If you have entered into a disguised remuneration scheme (or any other tax avoidance scheme) or you have failed to meet HMRC’s deadline of 30 September 2020, 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.
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, it was introduced in the Finance Act (No 2) 2017 and 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 came into effect on 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 have sent letters to Loan Charge contractors which included a calculation of their settlement and sought an agreement to the settle the outstanding sums due 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.”
How has the loan charge been criticised?
Iain Duncan Smith criticised HMRC’s management of the loan charge calling their behaviour “appalling“. Smith commented that it would be impossible for people to finalise their settlement by the 30 September 2020 deadline and called for a 6 month delay and government delay. Mr Smith asked Rishi Sunak, Chancellor of the Exchequer, if the declaration deadline for 30 September 2020 could be extended until the end of January 2021.
Furthermore, Liberal Democrat MP Murina Wilson has stated that the loan charge has left some of her constituents facing bankruptcy during a time of great financial uncertainty due to the COVID-19 pandemic. Ms Wilson called on Mr Sunak to make the ‘punitive loan charge fairer for those who have been hit with significant retrospective charges in order to reduce the number of bankruptcies resulting from the loan charge‘.
Coservative MP Matthew Offord has also expressed concerns about the consequences of the loan charge settlement’s impacts whilst there is added financial strain due to the impact of the COVID-19 pandemic.
“I have written to the Chancellor of the Exchequer, urging him to review and accept the reasonable proposals put forward by the Loan Charge APPG which would allow many people to reach affordable settlements. At a time when many of my constituents are facing financial pressures due to the impact of Covid-19, they should not have to face bankruptcy, especially as the vast majority acted in good faith – many times on the advice of qualified accountants and financial professionals.”Matthew Offord
Have HMRC extended the loan charge deadline?
Jesse Norman, the Financial Secretary to the Treasury, previously indicated that there will be no extension of the deadline commenting that individuals had already been provided with an 8 month extension from 31 January 2020 to 30 September 2020 to submit their 2018/2019 Self Assessment returns and pay the taxes due or alternatively agree a time to pay the arrangement.
HMRC have, however, stated that they will keep the situation under review and provide a reasonable approach for those who are unable to file their tax return or pay the taxes due by 30 September if the reason for their delay was a direct result of COVID-19.
Would I know if I have been part of a disguised remuneration scheme?
If you were caught by the aforementioned legislation, 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.
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