Government back-pedals on retrospective loan charge following review

The government is making changes in response to Sir Amyas Morse’s independent review of the loan charge policy and its implementation.

• The loan charge will only apply to outstanding loans made on, or after, 9 December 2010
• The loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action (e.g. opening an enquiry)
• Loan balances as at 5 April 2019 will be recalculated in line with the above changes
• Outstanding loan balances can be spread across 3 tax years which may mean that the loan balance is not subject to higher rates of tax
• HMRC will refund any voluntary payments made by individuals as part of the Settlement Process if the loan charge no longer applies. This will only take place once the loan charge legislation has been enacted by Parliament
• Time to pay arrangements will be agreed on an individual by individual basis but individuals earning less than £30k per year will be entitled to a minimum of 7 years
• In early 2020 HMRC will write to customers who have used disguised remuneration schemes to explain how the changes may affect them
• The guidance published by HMRC suggests that draft legislation and more detailed guidance will be published in early 2020, alongside a timetable showing the introduction of these changes
• Individuals who have not filed their tax return, or agreed a settlement with HMRC, will need to submit a self-assessment tax return for the 2018-19 tax year
• HMRC will waive penalties for late filing, late payment and inaccuracies in respect of the loan charge entries in these returns
• Late payment interest will not be payable for the period 1 February 2020 to 30 September 2020, as long as a return is filed and tax paid, or an arrangement made with HMRC to do so, by 30 September 2020

Aspire Comment

Sir Amyas Morse’s review of the controversial loan charge has resulted in significant easements and changes to the original policy proposals. 

For the full guidance, click here.

If you are affected by these changes and need advice, please contact us at 0121 445 6178 or enquire@aspirepartnership.co.uk.