Campaigners have been urging Loan Charge contractors to contact HMRC as soon as they can
The Low Incomes Tax Reform Group (LITRG) has urged lower-paid contractors affected by the 2019 Loan Charge to seriously consider contacting HMRC to settle before they lose the chance.
The group, an initiative of the Chartered Institute of Taxation (CIOT), has launched a detailed online guide to the Loan Charge and the settlement process with HMRC, and stresses that while there is a great deal of opposition to the Loan Charge, as things stand it is due to become law in April 2019 and the settlement process may lead to affected individuals paying less tax.
The guide is intended to inform affected taxpayers about the settlement opportunity that HMRC have offered. Questions covered include:
- I’m scared I’ll have to pay HMRC thousands of pounds – please help me understand what I might be facing
- I can’t provide information on the amounts of the loans I received. I suppose HMRC will just use an estimate, which won’t be in my favour?
- I want to settle with HMRC but have really limited means – are HMRC able to use any discretion whatsoever when coming to a settlement figure?
- HMRC say I can pay the money owed over five years if I settle my affairs ahead of the loan charge coming in – will I have to provide evidence to do this?
- Will I be expected to sell my house or take a loan to repay HMRC?
- I’ve heard I’ll have to deal with another part of HMRC if I want to arrange to pay over an extended time?
- Am I too late to reach settlement with HMRC now anyway?
The guide also includes example settlement figures. Head of the LITRG team Victoria Todd said: “The loan charge is causing a great deal of debate online and in Parliament. Naturally, strong feelings about the loan charge are voiced by some of those affected and we may well see some legal challenges against the loan charge in the future. Although a legal challenge to the loan charge will not stop HMRC from seeking to settle any avoidance disputes, this is likely to leave those affected confused as to what they should do next.
“We would encourage all workers potentially affected to read our latest news piece and, if they are considering settling, to contact HMRC without delay. There are a number of options open to HMRC in coming to a settlement sum and in arranging repayment of any money due. However, any settlement contract will only be binding once signed by the person. They can walk away from discussions at any point before then, meaning they are not really disadvantaged by at least talking to HMRC.
“Some people may be tempted to just face the loan charge in April, but we suggest that they do so only after careful research and with a full understanding of their other options. As the loan charge income will be classed as employment income for the 2018/19 tax year, this research not only needs to be about their tax position but also about their benefits position. Our understanding is that it should not impact tax credits and Universal Credit but it could trigger things like the high income child benefit charge and stop access to Tax-Free Childcare. It could also trigger higher rates of tax, student loan repayments or cause loss of the personal allowance.”
The LITRG guide can be found here:
20th December 2018.