HMRC have been criticised for continuing to pursue matters involving Loan Charge contractors, despite choosing to temporarily suspend compliance activity on other matters during the Covid-19 lockdown.
What is the Loan Charge?
The 2019 Loan Charge, which is the charge on outstanding disguised remuneration loans, is a government measure aimed at tackling this type of income tax avoidance. Having previously been announced in the 2016 Budget and was introduced in the Finance Act (No 2) 2017, the charge applied to all disguised remuneration loans made since 6 April 1999 if they were still outstanding on 5 April 2019.
HMRC has issued a briefing encouraging people to come forward and settle their tax affairs before the 2019 loan charge comes into effect on 5 April 2019. This charge will not arise on outstanding loans if the user has agreed or is progressing towards settlement with HMRC before 5 April 2019.
Since the Loan Charge was announced, HMRC has agreed settlements on disguised remuneration schemes with employers and individuals worth more than £1 billion. Around 85% of this amount was collected from employers, with less than 15% from individuals.
Why has HMRC chosen to push loan charge settlements?
Due to time limitations on some Loan Charge matters, HMRC expects that if they fail to pursue settlements on these cases they will then be “legally unable to collect any tax that is owed”.
As a result, HMRC will send letters to Loan Charge contractors that will include a calculation of their settlement and then ask for the contractor to agree to the settlement within 30 days. If the contractor does not respond within 30 days, HMRC has the power to ask them to pay the full settlement sum immediately.
Penny Ciniewicz, director-general of customer compliance at HMRC, has stated that “Customers who need more time to make a decision should let us know, and we will continue to take a reasonable and proportionate approach to such requests.”
What criticism has HMRC faced?
HMRC will be sending many loan charge letters to business addresses, even though many of which are closed due to Covid-19. As a result, many taxpayers risk being unaware that they are being pursued by HMRC in relation to the Loan Charge.
In addition, the widespread effect of the Covid-19 lockdown on businesses has meant a lack of income for many businesses during the pandemic , who may therefore not be able to pay the sought Loan Charge.
A Loan Charge Action Group spokesman stated: “We do know that HMRC is still sending out letters to people saying they need to settle, which is disappointing.”
However, more positively arrangements have been made for those who are self-employed to be able to benefit from the coronavirus self-employed income support scheme, even if their 2018-2019 tax return has not been filed.
Would I know if I have been part of a disguised remuneration scheme?
If you were caught by the aforementioned legislation, then HMRC would have been in contact and initially offered you the opportunity to settle with advantageous terms by 5 April 2019. However, due to the complexity of the claims, this deadline was further extended to 31 August 2019, with many cases still unresolved. If you fall into this group, where you have not yet settled, our expert legal team may be able to help.
What we can do for you?
- Review your entire matter;
- Provide expert advice throughout the entire process;
- Represent you in correspondence, interviews and meetings with HMRC;
- Collate and prepare all documentation required by HMRC, including Outline Disclosure, Full Disclosure and the Disclosure Report; and
- Contest disputed tax assessments and penalties.
Need Expert Tax Disclosure Lawyers Advice?
If you have entered into a disguised remuneration scheme (or any other tax avoidance scheme), it is important you seek legal advice as soon as possible.
Whether you are an employer, employee or contractor, our expert tax solicitors and barristers can assist you in managing HMRC’s investigation and entering into negotiations by providing comprehensive legal advice and robust responses to the investigators. Our tailored team which also comprises of specialist forensic accountants can calculate what you owe and make representations on your behalf to HMRC.
Our Tax Disputes professionals are available to give information and advice in negotiating penalties and loan charge settlement with HMRC. To contact one of our specialist Tax Lawyers please click here or call 02071830529.