Loan charge tax deadline in six days, warns LITRG

The Low Incomes Tax Reform Group (LITRG) is warning people that they have until Wednesday (30) to meet their loan charge reporting and payment obligations

The tax campaign group is particularly urging anyone who has worked through 'umbrella' companies to double-check whether they are liable to the loan charge.

 The loan charge is a tax charge on all outstanding disguised remuneration loans (arrangements that paid loans instead of ordinary income to avoid income tax and National Insurance contributions), made on or after 9 December 2010, and outstanding on 5 April 2019.

 There is an exception to this for loans made on or after 9 December 2010 and before 6 April 2016, if the avoidance scheme use was disclosed to HMRC and, as at 5 April 2019, HMRC had not taken action to protect their assessing position – for example, by opening an enquiry or issuing a tax assessment.

The loan charge does not apply to those who agree a settlement with HMRC by 30 September 2020.

Victoria Todd, Head of LITRG, said:There are still some people out there who do not realise that they have loan charge issues because they were paid in loans by their umbrella companies without their full knowledge or understanding.

‘If you have recently received a “notice to file” a tax return by 30 September 2020 from HMRC, it is likely that HMRC have some information that suggests that you may have been paid through a loan scheme. HMRC will expect you to report and pay the loan charge.

‘It is vital that you do not ignore any “notice to file” from HMRC, even if you think you did not have any loans.

Todd added: ‘If you need further help understanding and complying with your obligations, you should consider obtaining urgent advice from a qualified tax professional, even if it means having to pay. If you are on a low income, the charity TaxAid may assist you.’

For those affected by the loan charge, 30 September 2020 is the date by which they must:

  • report the loan amounts if they have not done so already via the on-line loan charge reporting form. A paper version can be obtained by calling HMRC on 03000 599110 or can be downloaded from the LITRG website.
  • decide whether to elect to spread the loan amounts over three years (also done via the loan charge reporting form – this may not be beneficial in all cases and you should ensure you understand the consequences of making this irrevocable election)
  • file their 2018/19 tax return and report the loan income in the relevant pages and boxes.
  • pay the loan charge and any other tax due (or agree a payment plan).

Late filing and late payment penalties and interest may apply if people fail to meet next Wednesday’s deadline.

Useful links:

Loan charge reporting form

TaxAid

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