Investments  

HMRC arrests six over loan charge

HMRC arrests six over loan charge

Six people have been arrested by HM Revenue & Customs in connection with the loan charge.

Two of the six were arrested for promoting a scheme designed to get around the loan charge, while, following a separate criminal investigation, four people were arrested for trying to circumvent the loan charge and "enabling" others to do the same.

The loan charge relates to payments made through disguised remuneration schemes, whereby individuals were paid for their work via loans they received from trusts they set up, thereby avoiding income tax. The loans were never intended to be repaid.

The practice was banned by the government in the 2016 Budget, and since the start of this tax year HMRC has been sending tax bills to those involved.

It has also introduced a charge from April for those who did not come forward to settle their tax voluntarily or repay the loan.

The arrests were in connection with schemes promising to avoid the charge through artificial means.

One example was to have the company that issued the loan (the company the employee set up) engage in a "bet" with the employee, whereby if the employee wins the bet, the loan is cancelled and counted as having been repaid, meaning the employee is not liable to pay the loan charge.

A HMRC representative said: "We strongly encourage people not to use loan-busting schemes and methods.

"They clearly don’t work and people run the risk of losing more money and being involved in fraud. As we always say – if it looks too good to be true, then it undoubtedly is."

HMRC expects to receive £3.2bn in unpaid tax, with about two thirds of this coming from employers.

The taxman said the average settlement from individuals is £13,000 and that there are approximately 50,000 individuals affected.

Critics of the loan charge argue that it is being applied retrospectively, because it seeks tax payments for years prior to when the loan charge was introduced.

HMRC’s view is the charge is not being applied retrospectively because the loans remain unpaid in this tax year.

Those who earn below £50,000 a year and face a loan charge tax bill have at least five years to repay the money, while those earning below £30,000 have a minimum of seven years.

But those repayment plans carry an interest rate of 4.5 per cent a year.

All six people arrested were interviewed by HMRC officers and have been released while investigations are ongoing.

david.thorpe@ft.com

All six people arrested were interviewed by HMRC officers and have been released while investigations are ongoing.