The 2019 Loan Charge

With the House’s approval of the necessary legislation for the General Election for 12 December, Treasury Minister Jesse Norman wrote to Sir Amyas to confirm that “ministers have agreed that it would be most appropriate for your report to be submitted to the new Government on its formation.”[22] Sir Amyas’ report was published on 20 December, making a long series of recommendations with major implications for those affected.[23] The Government has accepted all but one of these; a summary was given in a press notice alongside the Government’s detailed response:Following the Review the Government will;

Metadata

Provider:

UK Parliament research

URL:

https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8811

Retrieved on:

Wednesday, February 5, 2020

Information

Tags:

Taxation in the United Kingdom, Economy, Government, HM Revenue and Customs, Tax, Tax avoidance, Loans, Debt, Student loans in the United Kingdom, United Kingdom corporation tax

Summary

Key Points:

With the House’s approval of the necessary legislation for the General Election for 12 December, Treasury Minister Jesse Norman wrote to Sir Amyas to confirm that “ministers have agreed that it would be most appropriate for your report to be submitted to the new Government on its formation.”[22] Sir Amyas’ report was published on 20 December, making a long series of recommendations with major implications for those affected.[23] The Government has accepted all but one of these; a summary was given in a press notice alongside the Government’s detailed response:

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.[24]

In the 2016 Budget the Government announced the introduction of the Loan Charge - a major initiative to tackle the mass marketing of tax avoidance loan schemes.
In December 2019 the Government announced a series of reforms to the Loan Charge, following the recommendations of an independent review, chaired by Sir Amyas Morse.
In the 2016 Budget the Government announced the introduction of the Loan Charge - a major initiative to tackle the mass marketing of tax avoidance loan schemes.
[6] HMRC has estimated that 50,000 individuals, and around 10,000 companies used these schemes and are potentially covered by the Loan Charge.
The Loan Charge applies to the outstanding balance of DR loans on 5 April 2019 that were made over the previous 20 years that is, after 5 April 1999.
[10] HMRC estimate about 250 different loan schemes are covered by the Loan Charge.
[11] The Loan Charge stacks loans that the taxpayer has received, so that they are liable to pay a single charge based on the value of all outstanding loans.
[16] The review also restated the Governments position on whether the Loan Charge was retrospective legislation: "The charge on DR loans applies a tax charge to outstanding loan balances at 5 April 2019.
[18] In December 2019 the Government announced a series of reforms to the Loan Charge, following the recommendations of an independent review, chaired by Sir Amyas Morse.
[21] Although the Loan Charge was intended to shut down loan schemes, the Review had found scheme usage continues to be extensive in the 2019/20 tax year to date, with over 8,000 individuals having entered into loan schemes between April and October 2019.
[27]It is estimated that the changes to be made to the Charge will benefit more than 30,000 individuals: "An estimated 11,000 individuals will be removed from the loan charge due to the date the loan charge applies from being changed to 2010 and the provisions for those who have made reasonable disclosures.
An estimated 21,000 individuals will see the amount of tax they owe under the loan charge reduce as a result of the proposals to allow customers to split their loan balance over 3 years Initial analysis suggests that moving the date the loan charge applies from to 2010, together with the provisions for those who have made reasonable disclosures, would remove an estimated 1,000 employers.
It concludes by looking at developments following the introduction of the Charge in April 2019, and the series of changes the Government announced in December 2019 in response to the Independent Review.