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Financial Adviser Letters

Financial Adviser Letters

This week...

Repaying the loan charge is not realistic

As someone that is impacted by the loan charge, I thought I would take some time to respond to your article(Govt to overhaul tax charges after damning review’, December 20). 

It is great news and very long awaited that HM Revenue & Customs has finally been brought back into line and has had no choice but to agree with all but one of Sir Amyas Morse’s recommendations.  

From a personal perspective, having been on the receiving end of HMRC’s actions over the past eight years, this is a very welcome U-turn, but the stress it has caused can never be reversed.

I am disappointed, however, that the government and HMRC have rejected the one seemingly sensible (and catch-all) recommendation which is some kind of ‘write-off’ option to genuinely draw a line under any outstanding balance. This would allow people like me to move on after paying what they can afford. 

I appreciate HMRC’s rationale for the rejection, but this leaves a glaring gap in handling this matter to its natural end point.

In response to Sir Amyas’ recommendation that “all individuals subject to the loan charge should only be asked to pay up to half their disposable income each year and a reasonable proportion of their liquid assets. No one should have to sell their primary residence or use their existing pension pot to pay the loan charge,” HMRC confirmed that no taxpayer will be forced to sell their main home to fund a loan charge or disguised remuneration tax bill. It also said that, in line with normal practice, no one will have to release funds from their existing pension pots.

However, for someone who is in my position, where HMRC has calculated a very large settlement sum, because they have opted to calculate the maximum possible due under basic PAYE rules, based on my current age (53), and taking into account the above new guidelines for paying back, I am simply never going to be able to pay off this tax debt.  

I have very little in the way of liquid assets. I already had to sell our family home of 20 years because I had to downsize two years ago, when I moved from being a self-employed IT contractor to a permanent role due to impending IR35 legislation, and as a result am now on a much lower salary. 

To be fair, even if HMRC made me sell my home, after paying selling fees and giving my wife her half of the equity, what I could give to HMRC would still fall woefully short of what they calculate I owe them, so if there is no write off option then what?