Richard Coombs, Tax Partner at Bates Weston considers the recent update from the government regarding the independent loan charge review.

“The legislative changes brought about by the independent loan charge review received Royal Assent on 22 July and are therefore now law.  HMRC have  updated their guidance to incorporate the current position, which can be viewed here.  The guidance is lengthy, but the main headlines can be summarised as follows:

  • Disguised Remuneration loans made before 10 December 2010 are now not caught by the loan charge.  However, if HMRC already had open enquiries into the planning then they will continue to seek settlement of the outstanding liabilities.
  • Loans made between 10 December 2010 and 6 April 2016 will also not be caught by the loan charge provided that “reasonable disclosure” was made to alert HMRC of the existence of the loan and that the disclosure made it apparent that a tax liability may have arisen as a result of the loan arrangement.  In reality, we suspect very few clients will be able to avail themselves of this concession as the bar of “reasonable disclosure” is a high one.
  • Those people (employers or individuals) who had already settled with HMRC on loans that are now not caught by the loan charge on a “voluntary restitution” basis (i.e. where HMRC had no open enquiry and so were out of time) will be able to claim a repayment of any amounts paid and to cancel any future payments agreed to be made under that settlement.
  • Taxpayers caught by the loan charge will be able to elect to spread the amount chargeable across three tax years (2018/19, 2019/20 and 2020/21), which may limit the extent to which the tax on the loan charge pushes taxpayers into a higher tax bracket
  • The deadline for submitting a tax return and paying tax for 2018/19 where there is a loan charge has been extended to 30 September 2020.”

If you think you are affected by the loan charge and are unsure what to do, please feel free to get in touch with our tax team and we would be happy to discuss your options with you.

Disclaimer: The information contained in this article is generic in nature. You should take no action based upon it without consulting ourselves or an alternative professional advisor. All information correct at time of publication: 29 July 2020