Following the government's report on the review of the loan charge, HMRC has issued new guidance. What steps should you advise your clients to take if the charge applies?
Loan charge review: After considerable campaigning the government caved in to pressure and ordered a review of the controversial loan charge. The outcome, published in December 2019, was a partial but significant success for those affected. The review is the end of the road for those who campaigned against the charge and action is now required.
New guidance: HMRC published its guidance on the changes to the loan charge on 21 January 2020. This sets out the steps required because of the review. These vary depending on whether your client has reported the loan charge to HMRC and, if so, what stage of the settlement process has been reached.
Unreported loan: If your client is an individual and hasn't notified HMRC of a chargeable loan arrangement, they should include details on their self-assessment tax return for 2018/19. If they have already submitted their return it should be amended. They have until 30 September 2020 to do this. Employers who used schemes for their employees should contact HMRC by that date.
Reported loan: If your client is an individual and has told HMRC about a loan arrangement on a tax return and it hasn't taken any action, e.g. started an enquiry, the loan charge won't apply for 2015/16 or earlier years and they are not required to notify HMRC. If, for any year, your client told HMRC about a loan scheme and it has responded, there's no need to amend the information submitted even if the loan charge liability has changed. HMRC will contact you and your client about the revised charge. For employers who used loan schemes for their employees no action needs to be taken, HMRC will get in touch.
Tip: If you or your client haven't heard anything by 31 August 2020 you should get in touch with HMRC