Government To Make Changes To The Loan Charge

The findings from an independent review into the Loan Charge include a series of middle-ground reforms ...

The Loan Charge, which came into effect in April 2019, has been quite controversial and the review by Sir Amyas Morse has upheld the legislation, but does recommend several reforms should be made to it.

It targets disguised remuneration schemes that are really tax avoidance schemes. Workers get paid in loans rather than traditional income, and this means they can avoid paying both Income Tax and National Insurance contributions!

These loans are designed never to be repaid. However, the Loan Charge makes them taxable and applies to loans dating back to April 1999, so some individuals face paying back vast amounts of money.

There is a lot of confusion and fear from those paid with disguised remuneration loans, and it has even driven some to suicide. Because of these deaths and the public uproar about them, the independent review, published in late December 2019, took evidence from over 700 individuals affected by the Loan Charge. There was also input from the Treasury, MPs, tax and legal experts, as well as campaigners.

The most significant recommendation is that the Loan Charge should not apply to loans made before the 9th December 2010, so there is some degree of cut-off for those who were affected. Additionally, how the tax is repaid should be changed so that a lump sum payment of multiple years' worth of Income Tax and National Insurance contributions can be split over three tax years.

"HMRC should also not be allowed to force the sale of homes, push for bankruptcy or ask taxpayers for more than 50% of their disposable income!"

HMRC have accepted many of these recommendations, but have struck down several points including the 10-year tax writeoff, citing an unfair advantage to those early adopters who used tax avoidance schemes covered by the Loan Charge.

These recommendations will be welcome by many individuals affected by the Loan Charge.

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