Government to reassess impact of retrospective loan charges
The government will reassess its controversial proposed loans charge rules, which are intended to address disguised remuneration, typically via non-UK trusts or umbrella companies.
The loan charge is due to take effect from April 2019 and is intended to reduce tax avoidance by stopping people using loan schemes to avoid paying the appropriate amount of income tax.
The new charge has been challenged in part because it would give HMRC the power to pursue anyone who has used a loan scheme at any point over the last 20 years. In particular, criticisms have noted that the rules could penalise low- and middle-income individuals who used such schemes, rather than the those who promoted and recommended them.
However, the Treasury has now confirmed that it will undertake a review to assess the impact of the loan charge, particularly for those on low- and middle-incomes.
Loan charge settlements
Many people will have used such loans for relatively small amounts of income and may well have acted in good faith. It is also the case that individuals may not be able to pay significant charges back to HMRC so long after the income was received.
While HMRC will charge interest on any amounts relating to open tax years – generally the last four tax years – they have also said that penalties will be the exception instead of the norm.
Complex rules will apply to anyone caught by the charge, as the amount payable could depend on the untaxed loan income, their income tax rate and any leftover personal allowance at the time, fees from the trust or umbrella company and other factors.
If you are concerned that your past income may be caught in the loan charge, please get in touch to discuss your situation.Talk to Barnes Roffe today