Additional guidance on the implementation of the loan charge published

13 August 2020

HMRC has confirmed that it has published additional information on how it will implement the loan charge, applicable to loan balances that arose from the use of disguised remuneration tax avoidance schemes, where the tax due has not already been settled, and in situations where they were outstanding as of 5 April 2019.

Further details on how HMRC will implement the loan charge to support customers have been provided and HMRC has confirmed that there will be no special settlement terms for the loan charge.

Anyone affected by the loan charge is required to file their 2018-19 Self-Assessment tax return by a deadline of 30 September 2020, and will need to include details of any loan balances subject to the loan charge. They will also need to pay the charge due on that date.

HMRC guidance on how it will implement the loan charge has been updated to incorporate details of changes following the Independent Loan Charge Review. The amendments made to the loan charge following the independent review into the policy and its implementation went before Parliament in July 2020, and later received Royal Assent. This, in addition to the deadline for reporting details of loans subject to the amended loan charge to HMRC being 30 September 2020, meant that affected individuals could opt to spread the loan balance over a period of three tax years, to avoid it being subject to higher rates of tax.

For anyone who is concerned about how they will afford to pay the loan charge, HMRC has published detailed information, both about how they treat customers with a tax debt and how they support customers with a tax debt. Here, HMRC explains how it works with customers who have a tax debt, explains the support HMRC can provide to customers in helping them pay the tax debt that they owe , and what HMRC can do to get the money that tax customers owe in the event that they refuse to pay it. There is detailed discussion of how HMRC agrees Time to Pay arrangements.

There are some individuals who must act now to sort settlement of tax due on disguised remuneration schemes so that they can avoid having to pay the loan charge. Any customers not settling who become liable to pay the loan charge will need to pay the amount due on 30 September 2020, or discuss a Time to Pay arrangement with HMRC prior to that point.

HMRC has advised that it can only settle for an amount that is consistent with the law and cannot apply a different rate to that outlined in legislation, as it has a duty to be fair to all taxpayers. This includes those who have already settled their use of disguised remuneration tax avoidance schemes and, indeed, those who have never utilised tax avoidance schemes.

New settlement terms have been published for disguised remuneration loans outside of the scope of the loan charge under amended legislation. HMRC is also in the process of setting out principles to be adopted on any future settlement terms, following the published Litigation and Settlement Strategy.

In Autumn 2020, HMRC will publish settlement terms for any additional liabilities arising from open enquiries into disguised renumeration scheme use, for customers needing to pay the loan charge.

 


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