Loan charge contractors get seven-year HMRC payment concession

Loan Charge contractors who currently earn less than £30,000 a year have been offered up to seven years to settle their disguised remuneration bill, in a new concession from HMRC.

Quietly unveiled by tax staff last week, the concession will sit with a similar, existing HMRC repayment arrangement that allows contractors on under £50,000 to get up to five years to settle.

Both ‘no questions asked’ arrangements were described as an “automatic right” by HMRC’s Jim Harra, but it was another HMRC official, Mary Aiston, who initially outlined them.

'Without questions'

Addressing MPs on the Treasury Select Committee, and sitting parallel to Mr Harra, tax assurance commissioner, the Revenue’s director of counter-avoidance Ms Aiston said:

“I can also now…[announce] that where people’s current income in less than £30,000, they can have seven years to settle their bill, if they need it, without questions asked”.

Contractors who go forward to HMRC with a “serious intention” to settle, before April 5th 2019, will not be “disadvantaged” if repayments are ongoing past that date, she vowed.

'Last resort'

To “reassure people” further, Aiston said, it was now an official HMRC policy that “HMRC is not going to make people sell their homes to pay their disguised remuneration tax bill.”

HMRC also said that insolvency was “very much a last resort,” and that the five-year and seven-year payment ‘rights’ negated the need for individual negotiation with its staff.  

But the tax department also used the session to undermine these reassurances, which campaigners like the Loan Charge Action Group, the FSB and IPSE will likely welcome.

HMRC said that while taxpayers could not be forced to sell their home, it is “possible” they may be told to take out a loan if their property has equity, and if repayments are affordable.

'Ultimately accountable'

Tax staff are the decision-makers on the affordability, as opposed to the party who must make the repayments -- taxpayers, whom HMRC said were “ultimately accountable” for the schemes they used, not their advisers or the scheme providers.

On the related unproven point that loan charge contractors had, in Mr Harra’s words, a “level of knowledge” about the schemes they entered into, Ms Aiston developed it -- sarcastically.

“Skilled people…signing up to a set of arrangements…[with] an offshore trust in the Cayman Islands or somewhere like that, [receiving remuneration] in the form of a loan that gets bigger and bigger and bigger [and] that they have no expectation of ever repaying.

“I’m not suggesting everybody needs to be an expert in tax legislation to spot that we might come and ask some questions about that.”

'HMRC didn't do its job'

But it was questions by MPs to HMRC that were then fired, notably ‘why HMRC didn’t deal with the loans’ until Budget 2016, or why HMRC ‘didn’t do [its] job at the time,’ in the words of an outraged Wes Streeting MP.

A surprise admission of failings, of sorts, from HMRC came in reply from Ms Aiston.

“We appreciate that at the time [pre-2004], our strategy meant that we weren’t telling taxpayers enough about what we were doing about their case,” she said, adding:

“We recognise that at the time our strategy meant we weren’t communicating regularly enough to keep them [Loan Charge contractors] in the picture.”

'Not as communicative'

Mr Harra seemed to agree, saying the tax authority was “not as communicative” as it is today, admitting that its communication about the schemes since 2004 has been only “mounting.”

But he then tried to head off a suggestion from Labour MP Rushanara Ali that it would be fairer to taxpayers if the retrospective effect of the charge was curbed to no further back than 2004.

Adopting a corrective tone, Mr Harra said: “What evolved over time was our ability to get transparency in what was going on in cases, and the powers that we have to tackle tax avoidance.

“What was always there was the obligation on taxpayers to correctly complete their tax returns and to enter income on their tax returns, and our view is that this was always income that should have been put on tax returns.”


Surprising for coming after his rebuff, Ms Aiston then issued an explicit apology -- having admitted that HMRC is sitting on a “backlog” of cases where taxpayers are trying to settle or speak to tax staff about the loan charge, as alleged to the officials by Labour’s Ms Ali.

“I recognise people have been waiting too long [to hear back from us] and I’m sorry about that,” the HMRC director said (at 15:29:18 of the committee hearing). “Our ambition is to solve that by bringing in extra [trained tax] people, as planned [from February 2019], to improve those turnaround times so people are not waiting so long.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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