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Settlement opportunity still open for business

Don’t worry if you missed 30th September, there’s still time

Those contractors, previously involved with tax avoidance loan schemes that missed the 30th September deadline to register their interest in settling their affairs with HMRC, can still do so.

HMRC have recently published an updated guidance, ‘Tax avoidance loan schemes and the loan charge’, which urges anyone who wants to settle, but has yet to do so, to contact HMRC immediately. This will then provide the best possible chance of reaching a settlement before the Disguised Remuneration (DR) loan charge kicks in on 5th April 2019.

To date, over 24,000 people have registered an interest to settle their tax affairs and HMRC has set up dedicated e-mail and phone lines to help such folk.

Spreading the pain

HMRC say they want to make it easy for people to be rid of the loan scheme millstone around their necks and are offering a range of flexible payment options for those who may have difficulty in paying off the resultant tax arrears in one foul swoop. For example, someone currently earning less than £50,000 and no longer using a tax avoidance scheme, is able to agree a payment plan of up to 5 years without the need to provide detailed information about their income and assets.

Anyone earning in excess of £50,000 should be able to agree a manageable payment plan with HMRC based on their personal circumstances.

In the firing line

According to HMRC, only a tiny minority of the UK population will be affected by the DR loan charge. Most of those affected, approximately 50,000 and representing 65%, work in business services which includes IT consultants, financial advisers and management consultants.

Again, according to the Revenue, when taking into account the loan(s) they received, loan scheme users have on average twice as much income as the average taxpayer, and 70% of participants have used a scheme for two years or more.

The average amount avoided was £20,000 per year, per person and a large number used a scheme more than once.

Less than 1% of individuals have an outstanding loan pre-2003 and around half of scheme users have received a loan within the last 7 years.

Approximately 250 different DR schemes, which are both detailed and complex, will be affected by the loan charge.

The choice

The loan charge works by aggregating all outstanding loans and taxing them in one year, rather than spreading them across the tax years they fall. This is likely to result in a person paying more tax than had they settled with HMRC before 5th April 2019.

Three choices now lie before scheme users:

  • repay the loan; or
  • agree a settlement with HMRC; or
  • pay the loan charge when it comes into force

Mis-selling

Promoters of loan schemes can sometimes make false claims, such as the arrangements being ‘HMRC approved’ or ‘compliant with the tax rules.’ Anybody who feels they have been a victim of being mis-sold a financial arrangement should take legal advice as it is not fair they should carry the can for being lured into an arrangement where the full facts and risks were not openly disclosed to them.

The latest guidance can be found here: DR loan scheme guidance.

By Andy Vessey

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2 thoughts on “Settlement opportunity still open for business”

  1. HMRCtrip

    Shame your article in no way mentioned that there are alternatives.
    Firstly, you don’t have to settle – it might be that paying the tax is cheaper than settling – everyone’s situation is different.
    Secondly, there is a strong upsurge in condemnation of this pernicious retrospective tax from the likes of LCAG and WTT – LCAG, in less than 6 months, have secured 100 MP signatures on an early day motion and more will sign.
    HMRC had to get Mel Stride to mis-lead the House of Commons to get the law added! Which undoubtedly means he has broken the Ministerial code of Conduct.
    Actually, he and PhilipHammond have both lied in public saying the schemes were “always illegal” – when they never were and still aren’t!
    Philip Hammond has now said that the schemes were actually EVASION – criminalising thousands of people.
    If it were evasion, why have they even bothered with the loan charge? The evasion laws are somewhat stronger than the LC ones!
    Now, I note that only a small minority of people used these schemes -so its ok for a government to pick on minorities now is it?
    £20k per year is the average – so there will clearly be more with far bigger exposure – HMRC use these averages to smooth over the real plight of hundreds if not thousands – lets be clear, we have already had one suicide from this – there will be more
    Much of the rhetoric coming out go HMRC these days is aimed to vilify honest hardworking flexible workers.
    Many of these workers have well paid job – but this is held against them by HMRC!
    Get real, the average MP has way more than twice the income than the average scheme user – and there are only 630 of them!
    Now, if you are tempted to settle, once you sign that settlement document you cannot turn back – I’m not saying you shouldn’t sign – just that you have to know the consequences.
    It could be said that HMRC are rattling their sabre as. they know the legislation is unfair and doomed – so they’re wilfully scaring people into settling – terrible behaviour for a government department – but it is the only explanation.

    I imagine HMRC are threatening accountants to back them publicly under threat of having all their clients investigated – it is a threat that accountants fear – you know it – you’ve probably all had that chat with your accountant!

    Honestly Andy, I’d expect a more balanced article next time

  2. Jonny Darcy

    Spot on HMRCtrip.
    This government department is completely out of control. The left hand doesn’t know what the right hand is doing and HMRC are spouting out all sorts of wild statements and accusations. Just as HMRCtrip states, just look at the chancellor this week stating to the Treasury Sub-Committee that these arrangements were tax EVASION?!! WTF?!!

    This is either sheer incompetence by the chancellor or a total falsification, there is no middle ground here. He and others are simply not fit for office if they do not understand basic concepts such as tax avoidance and tax evasion. It is extremely worrying, these people are purporting to run the country FFS!!

    If we all stood up together on this, the Loan Charge will rightly disappear and HMRC would be utterly exposed for the corrupt and dysfunctional organisation that it is.

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