Loan charge independent review by Sir Amyas Morse supports HMRC’s targeted legislation whilst recommending some changes.

The Government introduced a controversial loan charge tax in April 2019 to target disguised remuneration schemes that paid workers in loans rather than income, thereby seeking to avoid paying income tax and National Insurance Contributions. Many contractors operating via corporates used this structure and, with the loan charge being applicable to loans dating back to April 1999, the amount of tax HMRC was seeking to recover was substantial and unaffordable in some cases - the money had been spent because there had never been an intention for the loan to be repaid.

The independent review found that the Government had been right to tackle these schemes but needed to act proportionately and responsibly. The recommendations include limiting the period of charge to loans made after 9 December 2010 and spreading the payment of tax over a period of time.

HMRC have published online guidance and response following the review.

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For more information about the loan charge and how you could be affected by these changes, please contact a member of our expert tax team.