Contractor Loan Charge Update

The findings of the review by All party parliamentary group (APPG) and the governments response was published on 22nd December 2019. It comes shortly after the election it was held up for and did contain several changes to the controversial contractor loan charge.

Below we have summarised the main recommendations and changes for ease of reference.

• The loan charge will now only apply to loans made on or after 9 December 2010. Previously the loan charge was to apply to loans made on or after 9 December 1999.
• The loan charge will not apply to loans made after 6 April 2016 where the scheme/ disguised remuneration was fully disclosed to HMRC and there is no open enquiry.
• People who have previously settled with HMRC on a voluntary basis for the year prior to 9 December 2010 (or qualifying period prior to 5 April 2016) will be repaid by HMRC.
• The submission of Self Assessment tax returns for the 2018/19 tax year can be made by 31 January 2020 as normal or 30 September 2020 without incurring a late filing penalty or interest on the tax from the normal due date (31 January 2020).
• The actual payment of the loan charge can be spread evenly across three tax years. The government has confirmed that flexible payment arrangements are available and individual’s ability to pay are considered.

From the changes announced there has clearly been much soul searching within Whitehall. The imposition of the original legislation was heavily criticised by contractors and professionals alike, and the announce of the AAPG review does seem to have led to a softening of HMRC’s view of the loan charge.

However, at the same time as the above announcements were made, HMRC have reminded people that they will continue to actively pursue avoidance arrangements and have announced a ‘beefing’ up of their investigation resources with an announcement of a new team to conclude enquiries and recover monies from tax planning arrangements.