Loan Demands following the use of a tax arrangement explained

Loan Demands: What They Mean and What to Do Next

Key considerations and early steps for individuals facing recovery action

Receiving a loan demand arising as a result of historic use of a tax arrangement can be stressful and unsettling. We are aware numerous individuals have recently been contacted by third parties trying to recover old or disputed loans. If this has happened to you, you’re not alone and it is important to know that there are actions you can take to protect yourself in response.

Below, we give a general overview of what these demands usually look like, how they arise, and some practical steps individuals should take.

Understanding the Demand

In many cases, these types of demands are sent alongside an offer to “settle” for a much lower amount. This could be because the person or company making the demand may not be fully confident, they can fully enforce it.

Before rushing into anything, it’s important not to panic. On the back of receiving a loan demand, you should take some time to gather any related information and consider getting professional advice. Jumping straight into making any payments or admissions can significantly weaken your position.

Common Types of Loan Demands

Although every case is different, most loan demands fall into one of the following three categories:

1. Demand from a Liquidator

This usually happens when a loan was made directly by your employer, and that employer has since gone into liquidation. In these cases, it’s worth checking whether the loan was sold or transferred to someone else before the liquidation. If it was, the liquidator may not actually have the right to recover it.

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2. Demand from a Trust

This can occur where money was paid into a trust and you were listed as a beneficiary.
Trustees have a duty to act in the best interests of beneficiaries. If they are pursuing repayment from you, it may raise questions about whether they are meeting those responsibilities. Sometimes these demands come in the form of a statutory demand. These have very tight deadlines and it’s very important you seek advice as soon as possible and in any event within 12 days of the date of the statutory demand.

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3. Demand from an Unconnected Third Party

Sometimes debts are sold or assigned to external companies. If a third party is now contacting you, they must be able to clearly prove that they legally own the debt and that you are the correct person to pursue.

Building a Defence

In many of these loan scheme arrangements, people were told that the structure used (such as a trust) would protect them from immediate repayment demands. Those assurances can be an important starting point in any challenge.

The two most common lines of defence include whether the loan was real and if the creditor can prove their claim.

Was there genuine intent of both parties to enter a legally binding agreement?

A court will look at what actually happened, not just what’s written down. If neither side truly intended the arrangement to be a legally binding loan, it may be considered invalid from the start.

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Can the creditor evidence their claim?

The party demanding payment must prove the following 3 things:

1. That the debt exists
2. That they legally own the debt
3. That you are the correct debtor

If they can’t properly evidence all of this, their claim may not be enforceable. It’s important to note that these aren’t the only possible defences, but they are often a key place to begin.

Statutory Demands

Some creditors may use statutory demands to claim a loan repayment. These types of demands carry the threat of bankruptcy, which can often frighten recipients’ into taking rushed action in response.

However, statutory demands are only meant for undisputed debts and they also should not be used as a tool to collect a debt. If you’ve already raised a genuine dispute, they generally should not be used.

That’s why it’s usually a good idea to formally challenge any initial demand as early as possible. Doing this early can sometimes prevent matters from escalating and save you time and legal costs further down the line.

If you’ve already received a statutory demand and haven’t yet disputed the debt, it’s important to seek advice quickly.

What Support Is Available?

There are many possible arguments and strategies, depending on the specific facts of your case.

If you have received a loan repayment demand, it is important that you:

• ✅ Take time to understand who is making the demand and why
• ✅ Don’t assume the claim is valid just because it looks official
• ✅ Seek immediate advice before paying, admitting liability, or sharing sensitive information

Our legal team has built up experience in handling these kinds of claims. With the right guidance and a measured approach, it’s possible to respond in an informed and strategic way.

We’re Here to Help

If you’re worried about a loan demand or a statutory demand, we can help you understand your position and your options. Get in touch with our team for expert, confidential advice.