insideKENT Magazine Issue 95 - February 2020 | Page 159
BUSINESS
The New Year
brings new
changes to loan
charges from HMRC
by Rick Schofield, Partner at Wilkins Kennedy Ashford
MANY OF YOU WILL BE AWARE THAT THE GOVERNMENT INTRODUCED LEGISLATION,
COMMONLY REFERRED TO AS “THE LOAN CHARGE”, IN THE FINANCE ACT 2016 TO ADDRESS
THE TAX LOSS TO THE EXCHEQUER FROM DISGUISED REMUNERATION SCHEMES. IN
ACCORDANCE WITH THE LEGISLATION, ANY LOANS TAKEN SINCE 1999 WHICH REMAIN
OUTSTANDING ON 5 APRIL 2019 BECAME TAXABLE AS INCOME ON THAT DATE.
In the period up to 5 April 2019, H M Revenue
and Customs (HMRC), who were tasked with
administering the loan charge, encouraged
taxpayers to enter into negotiations to reach a
settlement in respect of these disguised
remuneration schemes in order to avoid the
loan charge.
As a result of an overwhelming public outcry in
respect of the retrospective nature of the
legislation, an independent review was initiated
at the end of 2019 by Sir Amyas Morse.
Following the outcome of the review, the
government has announced a number of changes
to the loan charge which are summarised
as follows:
• The loan charge will only apply to outstanding
loans made on, or after, 9 December 2010.
• The charge will not apply to outstanding loans
made in tax years prior to 6 April 2016, provided
the avoidance scheme used was fully disclosed
to HMRC and HMRC did not take action.
• The amount of any outstanding loan balance
as at 5 April 2019 (recalculated in line with the
above) may be spread evenly across three years
from 2018/2019 to 2020/2021 inclusive. This
concession provides flexibility on the tax point
date, and may avoid the higher rates of tax in
full or in part.
• HMRC will refund payments made which
constituted voluntary restitution in order to
prevent the loan charge arising and were
included in a settlement agreement reached
since March 2016 for any tax years where:
- The loan charge no longer applies on the
basis the loan was made before 9 December
2010.
- The loan was made prior to 6 April 2016
and although the scheme was fully
disclosed to HMRC the department did not
take action.
There are also changes which have been
designed to give individuals assurance with
regard to settlement terms. In summary, these
surround Time to Pay arrangements with
HMRC and provide a minimum repayment
period depending on taxpayers earnings levels.
Finally, it is important to note that the loan charge legislation
does not impact or resolve the underlying tax dispute with
HMRC in respect of any open enquiries or assessments in
place. As such, it would still be necessary to resolve these
matters either by way of settlement negotiations with HMRC
or through litigation.
Where taxpayers have been involved in disguised
remuneration planning, it is recommended that they take
specialist advice, given the complex nature of the legislation.
If you would like to discuss any of the above points in further
detail, please get in touch.
Rick Schofield is a Partner at Wilkins Kennedy
E: [email protected]
Where earnings:
• Are less than £50,000, HMRC will agree a
minimum of 5 years.
• Are less than £30,000, the timescale extends
to 7 years.
It must be borne in mind that at present these
are proposed changes and draft legislation, and
detailed guidance is expected early this year.
HMRC have committed to writing to those
taxpayers it knows used a disguised remuneration
scheme and either settled the tax due ,or has
not and could be liable to the loan charge, to
explain the impact of the changes. No refunds
will be made by HMRC until the legislation has
received Royal Assent, which is expected to be
summer 2020.
Local offices:
Ashford: 01233 629 255 / Canterbury: 01227 454 861
Maidstone: 01622 690 666 / Orpington: 01689 827 505
Sandwich: 01304 249 997
[email protected]
www.wilkinskennedy.com
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