must be high on your list of priorities.
If you are self-employed you may have set up one of these in the last 10 years. The idea was that you could borrow money back from the Trusts untaxed.
The new legislation means that if you have done this then and you haven’t repaid the loan then you will need to declare the loan balance as at 05 April 2019 on your 2018/19 Tax Return. HMRC will then seek to tax the full balance owing in this tax year. So if you had, say, 3 loans at £250,000 over a 5 year period in the past and these have not been repaid, you will be liable to tax on £750,000 all in 2018/19.
If you think that this is harsh, you are quite correct. It is legislation designed to make those affected contact HMRC with a view to settling with them and not having all the loans taxed in one year and then creating a tax charge at the very highest tax rates.
If you are in this situation, then it’s important you have a suitable course of action to ensure this does not affect you. If you need help, we have a team of experts at our disposal to help you in this situation.
Employee Benefit Trusts (EBT’s) and Employer Financed Retirement Benefit Schemes
These arrangements are for employees and, in almost all cases, relate to the Directors of family-owned companies.
The legislation referred to above is desired to tax loans balances that remain unpaid by employees/directors when the loan has come from a Trust set up by the Company.
The loan balances are liable to PAYE and National Insurance Contributions and all details will have to be supplied to HMRC by the Employer in 2018/19.
HMRC are happy to settle matters now with a scheme that allows certain fairly generous concessions and have just extended the deadline for registration to 30 September 2018.
It is advised that you take advantage of this opportunity and if assistance is needed please contact us.
No two cases are the same and there may be facts in each case that can mitigate the final settlement figures. There are issues arising from time limits and HMRC need challenging if they are making incorrect assumptions.
It is strongly recommended that you do not leave matters until April 2019 and take advice now on finding the best resolution to what can be a very serious issue. If there are concerns regarding funding any settlement, a period of time to pay can be negotiated for you.
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If you are in this situation or need assistance, please contact us as soon as possible.
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