‘Disappointing’ that HMRC is pushing Loan Charge contractors to settle amid COVID-19

Critics of retrospective taxation have denounced HMRC’s decision not to extend its pause in compliance activity to 2019 Loan Charge contractors, calling it “disappointing.”

Despite being asked to suspend all ‘30-day response’ letters due to the impact of COVID-19 on its customers, HMRC says it will keep contacting LC contractors on two key grounds.

The first is where the imminent “expiry of a statutory time limit” risks leaving the Revenue “legally unable to collect any tax that is owed,” the department told the Loan Charge APPG.

The second basis where contractors will receive an HMRC letter (that also imposes a 30-day reply time), is where the taxpayer sent in details which could, potentially, be used to settle.

'Disappointing'

Or as the Revenue’s customer compliance director Penny Ciniewicz told the APPG: “We are also continuing to engage…customers who provided the information they need to settle.

“[And] settle their use of Disguised Remuneration schemes by 5th April 2019, and can therefore still settle with us and not to have pay the Loan Charge.”  

Unimpressed, a Loan Charge Action Group spokesman translated: “We do know that HMRC is still sending out letters to people saying they need to settle, which is disappointing.”

LCAG’s comments coincide with the Treasury’s Jesse Norman confirming that Finance Bill 2019-21 implements the recommendations of the Loan Charge Review by Sir Amyas Morse.

'Put beyond doubt'

“It will mean that the Loan Charge no longer applies to loans entered into before 9th December 2010,” the minister told the House of Commons on Monday.

“[This date] is the point at which Sir Amyas found that the law put beyond doubt the fact that disguised remuneration schemes were a form of tax avoidance.”  

But on the very same day, Nickie Aiken MP wrote to Mr Norman asking: “If the Morse review is correct in stating that the law on this issue has been clear since 2010/2011, why did the Finance Bill of 2017 need to include new legislation to cover loan arrangements?

Alongside three other questions on the charge, the Tory MP presses in her letter: “If the law was in fact clear then surely there should have been no need for additional legislation?

'Norman side-steps'

Online, contractors applauded the letter but doubt it will receive a proportionate response.

“Let’s hope Jesse Norman takes note of your letter,” one Loan Charge contractor tweeted Ms Aiken directly.

[But] to date has side-stepped away from answering any of the more difficult questions. Suspect you will get a template response which has become the norm over the last few years.”

Another contractor praised the MP for writing to the Treasury’s financial secretary, partly because he finds the ‘December 2010’ concession downright confusing – and concerning.

“[Due to the initially retrospective legislation we were] in scope…then out of scope again due to this arbitrary Morse recommendation on pre-2010 years.

“But might [we] be under threat again because of the new HMRC pre-2010 years team?”

'New fight'

The contractor’s question relates to a tax expert warning that, due to the review recommending its formation, an official unit to scrutinise pre-2010 scheme users marks the “start of a new fight.”

More positively for HMRC customers, the finance bill brings forward legislation to make repayments for years that are no longer in scope where settlements were paid by Loan Charge contractors, all of whom are not penalised from COVID-19 income support by virtue of their usage of schemes or arrangements caught by the charge.

Meanwhile, Mr Norman said that under the bill, LC contractors who are “still able to pay” HMRC (and wish to, presumably), will be able to spread their loan balance over three tax years to suit their finances.

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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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