Cost-of-living support for millions of households
More than £15 billion has been allocated to an unprecedented support package to help millions of households in the UK...READ MORE
A loan charge review will be concluded mid-November to give taxpayers certainty ahead of the January self-assessment deadline.
Sir Amyas Morse, the former comptroller, auditor general and chief executive of the National Audit Office (NAO), will lead an independent review of the loan charge, the Financial Secretary to the Treasury, Jesse Norman, announced on Wednesday.
The review, commissioned by the Chancellor of the Exchequer, Sajid Javid, will consider whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.
The disguised remuneration loan charge was introduced to tackle contrived schemes where a person’s income is paid as a loan that does not have to be repaid.
Disguised remuneration loan schemes were used by tens of thousands of people, and concerns have been raised about the use of the loan charge as a way of drawing a line under these schemes.
“Everyone should pay their fair share of tax. These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the loan charge is the appropriate way of tackling them,” said Mr Norman.
“The government fully appreciates the concerns expressed by individuals, campaigners, and MPs who have raised concerns about the loan charge.”
While the review is under way the loan charge remains in force, the government said.
The review will focus on the impact on those individuals who were using the schemes directly, reflecting the main concerns that have been raised by MPs and campaigners about the loan charge.
Responding to the announcement that the Treasury has appointed Sir Amyas to lead the review, Federation of Small Businesses (FSB) national chairman Mike Cherry said that the November completion date is unreasonable.
“While it’s encouraging to see the government doubling down on its commitment to a review of the loan charge – telling sole traders that they’ll have an update on where they stand as late as November, with then potentially only two months to settle-up, is unreasonable. And especially so in such an uncertain and unpredictable climate,” he said.
“The loan charge is causing misery for thousands of sole traders – many of whom were acting on the advice of employers or financial professionals when they agreed to schemes which were, at the time of participation, perfectly legal.”
He advised the HRMC to establish a tax efficiency white list, guaranteeing that – if the scheme is listed – “you have cast iron protection form a retrospective grab if you use it”.
HMRC has been challenging the use of disguised remuneration loan schemes for more than 20 years, and the government introduced targeted anti-avoidance legislation in 2011 to shut them down.
But the schemes continued to proliferate, and with many users not disclosing their use of them as they were required to, the government announced the loan charge in 2016. That gave users three years to either repay the loan, settle the tax due with HMRC, or face an income tax charge on the stock of outstanding loans.