Finance Bill amendment could scupper Loan Charge for older loans

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Finance Bill amendment could ruin Loan Charge for older loans

An amendment has been tabled to the Finance Bill that could force the Government to limit the application of the 2019 Loan Charge to a period less than the proposed twenty years.

The amendment, tabled by Lib Dem MP Sir Edward Davey, seeks to add a new clause to the Finance Bill that would force the Chancellor of the Exchequer to report to the House of Commons on the effect of proposed changes to the Taxes Management Act 1970 that will allow HMRC to go back up to twelve years for offshore “matters or transfers” from 2019-20, instead of the current four to six year time period.

This report would be required to include a “comparison … with other time limits on proceedings for the recovery of lost tax, including, but not limited to, those provided for by [the Loan Charge provisions]”.

Essentially, the amendment would force the Government to disclose figures on the revenue the Loan Charge is expected to net, within the context of the standard offshore time limits, which are to be effectively doubled.  The twenty year Loan Charge is still likely to collect far more tax than the new twelve year time limit for offshore matters, which could help to spell out its disproportionality.  This may make it difficult politically for the Government to continue with the proposed twenty year Loan Charge period, who could be forced to harmonise the time period with the new TMA1970 limits at twelve years, or even to the current four to six year period, as it could be argued that that was the regime that was in effect at the time the loans were taken out.

This has some problems, however – the main one being that the amendment asks for the Chancellor to report back to Parliament by no later than the 30th March 2019, and the Loan Charge will take effect a week later on the 6th April.  However, the Finance Bill is currently being used as leverage to change policy over Brexit and this could see the amendment stage delayed a great deal longer than is usual.

The amendment also asks the Chancellor to report on the compatibility of “the application of other time limits” – a veiled reference to the twenty year Loan Charge limit – to a provision in the new TMA1970 clause that prevents tax from being collected under the new doubled limits if “it was reasonable to expect the assessment to be made before that time limit”.  This is also of clear relevance to taxpayers affected by the Loan Charge, who in many cases feel that the tax years in question had been closed and accepted by HMRC.

The amendment will be voted on on Tuesday 8th January 2019 in the afternoon session in the House of Commons, along with Yvette Cooper’s much publicised amendment to prevent the collection of certain taxes in the event of the UK crashing out of the European Union without a transitional agreement.

8th January 2019.

Sources:

https://publications.parliament.uk/pa/bills/cbill/2017-2019/0304/amend/finance3_rm_rep_0103.15-21.html

https://publications.parliament.uk/pa/bills/cbill/2017-2019/0304/cbill_2017-20190304_en_7.htm#pt4-pb1-l1g79

https://www.taxation.co.uk/Articles/2018/08/07/338407/practical-advice-extended-time-limits-assessments-offshore-income-and

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/754255/Finance__No__3__Bill_Explanatory_Notes.pdf

https://www.telegraph.co.uk/politics/2019/01/08/finance-bill-does-amendment-mean-brexit/?icid=registration_eng_nba158433_personalised