HMRC passed new legislation regarding the Loan Charge in July 2020. They’ve now updated the implementation of this charge, which may affect those filing for Self Assessment. Although this implementation only applies to schemes where tax due has not been settled, it’s worth being aware of these updates should they impact you or your business.
The Loan Charge now applies to outstanding balances made between 29 December 2010 and 5 April 2019 inclusive. For those that are unaware of this policy’s inception, this charge initially arose due to the disguised remuneration tax avoidance schemes where tax due had not been already settled.
What’s in the update?
- The Loan Charge now applies to balances made between 29 December 2010 and 5 April 2019 inclusive
- Those affected by the Loan Charge will now need to file their 2018-19 tax return by 30 September 2020
- If individuals are settling, they will need to pay the charge due on the 30 September 2020 or agree a Time to Pay arrangement with HMRC before this date
- There will be no special terms for calculating or paying the loan charge regardless of circumstance
Though the bullet points above outline the loan charge update in layman’s terms, it is worth assessing your individual standing with regards to the legislation to avoid unnecessary penalties. We urge customers to pay particular attention to the final bullet point on the above list, as HMRC have made it expressly clear that no special terms will be applied to any individual.
What do I need to do?
Should you be affected by the Loan Charge update, you will need to file your 2018-19 Self Assessment Tax Return no later than 30 September 2020, including a report of any loan balances subject to the Loan Charge.
Following this action, you will need to put in place the necessary arrangements needed to pay the charge due on that date.
Should you be concerned about your ability to pay the Loan Charge, talk to your Warr & Co accountant. HMRC have provided a detailed article on how its debt management processes work, including examples of department pay arrangements. It is worth noting that there is no standardised period in which to pay the arrangement, and individual circumstances will be assessed when calculating tax debt repayment.
As there’s no upper limit on the length of time in which one can pay, the Loan Charge update aims more to urge rapid filing than encourage further debt. HMRC is encouraging individuals to repay any outstanding debt as quickly as possible once their affordable payments have been calculated.
As a final comment, HMRC have stated very clearly that they will not apply a different rate to that provided in the legislation, as it must uphold fairness to all taxpayers.
Where can I find more information?
If you need further information on the Loan Charge, we’d recommend that you read the official published guidance from HMRC on this matter. As debt handling can be a daunting task, it may also be worth perusing HMRC’s policy paper on tax debt. And remember that we’re here to help. Contact your Warr & Co accountant for friendly and tailored advice, or get in touch if you’re not already a Warr & Co client and let us guide you through the process.