The loan charge is likely to apply to beneficiaries of EBTs, EFRBS and individual contractors or anyone who received loans or owe a debt to a trust-based tax-avoidance structure.
If settlement negotiations weren’t entered into with HMRC before 5 April, either the individual who received the loan, or their employer, must report and pay the tax resulting from the April loan charge.
Failure to report and pay the tax due will result in additional penalties and interest being added which will increase the eventual liability.
Some people, particularly contractors, are still hopeful that the loan charge legislation will be reversed or challenged successfully through legal processes. Individuals may also be tempted to try and stay below the radar given that not all tax planning arrangements were disclosed to HMRC through the use of a DOTAS (Disclosure of Tax Avoidance Schemes) number.
It is important to note that HMRC have issued an information notice to certain trustee companies. The notice in question (often referred to as a ‘s.748’ notice) requires the trustees to provide HMRC with any information they have requested. In this context we are aware that HMRC have requested details of individuals with outstanding loans.
In relation to the above mentioned ‘legal challenge’, we think that it is highly unlikely that the government’s position will change. Given HMRC’s success in defeating schemes through tribunals, along with ever increasing legislative powers, we don’t see their approach changing.
If people don’t address the loan charge reporting requirements or reach a settlement with HMRC they will incur additional interest and penalties as time passes.
There is limited time within which to act. We would recommend contacting Bedrock Tax as soon as possible if you or your clients might be impacted by the April 2019 loan charge.
How we can help
It’s vital that you establish who is responsible for accounting for the loan charge i.e. your employer or you as an employee (or self-employed individual) – we can help with this.
We can also help with:
- Submitting loan information via the government gateway
- Pay as you earn (“PAYE”) and Real Time Information (“RTI”) advice for companies
- Advice concerning the application of any resulting s.222 / s.223 ITEPA 2003 charge for companies
- Self-Assessment reporting and calculation of the estimated tax due for individuals
- Inheritance Tax advice concerning any potential ‘exit charges’ which may arise if / when loans are written off
- Negotiating time to pay arrangements with HMRC
- Contract settlement with HMRC
Give us a call today to have a no-obligation chat about how we can support you or your clients with the loan charge reporting requirements.