My VIP Tax Team question of the week: Loan Charge predicament
My client has received a 2019 assessment for a loan charge on a six-figure sum, the client simply has no way of paying this, what can I do?

This is not a technical note on the loan charge and tactics on how to make a challenge, it is rather a note on the reality that this debt may not go away.

It seems that HMRC has carried out a review of information they hold on the use disguised remuneration in the forms of loan that remain outstanding on 5 April 2019, where no settlement terms have been agreed with HMRC.

This resulted in a bulk issue of assessments in March and early April by HMRC to ensure they met the normal assessing time limit of four years.

Given a lack of detailed information and evidence provided by HMRC in support of the assessments, the natural reaction for advisors is to appeal the assessment and make a full postponement application of the tax assessed and included on their clients SA statement (including amounts HMRC may also say they are pursuing from the ‘employer’).

As many of the individuals assessed had little idea or understanding of what they had signed up to, an appeal and request for more detail does seem reasonable to give more time to check the assessments accuracy.

While HMRC appear to be accepting appeals and postponement applications, unless you can demonstrate the calculation and/or loan figures are inaccurate it is likely the assessment will stand.

As many of the organisers involved in the scheme no longer exist or have rebranded over the years, it may be down to the individual to provide documentation such as bank statements and correspondence with the loan providers should the amounts assessed appear excessive.

Our enquiry consultancy team will be able to assist with managing an appeal situation. However, it is worth considering that if the figures are accurate, a full postponement will add to the debt with daily interest running, even on the postponed amount.

Within the documentation that HMRC issued with the assessments is a section on settling the tax position for disguised remuneration schemes using the previously offered 2020 terms, please see the following-

Disguised remuneration settlement terms 2020 for tax agents or advisers

The document explains what is available under instalment arrangements and depending on the individuals’ circumstances (including the latest years know income), payment terms may be offered up to 7 years without providing evidence of income and expenditure. Please see section 13 for further detail.

Settling under the 2020 terms would mean agreeing the amount owed therefore it is a decision that needs to be made with as much information as is available, HMRC state that you can find out what settling would mean for the individual without agreeing to settle first.

This will be a frightening time for many of the individuals that have received an assessment with a debt that could ruin them financially, particularly if ignored.

It may be for some the time for a difficult discussion on what can be done to help manage the debt.

See the following article on Croner-i Accountancy Daily.

Please share this article with your clients

It’s not easy to make 100’s of Accountants happy, and that’s what we did last year ! Previously known as Accountants in Business (AIB), Croner-i are back this year with a new conference for accountants in Business and Practice. Rated 5 ★★★★★ by previous attendees, this essential annual update has been designed specifically to keep you up to date with the latest changes in Tax, Financial reporting, Company Law and much more. Register your interest!

Back to Community

VIP Tax Advisor

Ewan Edwards is an experienced tax advisor working as part of the ‘My VIP Tax Team’ telephone advice lines.

My VIP Tax Team question of the week: EIS/SEIS shares on death
My VIP Tax Team question of the week: Company credit cards and EV charging
My VIP Tax Team question of the week: Loan Charge predicament