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Loan charge payment deadline should be scrapped

In a scathing report, members of the Loan Charge All-Party Parliamentary Group (APPG) have demanded an urgent delay and suspension of the loan charge, and for HMRC to suspend related accelerated payment notices (APNs).

An update to the Loan Charge APPG report was rushed out by MPs just before parliament was dissolved thus week.

The group was responding quickly as the government’s independent review of the loan charge, led by Sir Amyas Morse, is due to report as soon as a new government is formed after the election. The original report date for the review was mid-November but the Treasury has confirmed that this would be delay until a new government is formed after the 12 December election.

The MPs made a number of recommendations, essentially calling for a suspension of the loan charge until a full independent review of the impact on individuals has been conducted.

It also said that the fast approaching deadline of 31 January 2020 date for final declarations on self assessment tax returns needed to be reviewed as it was unrealistic.

The Loan Charge APPG, which is chaired by Sir Ed Davey [outgoing MP], said the deadline must be scrapped, as well as the date for paying the loan charge, also 31 January, where taxpayers have not negotiated a settlement agreement.

‘The incoming government will not realistically be able to implement its findings before the Loan Charge becomes payable. The 31 January date is therefore now illegitimate and wholly unfair,’ the report said. ‘It must be abandoned to allow proper consideration by the next parliament and by the incoming government of the Loan Charge Review findings. The deadline must be abandoned to allow time to implement the recommendations of the Review.’

The APPG also said that there should be an ‘investigation to assess why HMRC failed to adequately resource the counter avoidance department to deal with the settlements process’.

It also called for suspension of all HMRC activity related to the loan charge and demanded that the tax authority suspends all accelerated payment notices (APNs) already issued and should agree not to issue any new payment demands including APNs.

The group also criticised the government’s Morse enquiry into the loan charge, saying ‘we believe that the narrow scope is deliberate so as to avoid the essential scrutiny and investigation into the “Loan Charge scandal” as a whole and very specifically to avoid investigation of the role, and conduct, of both the Treasury and HMRC.

the group said that ‘a full, independent inquiry into the loan charge scandal is required. This must properly and fully examine the whole issue, in a reasonable timescale, and specifically it must investigate the behaviour of HMRC. The scope of the inquiry must include a review of the treatment of taxpayers. It must also include the conduct of, and communication by, HMRC and the Treasury’.

The outgoing MPs also said that a specialist bereavement unit should be set up ‘to swiftly resolve outstanding tax disputes after someone has died’.

There was also concerns that the IR35 off payroll working rules for the private sector, due to come into force from April 2020, could also have an impact on those affected by the loan charge.

Reflecting the growing demand for an overhaul of employment tax rules to reflect the modern working patterns, from gig working to contracting, the APGG also called for ‘rationalisation of the tax legislation for self-employed contractors to simplify the distinction between the tax status of employed and self-employed people’.

Loan charge APGG survey

As part of the report, the APPG also released results of the latest survey into the loan charge, conducted from 23 to 28 October, and completed by 2,086 respondents.

This found that one in six people facing loan charge demands have still not received any settlement figures from HMRC, while the tax office’s ‘ever changing deadlines and inconsistent communications are placing unbearable pressure on people who don’t know what they have to do’.

A third of respondents said they still had not been formally notified by HMRC about the loan charge, while only a quarter had received settlement figures from HMRC prior to 5 April 2019. There were also concerns that the ‘incoming changes to IR35 are reducing ability to pay the sums that HMRC are demanding. This is causing additional stress and will lead some people to lose jobs and income and be unable to pay what is demanded or anything at all’.

Published by Croner-i Ltd