The government has announced a significant reduction in the scope of the loan charge, following the recommendations of Sir Amyas Morse’s review published on 20 December. While the report supported the loan charge policy in principle, it concluded that HMRC’s implementation went ‘too far in undermining or overriding taxpayer protections’.
The main changes are that:
the charge will now apply only to loans made on or after 9 December 2010;
the charge will not apply to loans made before 6 April 2016 where use of the scheme was fully disclosed and HMRC took no action, such as by opening an enquiry, to protect its position; and
taxpayers affected will be allowed to spread their outstanding loan charge balance across three tax years.
Where taxpayers have already settled, HMRC will be able to repay tax for years no longer subject to the loan charge because the year was ‘unprotected’.
Those who have not yet settled with HMRC may either provide an estimate of the tax due with their self-assessment return by 31 January 2020, or delay filing until 30 September 2020, with penalties and interest waived between these dates.
New ‘time to pay’ arrangements will permit payment over five years for those with no disposable assets and earnings under £50,000. Those with earnings under £30,000 will be able to pay over seven years.
Legislation for these changes will be included in Finance Bill 2020 and will have effect from 20 December 2019. HMRC will not be able to process any refunds arising from the changes until the Finance Bill has received royal assent.
The financial secretary to the Treasury’s statement says HMRC will continue to pursue the underlying tax liabilities on disguised remuneration loans made before 9 December 2010 through open enquiries and assessments in place. See bit.ly/37Qt1Wp.
Commenting on the charge, Hugh Gunson, senior associate at Charles Russell Speechlys, said: ‘As ever, the devil will be in the detail and the new legislation should be closely scrutinised when it is published. Of particular interest will be the approach taken to what constitutes “full disclosure” for the 2010 to 2016 period and also the mechanics of the refund of “voluntary restitution”.’
The government has announced a significant reduction in the scope of the loan charge, following the recommendations of Sir Amyas Morse’s review published on 20 December. While the report supported the loan charge policy in principle, it concluded that HMRC’s implementation went ‘too far in undermining or overriding taxpayer protections’.
The main changes are that:
the charge will now apply only to loans made on or after 9 December 2010;
the charge will not apply to loans made before 6 April 2016 where use of the scheme was fully disclosed and HMRC took no action, such as by opening an enquiry, to protect its position; and
taxpayers affected will be allowed to spread their outstanding loan charge balance across three tax years.
Where taxpayers have already settled, HMRC will be able to repay tax for years no longer subject to the loan charge because the year was ‘unprotected’.
Those who have not yet settled with HMRC may either provide an estimate of the tax due with their self-assessment return by 31 January 2020, or delay filing until 30 September 2020, with penalties and interest waived between these dates.
New ‘time to pay’ arrangements will permit payment over five years for those with no disposable assets and earnings under £50,000. Those with earnings under £30,000 will be able to pay over seven years.
Legislation for these changes will be included in Finance Bill 2020 and will have effect from 20 December 2019. HMRC will not be able to process any refunds arising from the changes until the Finance Bill has received royal assent.
The financial secretary to the Treasury’s statement says HMRC will continue to pursue the underlying tax liabilities on disguised remuneration loans made before 9 December 2010 through open enquiries and assessments in place. See bit.ly/37Qt1Wp.
Commenting on the charge, Hugh Gunson, senior associate at Charles Russell Speechlys, said: ‘As ever, the devil will be in the detail and the new legislation should be closely scrutinised when it is published. Of particular interest will be the approach taken to what constitutes “full disclosure” for the 2010 to 2016 period and also the mechanics of the refund of “voluntary restitution”.’
