Outcome of the independent loan charge review

By Tolley
  • (Updated for Budget 2020)
Outcome of the independent loan charge review

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Outcome of the independent loan charge review
  • Impact of the review for employers
  • Impact of the review for employees
  • Self assessment requirements
  • Election to spread the tax liability and additional information form
  • Refunds for voluntary restitution
  • Meaning of ‘fully disclosed’
  • Promoters of tax avoidance

The Government released on 20 December 2019 a copy of the loan charge independent review report , containing some considerable changes to the loan charge.

The review, led by Sir Amyas Morse, was commissioned to look at the impact of the charge, which was introduced to tackle what the Treasury described as ‘disguised remuneration schemes’.

For a brief history of the loan charge, see the Loan charge guidance note and ‘Morse Code’ by David Graham in Taxation, 16 January 2020, 11.

The review, the Government response and the initial guidance can be found on GOV.UK .

Some of the fundamental amendments are listed below:

  • the loan charge will now only apply to outstanding loans made on, or after 9 December 2010, as opposed to any from 1999 onwards
  • the loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take any action (see below for the meaning of ‘fully disclosed’)
  • affected individuals can opt to spread the amount of their outstanding loan balance (as at 5 April 2019, recalculated in line with the above changes) across three tax years (2018/19, 2019/20 and 2020/21), as long as it is paid in equal instalments for each tax year. This reduces the effect of stacking their outstanding loan balances into a single year, which artificially created an increased exposure to a higher rate of income tax (see below for further details)
  • HMRC will refund voluntary payments (‘voluntary restitution’) already made to prevent the loan charge arising and included in a settlement agreement reached since March 2016 for any tax years where the loan charge no longer applies (loans made before 9 December 2010) or loans made before 6 April 2016 and the

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