As MPs tell the new Treasury secretary to stop and review the 2019 loan charge, a Simply Business survey shows that the majority of people think the legislation is unfair.
Back in April we reported on the 2019 loan charge coming into effect.
In that article we polled people on what they think about the legislation. The survey asked whether the loan charge is fair or not – and the answer is a resounding no.
The 2019 loan charge is legislation designed to tackle ‘disguised remuneration’ – specifically, unpaid loans that contractors received instead of salary payments.
It applies to loans going back as far as 1999, but it’s the retrospective element of the charge that’s been heavily criticised.
In December the House of Lords questioned whether it’s fair for HMRC to apply a retrospective charge, even when contractors disclosed their involvement in loan schemes to the tax authority.
Here’s what’s happened since the loan charge came into effect on 5 April:
And we carried out a poll that asked: Is the 2019 loan charge fair? It gave readers three options:
Our poll has 550 respondents as of 11 June. 58 per cent of those are against the loan charge, appearing to echo the House of Lords’ view of the retrospective part of the legislation.
But HMRC argues that the loan charge isn’t retrospective, telling the Guardian in February: “The charge on disguised remuneration (DR) loans is not retrospective. It is a new charge, arising at a future date, on loan balances outstanding at that date.”
And in May, former Treasury secretary Mel Stride said “the tax has always been due” – but the Loan Charge Action Group countered, saying he “omits to explain why a new law is needed to collect it.”
Back in May 2018, Stephen Lloyd MP said that the loan charge is a “quick fix” and is “unfair and draconian” because it targets individuals rather than the promoters who pushed the schemes.
HMRC have arrested six people for either pushing loan charge avoidance schemes, or trying to avoid the loan charge themselves.
But founder member of the Loan Charge Action Group, Steve Packham, suggests HMRC is misleading people by implying the arrests show they’re going after scheme promoters. He says: “They are not action against promoters of the historic arrangements now subject to the loan charge and there is still no evidence that HMRC are going after the promoters of these older and now closed down arrangements.”
Finally, 18 per cent of those surveyed said they believe those who took part in the schemes should pay the tax owed.
This is in line with the view put forward by Mel Stride, who claims HMRC has always said these schemes were illegal. But experts and MPs have challenged that claim, including Laurence Robertson, who asked: “If this tax was due then, why did HMRC not obtain that tax then?”
While debate rages about the fairness of the loan charge, it’s true that HMRC is currently showing no sign of reviewing or suspending the legislation.
So if you’re affected by the loan charge, it’s important that you speak to a professional to discuss your options and get in touch with HMRC if you haven’t done so already.
According to the tax resource rossmartin.co.uk, HMRC has continued to let contractors register to settle and each case will be considered individually. They’ll look at whether the taxpayer has met HMRC’s deadlines and responded promptly to their communications.
The 2019 loan charge is a complex piece of legislation, so please speak to an expert if you're affected.
What do you think about the latest loan charge developments? Let us know in the comments below.
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