The controversial loan charge was due to be levied by HMRC on loan balances from relevant planning outstanding as at 31 March 2019, resulting in a flurry of activity as taxpayers settled their affairs under the terms offered by HMRC or prepared to deal with the imposition of the charge.
However, following the recent review of the loan charge, it will no longer apply as widely as was previously proposed.
It should be noted that the fact that the loan charge is being dropped does not mean that HMRC will not continue to pursue companies for tax due under the original planning, but in some instances there will be repayments due from HMRC in due course where settlement has taken place.
The first category of change is where the loan was entered into prior to 9 December 2010. For loans entered before this date (when anti-avoidance legislation was enacted), the loan charge will no longer apply.
For loans entered between 9 December 2010 and 5 April 2016, the loan charge will not apply where the planning was fully disclosed to HMRC, and HMRC did not take any action. This will cover cases where HMRC did not open an enquiry, and presumably cases where HMRC did open an enquiry but closed the enquiry without proposing any adjustment.
Those who are still subject to the loan charge can spread the amount over 3 tax years evenly to potentially reduce the amount of the charge which will be due at higher rates of income tax. There are also certain relaxations in terms of Time to Pay arrangements.
Taxpayers who are due refunds from HMRC from settlements entered should begin contact HMRC once the amending legislation has been passed (which is forecast to be in summer 2020). Those considering what to include on their 18/19 tax return can delay filing their return until 30 September 2020 without suffering any penalties.
Each taxpayer who has been involved in relevant planning will need to take professional advice based on their individual tax pattern, and our team would be delighted to assist in this.
If you have any queries, please speak to your usual Campbell Dallas advisor.
0141 886 6644
The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.