Independent Loan Charge Review
The Chancellor of the Exchequor has Commissioned an Independent Loan Charge Review
Since the Loan Charge came into effect on 6th April 2019, as a means of HMRC recouping c.£3 billion in unpaid tax, retrospectively, for those who were involved in employee benefit trusts and other disguised remuneration schemes, there has been increasing pressure on the government to abolish it. The Government’s response has been to commission an independent review, as announced by the Chancellor Sajid Javid on 11th September. In this article we give details of what is known about the review but point out that the loan charge will still be in operation whilst the review takes place.
The Loan Charge Review – What we Know
The loan charge applies to anyone who used disguised remuneration schemes, such as employee benefit trusts, and adds a 45% non-refundable charge on all loans advanced through such schemes, unless the individual has already agreed with HMRC to settle their tax affairs. Some of these loans date back to 20 years ago, at a time when HMRC did not question their legitimacy. It is this and the retrospective nature of the loan charge that has caused significant controversy.
It is believed that c.50,000 people have been caught up in the Loan Charge. Many are relatively low paid freelancers and contractors, such as nurses and social workers, who were persuaded by their employers to join a disguised remuneration scheme. Others are higher paid company directors, with some figures owed being into the £millions. Either way, the outcome for some has been bankruptcy and insolvency, with the impact being serious enough for a number of suicides to have been reported.
The review into the loan charge policy will be led by Sir Amyas Morse, former chief executive of the National Audit Office. He has been asked to report back by mid-November 2019, in advance of the January 2020 self-assessment deadline. The Treasury has stated that the review will focus on the impact of the loan charge on those individuals who were using the schemes directly.
“Everyone should pay their fair share of tax. These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the loan charge is the appropriate way of tackling them.
The government fully appreciates the concerns expressed by individuals, campaigners, and MPs who have raised concerns about the loan charge.
Sir Amyas is known and respected across Parliament for his expertise and independence of mind. The government looks forward to his report as it continues to tackle these and other tax avoidance schemes.”
What Does the Review Mean and What if I can’t pay the 2019 Loan Charge?
We cannot predict the outcome of what is an independent review. What we do know is the Loan Charge will continue in operation during the review. However, given the comments of Jesse Norman, quoted above, we could speculate that what we might see will be a softening in the stance of the government when it comes to the particular hardships being faced by lower paid contractors and freelancers. It is unlikely that we will see the Loan Charge scrapped in its entirety.
Our Insolvency Practitioners can Help
Our advice remains that If you think you will have difficulty paying the loan charge you should seek professional advice as soon as possible, even whilst the current independent review is being conducted. This is where the insolvency practitioners at Antony Batty and Company come in. We are not tax advisors, but we are experienced in negotiating with HMRC and agreeing payment plans. The whole process of negotiating with HMRC can be complex, difficult and lengthy, especially if the numbers are large. It takes experience and expertise to work with HMRC to agree time to pay arrangements.
Contact us for Help and Advice
So, if you haven’t paid the tax on an Employee Benefit Trust, or similar disguised remuneration loan, haven’t attempted to settle and have been hit with a loan charge, then please call us on 0208 088 0633 or contact us. It might be that the amount being demanded by HMRC could lead to insolvency and our experts are here to work out a plan that will help to avoid that happening.