2019 Loan Charge contractors handed 11th hour advice
Law firm Pinsent Masons says that HMRC’s preferred course of action – settlement of over potentially 20 years’ tax liabilities in a single tax year – is finally being accepted by droves.
“Many individuals are now coming forward voluntarily to close outstanding cases in order to settle and pay what could be a lower amount of tax compared to the new charge,” the firm says.
“After the deadline, a new charge will be applied on any outstanding loans made through Disguised Remuneration Schemes. It essentially presents taxpayers with a very substantial tax bill based on the outstanding loans.”
'Allowing the charge to apply'
But while settlement may have gained ground as a response to the imminent deadline, “some people may be better-off [financially] by allowing the loan charge to apply”, says the Low Incomes Tax Reform Group.
For the majority however, the group says settlement is still the answer or, at least, must be ‘urgently considered’ -- partly due to the short time left. But HMRC has signalled flexibility.
“If you contact HMRC about ‘settlement’ before the 5th April 2019 date, then the loan charge will not apply, provided you subsequently then settle,” LITRG advises.
“They [the Revenue] have confirmed that you must contact the settlement team and send through the necessary information by 5th April 2019, but that they will accept information that arrives later, provided the postmark is no later than 5th April 2019.
“Those who are already in the settlement process and who genuinely want to settle will not have the loan charge applied, even if they are missing a few pieces of paperwork.”
The main thing one chartered accountant wants to see when loan charge contractors get in touch with HMRC – if they get in touch – is its officials taking a “sympathetic approach.”
“It’s likely that they were sold these products by promoters who assured them that they were compliant,” explains UHY Hacker Young. [So] it’s vital that HMRC make ‘Time To Pay’ arrangements with taxpayers wherever needed.”
For taxpayers, it seems vital to not only take some form of action, but to also ensure the action does not involve a scheme offering a ‘get-out’ of the loan charge. Or a protection of some form.
“There are schemes out there promising to avoid the charge,” says WTT Consulting, which detects such schemes at the rate of two a month. “Don't be tempted.”
Other affected parties will be hoping for the government to grant an eleventh-hour reprieve, which only last week was reassured by the Loan Charge APPG as still being a valid option.
“There is just enough time to delay it, before it does huge damage and the Loan Charge APPG will do all we can to make it happen,” Ruth Cadbury MP wrote last Tuesday.
The Labour MP was alluding to a debate today in the House of Commons, scheduled for three-hours, with the explicit aim of delaying implementation of the charge for six months.
Not everyone is optimistic. “You may have been pinning [your] hope[s] on the review into the effects of changes to the offshore time limit rules,” reflected the LITRG.
“However the review has now been published and it is clear that the government are firm as to their policy relating to the loan charge.
“We are also aware that there is a debate on a motion about the loan charge scheduled for [Thursday April 4th], but it is unlikely to change anything given the government’s firm stance.”
'Head in the sand'
Yet there are still options, including another route to shelve the charge, according to WTT Consulting’s Graham Webber. He advises: “If settlement is your choice, apply before Friday.
“If not, be prepared to join a Judicial Review on the loan charge. It may postpone the charge while the legalities are resolved. Once past settlement and loan charge judicial review, you need a strategy. Go and get advice. [But] head-in-the-sand is not a strategy as legal obligations are on you to report.”