HMRC has published further details on how it will implement the loan charge in relation to the use of disguised remuneration tax avoidance schemes where the tax due has not already been settled, emphasising there will be no special settlement terms
Parliament approved amended legislation for the loan charge, which became law in July 2020.
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.
Those affected need to file their 2018/19 self assessment tax return by 30 September, including a report of any loan balances subject to the loan charge, and put in place any arrangements they need to pay the charge due on that date.
HMRC warns that some taxpayers need to act now to conclude settlement of tax due on disguised remuneration schemes so that they do not have to pay the loan charge.
Individuals who are not settling, and therefore become liable to pay the loan charge, will need to pay the charge that is due on 30 September or agree a time to pay arrangement with HMRC before then.
HMRC has published a policy paper on its approach to individuals with tax debt. This states that there is no standard time to pay arrangement.
The tax authority will discuss a taxpayer’s specific financial circumstances, look at what they can afford to pay, and then use that to work out how much time they need.
There is no upper limit on the amount of time that someone can have to pay, but HMRC says it will look for individuals to repay their debt as quickly as possible while maintaining affordable payments.
In the minority of cases where it is not possible to reach an agreement, HMRC has a range of enforcement powers. These include direct recovery of debt from an individual’s bank account, as well as charging orders over property.
The policy paper states: ‘To date, HMRC has only forced the sale of customers’ residences where they had multiple properties or were involved in criminal activity.
‘No customer will be forced to sell their main home to fund a loan charge or disguised remuneration tax bill.’
HMRC has spelt out that it will not be offering special terms for calculating or paying the loan charge. Following an independent review by Sir Amyas Morse, the government agreed to changes to the loan charge, such as the ability to spread it over three years, and these are reflected in the amended law that Parliament passed in July.
HMRC says it cannot apply a different rate to that provided in legislation and has to be fair to all taxpayers, including those who have already settled their use of disguised remuneration tax avoidance schemes and those who have never used tax avoidance schemes.
For disguised remuneration loans that are not in scope of the loan charge under the amended legislation, HMRC has now published settlement terms. These take into account changes to the loan charge following the independent review.
HMRC is also setting out the principles it will adopt on any future settlement terms, which will follow its published litigation and settlement strategy.
For taxpayers who need to pay the loan charge, HMRC says it will publish the settlement terms for any remaining liabilities that arise from open enquiries into disguised renumeration scheme use in autumn 2020.
Policy paper How HMRC treats customers who have a tax debt