Covid-19: loan charge taxpayers given ‘special arrangements’

HMRC is to introduce special arrangements for taxpayers affected by the loan charge rules relating to disguised remuneration tax avoidance schemes, paving the way for some of them to make claims under the government’s coronavirus support scheme for the self-employed, reports Pat Sweet

The move was disclosed in a letter from Penny Ciniewicz, HMRC director general, customer compliance, to the All-Party Parliamentary Loan Charge Group (APPLCG),  in  response to its inquiries about enforcement actions undertaken by the department relating to loan charge customers as of April 2020.

Ciniewicz wrote: ‘HMRC is working hard to support taxpayers affected by the Covid-19 outbreak. You will also be aware of the Chancellor’s announcement on measures to support the self-employed during the outbreak.

‘Special arrangements will be put in place to ensure that those liable to the loan charge can benefit from the self-employed income support scheme where appropriate, even if they have not filed their 2018-19 tax return. Guidance will be published shortly on’

APPLCG members raised a debate on the charge in Parliament at the end of last month, describing it as ‘unjust and retrospective’, and arguing it should only apply from 2017, the year it was brought into law, not back as far as 2010 as the government currently proposes.

That deadline has already been amended following the publication in December of a review of disguised remuneration avoidance schemes by Sir Amyas Morse. The loan charge now applies to outstanding balances of disguised remuneration loans made between 29 December 2010 and 5 April 2019 inclusive. Previously it was intended to apply to any loans made through disguised remuneration schemes after 6 April 1999, which had not been repaid by 5 April 2019.

Ruth Cadbury, APPGLC co chair, said in Parliament: ‘While this debate is wholly unrelated to the covid-19 virus, for the victims of the loan charge scandal, who are already worried about their financial futures, the coronavirus outbreak only heaps more agony on top.

‘The new suggested cut-off date of 29 December 2010 is based on the law being clear, yet we know now that this was not the case. If the law was clear then why did we need the loan charge and another change in legislation in 2016?

‘Is applying the loan charge from 2010 justified and proportionate? The answer to that from the all-party group is, no, it is not.

‘I urge the government to listen to the strong opposition to this retrospective, unjust and unfair tax and, quite simply, to do the right thing’.

HMRC official rates - beneficial loan arrangements

The HMRC guidance has been updated with the actual official rate of 2.25% that will apply from 6 April 2020, subject to the necessary Treasury regulations coming into force.

The average official rate of interest has to be used for years when the loan was outstanding throughout the income tax year based on the normal averaging method of calculation.

HMRC Penny Ciniewicz letter

HMRC guidance, Beneficial loan arrangements - HMRC official rates, issued 6 Apr 2020

Reporting by Pat Sweet


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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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