An independent review that concluded in December 2019 has curtailed the application of the loan charge and been hailed as a “small but mighty victory” against the injustice of HMRC. In the article, Sarah and Lisa consider the changes to the loan charge as a result of the review, and the financial impact and opportunities accountants should be aware of.

The article explains that one of the most significant changes to come out of the review is that the loan charge will not apply to disguised remuneration loans made before 9 December 2010. It also says there is pressure on Jess Norman, Financial Secretary to the Treasury, to limit the application of the loan charge to 2017 when the Rangers tax case was decided.

Sarah and Lisa say that the review recommendations have implications for individuals and corporates and set out some advice for accountants and financial advisers, including:

• Employers, employee and contractors who have not settled with HMRC should review the cost of the loan charge versus what settlement with HMRC would look like as the overall liability may not be the same
• Employers, employee and contractors who have already settled with HMRC but overpaid will receive a refund of the voluntary restitution element of the settlement
• Loans between 9 December 2010 and 5 April 2016 will remain subject to the loan charge unless the individual in receipt of the loan can demonstrate they made a “reasonable disclosure” of the scheme usage to HMRC. “Meeting the ‘reasonable disclosure’ criteria will not be easy, and advice may need to be taken,” say Sarah and Lisa.

Finally, Sarah and Lisa warn that “once the dust settles following the loan charge review, taxpayers and their advisers should be prepared for HMRC to bare its teeth once more”.

The full article in Accountancy Age can be read here.