Treasury publishes Loan Charge review by former NAO boss Sir Amyas Morse and government response
Treasury publishes Loan Charge review by former NAO boss Sir Amyas Morse and the Government’s response
charge will now apply to loans taken out on or after 9 December 2010, rather than from 1999
ministers will bring forward alternative action to tackle use of the tax avoidance schemes before 2010, along with new action against promoters
The Government has today welcomed an independent review that recommends changes to the Loan Charge, while also confirming that it was a ‘necessary’ response to the tax avoidance schemes it was designed to tackle.
The Review, led by Sir Amyas Morse, was commissioned to look at the impact of the charge, which was introduced to tackle those who used Disguised Remuneration schemes.
Sir Amyas, the former head of the National Audit Office, confirmed the schemes were a form of tax avoidance but made a series of recommendations about the design of the charge and its impact on those in its scope.
The Government recognises the concerns raised in the Review about the impact on individuals and fairness of some aspects of the Loan Charge. To address them, all but one of the recommendations have been accepted.
Following the Review the Government will;
make changes so that the Loan Charge will now only apply to loans taken out on or after 9 December 2010. The Review found that legislation announced in 2010 removed any doubt that tax was due
not apply the Loan Charge to users of loan schemes between 9 December 2010 and 5 April 2016 who fully disclosed their schemes on their tax return and where HMRC failed to take action
allow users to defer filing their returns and paying their Loan Charge liability until September 2020
allow taxpayers to split the loan balance over three tax years to make bills more affordable
invest in a new HMRC team to collect tax from those who used the avoidance schemes pre-2010
The package of measures announced today are estimated to reduce bills for more than 30,000 people subject to the Loan Charge, more than 60 per cent of the total number of users. That includes an estimated 11,000 who will be taken out of it altogether.
The Government has also announced further steps to crack down on promoters of Disguised Remuneration schemes and will announce further action at Budget to tackle their ongoing use.
Financial Secretary to the Treasury Jesse Norman said:
We welcome this careful and considered report, and I thank Sir Amyas and his team for their work.
There have been important public concerns about this policy, and that is why we commissioned this report and have responded so quickly to it.
The changes we are making go to the heart of Sir Amyas’s concerns about the fairness and application of the Loan Charge, which he accepts in principle.
We also have plans under way to crack down further on the promoters of these avoidance schemes.
Among other recommendations in the Review, HMRC will – once legislation has been passed – repay parts of some settlements reached with taxpayers where they had voluntarily paid amounts due for earlier years.
New guidance will be published to help users of the schemes understand what they have to do – and extra time will be provided so that users of schemes can defer sending their return, and paying the tax for 2018-19, until the end of September 2020.
The Government remains committed to tackling tax avoidance – which deprives the Exchequer of funds for vital public services and is unfair for the vast majority of taxpayers who pay the tax they owe at the right time.
In December 2010 the Government announced targeted anti-avoidance legislation to tackle Disguised Remuneration schemes. This put beyond doubt that DR schemes are ineffective.
The Loan Charge is a tax on loans outstanding in April 2019 and was designed to tackle individuals who paid themselves through loans, often routed via offshore trusts, which never had to be repaid.
The new HMRC team looking at pre-2010 use of loan schemes will aim to conclude enquiries and bring in the tax due from people who in the past have used disguised remuneration schemes and other forms of tax avoidance.
HMRC has already taken action to enhance its support to vulnerable customers in recent months, and is introducing a New Extra Support Service for customers undergoing compliance checks who need additional support, building on its existing Customer Service Extra Support team.
The Government is not accepting a recommendation in the Review to introduce a write-off of tax due on the Loan Charge after 10 years for individuals whose time to pay arrangement is longer than 10 years. That would allow those who have avoided tax through use of Disguised Remuneration tax avoidance schemes more favourable terms than taxpayers with other debts, including tax credit claimants.