HMRC’s controversial Loan Charge – MPs call for review

28th August 2019

Prime Minister Boris Johnson has come under pressure from MPs in his own party to make good on a promise to launch an independent review of HMRC’s controversial Loan Charge.

Johnson promised a review during the Conservative Party leadership election, but has not acted since arriving in 10 Downing Street. Former cabinet minister Iain Duncan Smith and Ross Thompson, Vice-Chair of the Loan Charge All-Party Parliamentary Group are amongst the Conservative MPs calling for the Prime Minister to allow a ‘thorough review’ and a delay to the 31 October Loan Charge payment deadline.

The Loan Charge, which came into effect on 6 April this year, applies to anyone who used ‘disguised remuneration’ schemes. The legislation added a 45% non-refundable charge on all loans advanced through the schemes, unless the individual had agreed with HMRC to settle their tax affairs by 5 April.

The charge mainly affects freelancers and agency workers: however, many of the 50,000 people affected by the issue are low paid and were persuaded by their employers to join the schemes. The typical sum owing, according to the Loan Charge Action Group (LCAG), is almost £120,000.

Commenting on the Loan Charge, a Treasury spokesperson said: ‘The Loan Charge is designed to tackle tax avoidance and ensure everyone pays their fair share. It builds on more than two decades of HMRC action to challenge these schemes.’

That may be the official line, but it is clear from the potential damage the Loan Charge could have on the lives of contractors and freelancers that something urgently needs to be done. It remains to be seen if Boris Johnson’s previous pledge to order an independent review of the policy is implemented.

For more information on the Loan Charge, please take a look at the Hot Topics section of our website.

If you are unsure about anything to do with this charge or would like to discuss the matter further, please do not hesitate to contact us.

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