The “Loan Charge” potentially applies as at 5 April 2019 to any loans or similar indebtedness taken out since 6 April 1999 which are considered to be “disguised remuneration” loans.
This very broadly means loans provided to employees by a third party (other than commercial loans) in connection with employment which have not been repaid in accordance with certain conditions, will be subject to PAYE and NIC as earnings from employment on 5 April 2019.
A number of settlement opportunities were made available before the date of the charge but many such arrangements requested by taxpayers have not yet been concluded.
On 16 July 2019, the House of Lords Economic Affairs Committee questioned the Financial Secretary to the Treasury, Jesse Norman, who revealed that he would be announcing 'clarifications' to the loan charge in the next few days.
Mr Norman stated that the clarifications would include a commitment that HMRC will not apply the loan charge to a tax year which was closed on the basis of fully disclosed information.
He also stated that HMRC is not going to seek to tax the same income twice; there would be a more collaborative approach to communications with members of the public who may be affected by the loan charge drawing on the expertise of the Chartered Institute of Taxation and the ICAEW.
Mr Norman stressed that “It is important to say that where a person has no realistic prospect of paying tax due HMRC will stop pursuit and leave any unpaid debt to be collected later only if those circumstances improve, and that is in fact their current practice but I don’t think it is widely understood”.
If you are concerned that the loan charge applies to you and you have not yet settled your affairs, or if you are not sure whether your loan charge applies to open years or not, please contact Caroline Harwood or John Cassidy for more information.