Treasury to review 2019 Loan Charge
(The following is only potentially relevant to any taxpayers who might have been party to EBT or EFURB type remuneration arrangements).
The Treasury has been forced to agree to review its controversial 2019 Loan Charge proposals, which are designed to tackle disguised remuneration, by the end of March after a cross-party group of MPs were successful in pushing through an amendment to the Finance Bill.
Both the support of MPs, and the fact that the Government have been forced to review the policy, are clearly positive. However, the timings (i.e. the Loan Charge date being only 6 days after the review must be concluded) mean that it is not something to be relied upon to change the scope and impact of the 2019 Loan Charge.
The loan charge, due to come into effect in April, has attracted considerable controversy as the regulations effectively give HMRC powers to impose a second taxing point for historical schemes. This means the charge will affect anyone who used a loan scheme and who has not paid the intended amount of tax over the last 20 years. HMRC has indicated it expects to 'protect' around £3.2bn in tax by tackling such avoidance schemes.
A House of Lords report from the economic affairs committee published in December was heavily critical of the plans, saying: ‘HMRC appears to be prioritising recovery of tax revenue over justice by targeting individuals, rather than promoters (who could be considered more culpable), so it can more easily recover liabilities.’
Lord Forsyth, chair of the economic affairs committee, said: ‘We took some disturbing evidence on the government’s approach to the loan charge. This is devastating the lives of middle- and lower-income individuals, from the private and public sector (including the NHS) who used disguised remuneration schemes, in many cases being required to do so by their employers. The charge is retrospective in its effect, claiming tax from years which should be closed to enquiry.’
Whilst it is possible that the review may result in changes to the Loan Charge Rules (which could ultimately be of benefit), it may be sensible at this stage to assume the law will remain in its current form and continue to make arrangements to deal with any potential Loan Charge as affected taxpayers see fit based on their particular circumstances.
If, in the fullness of time, there is a cancellation or postponement of the Loan Charge affected taxpayers may have a valid claim for their settlement to be displaced as it was undertaken almost entirely due to the imposition of the 2019 Loan Charge.
We will continue to monitor matters and will update you further as and when any developments arise. In the meantime if you would like to discuss this in more detail please contact our Tax Partners Steve Crompton or Chris Barrington on the details below;
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
direct dial: 01942 292505
mobile: 07730 436070