Tax update: Loan charge review

Published: Wednesday 8 January 2020

Just before the Christmas break, the government published details of Sir Amos Morse’s independent review of the loan charge and issued updated guidance in response.  

The loan charge was introduced to target disguised remuneration schemes, where individuals were provided with loans (normally via a third party such as an ‘employment benefit trust’) which were never intended to be repaid. These loans were often provided instead of a salary which resulted in the individuals avoiding income tax and national insurance liabilities. The loan charge, as originally drafted, was intended to apply to all loans made since 1999 which were still outstanding as at 5 April 2019 and taxing them in full as income on that date.

Some key changes as a result of the review include:

  • The loan charge will now only apply to outstanding loans made on, or after, 9 December 2010 (rather than applying to loans made as far back as 1999).
  • Charges will be waived where loan scheme issues were fully disclosed to HMRC (i.e. within the individual’s personal tax return), in respect of loan charges raised between 9 December 2010 and 5 April 2016 but where HMRC failed to take action (e.g. an enquiry was not opened).
  • A refund of any voluntary payments made, for which the loan charge no longer applies, once the new legislation has been enacted.

HMRC has also confirmed that the loan charge payment date will be deferred until 30 September 2020 (rather than 31 January 2020) as well as giving the option to elect to spread the outstanding loan balance across three tax years rather than just in 2018-19. 

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Nick Haines
Nick Haines
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