The Low Incomes Tax Reform Group (LITRG) is warning people that they have until next Wednesday (30) to meet their loan charge reporting and payment obligations. The tax campaign group is particularly urging anyone who has worked through 'umbrella' companies to double-check whether they are liable to the loan charge.
The Low Incomes Tax Reform Group (LITRG) is warning people that they have until next Wednesday (30 September) to meet their loan charge reporting and payment obligations. The tax campaign group is particularly urging anyone who has worked through 'umbrella' companies to double-check whether they are liable to the loan charge.
The loan charge is a tax charge on all outstanding disguised remuneration loans (arrangements that paid loans instead of ordinary income to avoid income tax and National Insurance contributions), made on or after 9 December 2010, and outstanding on 5 April 2019.
There is an exception to this for loans made on or after 9 December 2010 and before 6 April 2016, if the avoidance scheme use was disclosed to HMRC and, as at 5 April 2019, HMRC had not taken action to protect their assessing position – for example, by opening an enquiry or issuing a tax assessment. Additionally, the loan charge does not apply to those who agree a settlement with HMRC by 30 September 2020.
Victoria Todd, Head of LITRG, said:
“Time is running out for people to tell HMRC about any loans subject to the loan charge and to pay what they owe or arrange a payment plan.”
An umbrella company is a business that employs agency workers or contractors who work at different end clients’ premises. Some people who were employed through umbrella companies were encouraged to sign up to loan arrangements. However, in some cases, it seems that workers may simply not have known about the loan arrangements in the background.1
Victoria Todd said:
“There are still some people out there who do not realise that they have loan charge issues because they were paid in loans by their umbrella companies without their full knowledge or understanding.
“If you have recently received a 'notice to file' a tax return by 30 September 2020 from HMRC, it is likely that HMRC have some information that suggests that you may have been paid through a loan scheme. HMRC will expect you to report and pay the loan charge.
“It is vital that you do not ignore any ‘notice to file’ from HMRC, even if you think you did not have any loans. Our website contains a lot of helpful guidance about the loan charge, including how to recognise if you were in a loan scheme and how to quantify the amount you received in loans.
“If you need further help understanding and complying with your obligations, you should consider obtaining urgent advice from a qualified tax professional, even if it means having to pay. If you are on a low income, the charity TaxAid2 may assist you.”
For those affected by the loan charge, 30 September 2020 is the date by which they must:
- report the loan amounts if they have not done so already via the on-line loan charge reporting form. A paper version can be obtained by calling HMRC on 03000 599110 or can be downloaded from the LITRG website.
- decide whether to elect to spread the loan amounts over three years (also done via the loan charge reporting form – this may not be beneficial in all cases and you should ensure you understand the consequences of making this irrevocable election).
- file their 2018/19 tax return and report the loan income in the relevant pages and boxes.
- pay the loan charge and any other tax due (or agree a payment plan).
Notes for editors
1. LITRG's most recent article on the loan charge can be found here: https://www.litrg.org.uk/latest-news/news/200910-worked-through-umbrella-company-past-you-should-check-whether-you-need-do
3. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998, LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact Hamant Verma, External Relations Officer, HVerma [at] ciot.org.uk 0207 340 2702 / Out of hours contact: George Crozier, 07740 477 374