Loan charge repayments deferred until September 2020

The government has agreed to defer loan charge repayment date to September 2020 in a move which will see 11,000 affected taxpayers removed from the tax clawback following the release of the Amyas review

The Treasury has also decided to limit the loan charge cut-off date to 9 December 2010 instead of 1999 and will waive charges for those who disclosed loan scheme issues to HMRC, in instances where the tax authority failed to take action, for loan charges raised between 9 December 2010 and 5 April 2016.

To quality, taxpayers would have had to fully disclose their schemes on their tax return over this period. If HMRC took no action, then their cases will be deemed to have been resolved.

However, the government refused to accept that that there was an issue with the loan charge and said that it was a ‘necessary’ response to the tax avoidance schemes it was designed to tackle.

The government also signalled that it would take ‘new action’ against promoters who marketed the schemes prior to 2010, and said that details on the crackdown would be announced at the Budget in February.

Sir Amyas, former head of the National Audit Office, confirmed that the schemes were a form of tax avoidance but made a series of recommendations about the design of the charge and its impact on those in its scope.

The government accepted all but one of the recommendations in the review.

Following the review, the government said it would make changes so that the loan charge would now only apply to loans taken out on or after 9 December 2010. The review found that legislation announced in 2010 removed any doubt that tax was due.

Now users will be able to defer filing their returns and paying their loan charge liability until September 2020.

It will also allow taxpayers to split the loan balance over three tax years to make bills more affordable.

A new HMRC team will be set up to collect tax from those who used the avoidance schemes pre-2010.

The package of measures are estimated to reduce bills for more than 30,000 people subject to the loan charge, which means that more than 60% of the total number of people affected by the loan charge will get some respite from the much criticised retrospective legislation. That includes an estimated 11,000 who will be taken out of it altogether.

Once legislation has been passed HMRC will repay parts of some settlements reached with taxpayers where they had voluntarily paid amounts due for earlier years.

New guidance will be published to help users of the schemes understand what they have to do and extra time will be provided so that users of schemes can defer sending their return, and paying the tax for 2018-19, until the end of September 2020.

HMRC has already taken action to enhance its support to vulnerable customers in recent months, and is introducing a 'New Extra Support Service' for customers undergoing compliance checks who need additional support, building on its existing customer service support team.

Glyn Fullelove, CIOT president said: ‘We welcome the government’s fast-tracking of this report and their response.

‘These are significant changes which will go some way towards reducing the disproportionality of the loan charge, which we identified in our evidence to the inquiry.

‘The government has published fairly detailed guidance and we strongly encourage those affected to read this.

‘If, after all of these changes, the loan charge still applies to you we strongly encourage you to engage with HMRC. The government response repeats that HMRC will “not seek bankruptcy proceedings for individuals who have engaged with HMRC, completed an affordability assessment, and are solely unable to pay the loan charge”.’

The government rejected a recommendation in the review to introduce a write-off of tax due on the loan charge after 10 years for individuals whose time to pay arrangement is longer than 10 years. That would allow those who have avoided tax through use of disguised remuneration tax avoidance schemes more favourable terms than taxpayers with other debts, including tax credit claimants.

Financial secretary to the Treasury Jesse Norman said: ‘There have been important public concerns about this policy, and that is why we commissioned this report and have responded so quickly to it.

The changes we are making go to the heart of Sir Amyas’s concerns about the fairness and application of the loan charge, which he accepts in principle.

‘We also have plans under way to crack down further on the promoters of these avoidance schemes.’

HMRC guidance, Report and account for disguised remuneration loan charge

By Sara White



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