Government announces review of 2019 loan charge
12 September 2019
Following concerns expressed by individuals, campaigners and MPs, the Government has announced that there will be an independent review into the 2019 Loan Charge.
The review will focus on the impact of the Loan Charge on individuals who have directly entered into disguised remuneration schemes, and will consider:
- Whether the Loan Charge is an appropriate method of dealing with disguised remuneration loan arrangements used to avoid tax
- Whether changes announced by the Government in advance of, and since, the Loan Charge came into effect address any legitimate concerns that have been raised about the impact on individuals, including affordability for those affected.
The review is scheduled to conclude by mid-November, to enable taxpayers to consider their position ahead of the 31 January deadline for the submission of self-assessment returns.
The Loan Charge will remain in force during the review, and HMRC has provided the following guidance to taxpayers:
- Taxpayers who have settled their disguised remuneration loan scheme use and paid the amount owed in full, or are paying it in instalments, are not directly affected by the announcement of the review.
There is no change to their tax position at this time, and any instalment payments should continue to be made. HMRC will update its guidance setting out details of the next steps if the potential liability to the Loan Charge changes following the Government’s response to the review.
- Taxpayers who provided all the required information by 5 April 2019 and are waiting to finalise their settlement with HMRC can continue to do so, if they wish.
However, HMRC recognises that they may wish to await the Government’s response to the review before finalising their settlement. They therefore do not need to submit the additional information return by 30 September 2019. If they choose to settle, HMRC will continue its existing practice of not charging statutory late payment interest from 1 October 2018, or, if later, the month in which the required information was provided. HMRC will update its guidance setting out details of the next steps if the potential liability to the Loan Charge changes following the Government’s response to the review.
- Taxpayers who are not settling their disguised remuneration scheme use will still need to complete an additional information return by 30 September 2019. If they fail to do so, HMRC reserves the right to charge penalties.
HMRC states that the review will not affect routine HMRC compliance activity related to disguised remuneration schemes, including Accelerated Payment Notices and ongoing litigation. Unless taxpayers are in the process of settling, statutory late payment interest will continue to accrue on any unpaid tax during this period. Taxpayers can stop this accruing by making a payment on account.
The announcement of the review is welcome, although it remains to be seen whether there will be a positive outcome for any affected taxpayers.
Please contact Jon Claypole or Dawn Register for further information on the review, or to discuss how to proceed in settling disguised remuneration scheme use in light of the review.
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