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Independent review into loan charges

by | Feb 6, 2020 | ACCA, business taxation, personal taxatation, PSC

Have you seen HMRC’s response to the review’s outcomes?

You may have already received HMRC’s communication highlighting its advice around the independent review into loan charges where it signalled it will refund voluntary payments.

HMRC stated in its update:

‘On 20 De‌ce‌mb‌er 2019, the independent loan charge review was published along with the government’s response on G‌OV‌.U‌K. HMRC also published guidance on GOV.UK on the key changes to the loan charge policy and what this means for customers.

‘On 20 Ja‌nu‌ar‌y 2020, the government published draft legislation to implement the changes to the loan charge as recommended by the independent review. Further guidance has also been published which provides more details of the changes, including the self assessment process.

‘If any of your clients are affected by the loan charge, then we would advise you to review the latest guidance and discuss with your clients any changes they may need to make to their return. The new guidance can be found on GOV.UK’

The guidance summaries the following main changes:

  • the loan charge will apply only to outstanding loans made on, or after, 9 December 2010
  • the loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was disclosed to HMRC and HMRC did not take action (for example, opening an enquiry)
  • people can now elect to spread the amount of their outstanding loan balance (as at 5 April 2019, recalculated in line with the above changes) evenly across three tax years: 2018 to 2019, 2019 to 2020 and 2020 to 2021. This will give greater flexibility on when the outstanding loan balance is subject to tax and may mean that the loan balance is not subject to higher rates of tax
  • HMRC will refund voluntary payments (known as ‘voluntary restitution’) already made in order to prevent the loan charge arising and included in a settlement agreement reached since March 2016 (when the loan charge was announced) for any tax years where:
    • the loan charge no longer applies (loans made before 9 December 2010)
    • loans were made before 6 April 2016, the avoidance scheme use was disclosed to HMRC and the department did not take action (for example, opening an enquiry).

Article from ACCA In Practice