Loan charge recap. The aim of so-called loan schemes was to defer, possibly indefinitely, tax on earnings by lending money to workers rather than paying salary. Because loans are not income there was no tax (or NI) to pay. HMRC always considered that such arrangements didn’t work and persuaded the government to pass anti-avoidance rules in 2016 to ensure there was no escape. If you used a loan scheme to pay yourself or your workers you were required to report the details to HMRC and pay the corresponding tax and NI no later than 5 April 2019.
Doubts and questions. Despite the anti-avoidance rules and the April deadline, objections to the loan charge have continued. These have been so vigorous that in September 2019 the government announced an independent review to take place in November 2019 (see The next step ).
What next? Pending the outcome, if you’ve used a loan scheme here’s what you need to do:
- if you’ve declared the scheme and paid the tax and NI you don’t need to do anything. HMRC will contact you after the review.
Tip. If you’re paying the tax and NI by instalments continue with this arrangement, at least until the outcome of the review is known.
- if you’ve notified HMRC that you’ve been involved in a loan scheme but are yet to provide full details, you can defer doing so at least until after the review. Note. If you settled the tax and NI bill by 30 September HMRC will charge you less interest and penalties
- if you haven’t reported that you used a loan scheme you may need to do so depending on the outcome of the review. HMRC wants you to notify it now but in our view there’s little to be gained from this. Be prepared to act quickly in line with recommendations of the review.