Clients impacted by the loan charge should not wait until they receive a letter from HM Revenue & Customs but be proactive about dealing with their tax affairs, a tax specialist has warned.
It was announced just before Christmas that following a review the legislation introducing the loan charge will be revamped, signalling a major U-turn by the government.
Those affected have several options for what to do next as the government prepares to change the rules.
Under the new rules the charge will only apply to the period after 2010, instead of 1999 as was previously the case.
On top of this, the loan charge will no longer apply to users of loan schemes between December 9, 2010 and April 5, 2016 who fully disclosed their schemes on their tax return, which HMRC then failed to take action on.
Consumers still levied with the charge will be allowed to defer their filings and loan charge liability until September 2020 and can split the loan balance over three tax years to make the bills more affordable as part of the changes.
George Bull, senior tax partner at RSM, urged taxpayers to consider what the new rules mean for them and act accordingly.
He said: "The changes announced by HMRC will affect different people in different ways. Everybody with a loan charge liability needs to work out how they will be affected and what they should do now.
"It would be unwise to simply wait for the arrival of the letter from HMRC, particularly if a self-assessment return for 2018/19 is required.
"Some people may be able to, and may wish to, defer submission of their 2018/19 tax returns. However, the implications must be considered carefully and understood, so that an informed decision can be made on the approach to be adopted.”
Mr Bull said HMRC would write to affected taxpayers it is aware of in early 2020 to explain how the changes apply to them.
The taxman has confirmed self-assessment returns for 2018/19 can either be filed by January 31, 2020, giving a best estimate of the tax due, or filed by 30 September 2020.
He added: "HMRC will waive penalties for late filing, late payment and inaccuracies in respect of loan charge entries in these returns. Late payment interest will not be payable for the period from 1 February 2020 to 30 September 2020, provided that a return is filed and tax paid, or an arrangement made with HMRC to pay, by 30 September 2020."
Mr Bull also said clients who still have a tax bill can “elect to spread the loan charge by recognising the amount of the outstanding loan balance across three tax years (2018/19, 2019/20 and 2020/21)."
Any taxpayer who has already made a settlement with HMRC, prior to the legislation being implemented, will get a refund.
The loan charge relates to people who worked and received their remuneration through loans, which are not taxable, rather than a salary, which is. The loans were never intended to be repaid resulting in the tax office treating them as tax avoidance, although the loans were legal at the time.