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    • HMRC is putting loan tax settlements on ‘pause on demand’ until the independent review is completed
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    HMRC is putting loan tax settlements on ‘pause on demand’ until the independent review is completed

    Online Niel Posted on

    HM Revenue & Customs (HMRC) allows contractors to stop loan commission settlements pending the conclusion of the government’s independent review of the controversial tax policyComputer Weekly found out.

    The retroactive tax policy forms the central tenet of HMRC’s crackdown on disguised remuneration schemes, with the government’s tax collection agency claiming the loan charge policy could generate up to £3.4bn over five years for the Treasury in unpaid income tax .

    Specifically, the policy targets contractors who between 9 December 2010 and 5 April 2019 participated in loan-based remuneration schemes, which reimbursed them for work they did in tax-free loans rather than a conventional salary .

    The launch of the policy has resulted in tens of thousands of IT contractors being hit with life-changing tax bills as HMRC alleges these individuals took part in these schemes to artificially minimize their income tax liabilities.

    There have been numerous reports of contractors under the scope of the loan charge facing financial ruin, and the policy has also been linked to at least 10 suicides to date.

    The plight of those affected by the loan tax has attracted the support of more than 200 MPs from all parties, who are coming together in the All Party Parliamentary Group (APPG) on the Loan Tax and Taxpayer Fairness.

    The group wrote a letter to Treasury Secretary James Murray, from October 9, 2024following a meeting he had with various parties affected by the loan charge in August 2024.

    Financial burden

    The letter sheds light on the level of financial burden the loan tax places on people, with one person caught under the legislation quoted as being told by HMRC in 2017 that he owed £60,000 in unpaid tax – but this amount it has now risen to £500,000.

    The letter also flags the cases of other people, who attended the meeting with Murray in August 2024, who HMRC calculated owed between £200,000 and £300,000 in loan fee arrears. HMRC has previously claimed that a typical loan charge is around £13,000.

    “In all eight cases (presented to Murray), the individuals are unable to pay the required amounts,” the APPG letter said. “They just don’t have the money that HMRC is asking for. This, of course, means that HMRC’s figures on how much they will collect from loan tax and associated activity are completely bogus, as it is impossible for them to collect such a thing when people simply cannot pay.”

    The amount of money that HMRC claims from people affected by the borrowing charge is one of several reasons why the policy has proved so controversial.

    The retroactive nature of the policy is another, as many of the people who are now being prosecuted under the terms of the loan charge claim that the schemes they participated in were recommended to them by trusted tax advisers and chartered accountants.

    “Four of the witnesses (attending the meeting with Murray) were placed with umbrella companies through their agencies and the umbrella companies recommended that they use the arrangements that are now subject to the loan charge,” the APPG letter continued.

    “(Another) four witnesses chose to work through umbrella schemes because of concerns about IR35 legislation… As with the vast majority of those affected by the borrowing charge, these are not people who set out to avoid tax. .. they all used the schemes because they wanted to follow the law. All these people received and then followed professional advice, either from their employment agencies or from trusted advisers – which included chartered accountants as well as accredited advisers.”

    Independent review

    In late October 2024, a few weeks after APPG wrote to Murray, the UK Government confirmed during the Autumn Budget an independent review of the policywith the intention of ending the consequences of the policy, would take place.

    This will be the second time the government has undertaken an independent review of the policy, the first being published in December 2019.

    At the time of writing, HM Treasury – the government department tasked with overseeing the review – has not yet confirmed details of when the second review will start, how broad its terms of reference will be and who will be responsible for leading it. .

    Computer Weekly understands, however, that HMRC has already started offering contractors caught in the scope of the loan charge the opportunity to request a pause in their settlement payments until the outcome of the review is known.

    However, this position has only been communicated to contractors who have contacted HMRC directly, prompting calls for the agency to let thousands of people affected by the loan charge know that this option is available.

    An IT contractor, who spoke to Computer Weekly on condition of anonymity, said: “They should let all those victims of the loan charge know what their options are.”

    An HMRC email seen by Computer Weekly says the government agency has “not yet been instructed to” suspend settlements for those affected by the policy, but has been asked to “accommodate requests from customers to suspend current settlement activity” in waiting for the review result.

    The email also advises those considering applying for a settlement pause to “consider making a payment on account” to HMRC to “reduce or stop the breach of late payment interest”.

    The email added: “Any payments made will be refunded with refund interest if further review (concludes) the tax due should not be paid.”

    Computer Weekly contacted HMRC for clarification on its decision not to make it widely known that it was giving contractors the option to pause their settlements, but was told that all press inquiries about the loan charge should be directed to the Treasury.

    In response, a Treasury spokesman offered the following statement: “We recognize that concerns continue to be raised about the loan charge. The Government will honor its commitment to hold an independent review of the borrowing charge to help bring closure to the matter for those affected, while ensuring fairness for all taxpayers.”

    Public appeal

    Following the Autumn Budget 2024campaigners from the Loan Charge Action Group (LCAG) have publicly called on HMRC to suspend enforcement of the policy until the government has completed its latest review of the policy.

    LCAG spokesman Steve Packham said that given the personal impact the policy has on those within its scope, it is “unfair that some people’s cases are suspended and not others”.

    Speaking to Computer Weekly, he said: “Now that the government has announced that it will commission a further review of the loan charge, it is vital that Treasury ministers announce that all related taxpayer cases and associated HMRC action will be suspended pending the review . concluded and reported.

    “The fact that the government has commissioned this review reflects serious concerns about the controversial loan charge and HMRC’s approach, which has led to ten suicides,” Packham said. “It is unthinkable that this same approach should be allowed to continue while an independent review takes place.”

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