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HMRC reveals impact of loan charge

HMRC reveals impact of loan charge

The number of taxpayers likely to be impacted by the government’s forthcoming loan charge is about 50,000, according to data released by HMRC.

The loan charge is a provision in the latest Finance Bill, whereby taxpayers who received renumeration via loans have been told to pay tax on the income or repay the loan on any money received going back to 1999.

In data released today (February 8) following a Freedom of Information request, the taxman stated it had sent awareness letters to 39,200 people in and outside of the UK since November 2017 to alert them to the impending legislation.

These users had been identified through its compliance work, IT records and tax return data. A HMRC representative said the total number affected is 50,000, but only 40,000 letters were sent because in some cases, the employer was contacted, rather than each individual employee. 

HMRC stated it was "actively encouraging disguised remuneration scheme users to come forward and settle through its regular contact with customers and has raised additional awareness through its series of Spotlight publications, tweets and webinars."

Objecting to the retrospective application of the loan charge a group of MPs, led by Sir Ed Davey, had tabled an amendment to the Finance Bill in January to force the government to consider the consequences of its action. 

But HMRC was unswayed by the action and confirmed it would push forward with collecting the tax from April.

The taxman takes the view that because the "loans", which were never intended to be paid back, remain due, the law is not being applied retrospectively.

It later offered a slight concession however, in that taxpayers with an income of £30,000 or less will have longer to repay the money.

According to a statement on February 1 they will have a "minimum" of seven years to repay any tax owed whereas previously the taxman's policy was that those with an income of less than £50,000 would have a minimum of five years to repay the money. This provision will continue for people above the £30,000 mark.

Sir Ed said that a number of the people impacted had their tax returns for previously years filed and the case closed by HMRC, without reference to an outstanding issue, and this made the rule change retrospective.  

CountryNumber of letters
England33,320
Wales1,030
Scotland2,560
Northern Ireland570
Outside of UK1,720

david.thorpe@ft.com