Loan Charge disclosure deadline imminent: final considerations for contractors

We previously advised that confusion continues at HMRC, in turn causing justified concern across the contractor Loan Charge population.

While we are disappointed to report that the conditions remain, so close to Monday’s disclosure deadline, a few recent decisions have compounded the obfuscation for 2019 Loan Charge contractors, writes Graham Webber of WTT Consulting. Here we attempt to clarify.

Where are we now?

  • As per previous guidance, the Loan Charge requires a disclosure by the end of September. That is the law and is the only stable point upon which we can leverage. What that disclosure looks like is now perhaps in question.
  • There is a review underway which will report in mid-November which may or may not have practical consequences for the Loan Charge.
  • There is an ongoing settlement which according to HMRC affects your legal requirement to disclose. HMRC have also offered all those going through settlement the opportunity to suspend until the review is finalised.


A key question we’re being asked: Is it necessary to comply with the letter of the (loan charge) law or the spirit?

While not really a practical tax question, it does sum up the dilemma facing contractors.

HMRC have previously set out the method for disclosing loans via an online mechanism created for the sole purpose of collecting the data. More recently HMRC have indicated in a press release that where the information has been provided through settlement, no disclosure is necessary.

So contractors, you may understandably ask: ‘Do I go with a logical, literal interpretation of the situation, being aware of the risks and potential for penalty?’ Or, ‘do I go with a view that abides by the underlying spirit of the law to gift HMRC additional information but restrict their ability for penalties?’

I do not envy this decision. Let me also be clear that advisers in this space are far from agreed. I draw no inferences from that. Advisers will consider client circumstances and risk appetite and advise accordingly. We are all trained, qualified or experienced in tax. We all have our own strategies and will usually advise in a manner consistent with them. Different advice from different advisers does not mean that any of them are wrong.

We know that the law says you should disclose loans by the end of September. That is a given. The law has not changed. Choosing not to disclose could result in a penalty. It is entirely likely that the penalty could be challenged where settlement discussions remain ongoing and you subsequently settle, but do we trust HMRC’s machine to not churn out automatic daily penalties?

We do not.

I’m imagining a judge considering whether a contractor who has not disclosed and who now has a penalty, is able to claim “reasonable excuse,” based on HMRC’s published statements. You would hope that HMRC would not in such circumstances have issued a penalty. If they do (and who in the adviser or contractor community trusts them in relation to the loan charge?), would a judge strike it out? Even if he or she does, you still will be out of pocket financially in taking such a case to court.

HMRC publications have no statutory power. They may display how HMRC considers the law to apply but they are -- as is demonstrated regularly – hardly expert in tax law. The Revenue’s publications are perhaps better than blog posts, but how much better?

Also, what does ‘engaged in settlement’ mean? You’ve sent details months ago and heard nothing? You have signed an agreement and are awaiting a final confirmation? Where along that line is the boundary between safety and jeopardy?

The Review

The Review – or more precisely the Reviewer – is, in my opinion, honestly meant. I have met Sir Amyas Morse and believe him to be a person of integrity. He is, though, conducting an entirely extra statutory exercise that has no power to bind government. He may decide that the Loan Charge is a terrible piece of legislation on every level and recommend abolishing it – and be ignored. He may decide that it is apposite and the government for political reasons will remove it from the statute book.

Our advice is to forget that the Loan Charge Review is underway for the purposes of disclosure.

Finally, does your scheme fit the legislation? Many do not. Many have very good grounds for being outside the law as it stands. Some have loans that disappeared long before March 2016. Some have loans that did not come from third parties. Some have no loans at all. These all may lie outside the words of the law.

What, however, is the policy driving this legislation and what might a judge consider to be the intent of parliament?

It is clear to us that whatever motivation is behind the Loan Charge (and we purposefully choose not to comment here), the intent is that those who received sums of money from contracting their time and expertise in a manner that was not taxed, are the focus. This disclosure is not perhaps a reason to raise an assessment (legally), but it is what the intent of parliament might be interpreted as.

Considering this broken landscape and the need to navigate through it, which is the safest course?

In our view it is that unless you have signed a settlement agreement, disclosure should be made to protect you from all penalties. This is on the basis that if you have already disclosed through settlement, disclosing again can’t jeopardise, but failing to disclose can on both penalties and the costs of defending those penalties. Better to be safe than sorry, or better still consult an expert; even if they don’t agree with the guidance herein. Either way, Monday is deadline day, so your final approach must be considered, justified and adopted.

Profile picture for user Graham Webber

Written by Graham Webber

Following nearly 4 decades working in various tax disciplines, Graham co-founded WTT to offer his deep experience and understanding of complex tax structures to those embroiled in tax enquiries. More recently Graham was awarded best forum adviser and best forum personality in the ContractorUK Awards.
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