Examination of legislation on loan costs 2017

Preview

A new examination of the 2017 loan costs on loan costs is underway, led by Ray McCann, former president of the Charterd Institute of Taxation (CIOT).

Announced in the fall budget, HM Treasury recently provided details on what this review will imply.

A brief history

The legislation on loan costs has had a significant impact on many entrepreneurs, including those on lower income, who were unwelcome.

Before 2017, HMRC sought to recover the lost income from the agreements he considered tax evasion. These disguised remuneration patterns people involved receiving payments such as loans Rather than wages, often through trustees. These loans have never been intended to be reimbursed, allowing users to avoid income tax and national insurance contributions (NIC).

A key turning Case of Rangersin which HMRC successfully supported before the Supreme Court that such regimes were an illegal tax avoidance. This decision justified the HMRC to pursue individuals and companies that had used similar arrangements.

Consequently, the Loan costs legislation was initiated in Target 1999with the charge itself applied as an additional taxable income in the 2018/19 Tax year. This led to unexpected and often devastating tax invoices For thousands of people, many of whom had participated in these programs according to professional advice.

Critics argued that the loan fees went up to retrospective taxationwhich was unfair. Deputies, activists and Loan costs action group called for its suspension and examination. In response, the government has ordered an independent examination of Sir Amyas Morse In December 2019, which led to key changes:

• The load was limited to loans contracted after December 9, 2010 (instead of 1999).
• Those who had fully disclosed their patterns at the HMRC but who were not investigated were exempt.
• A propagation election was introduced to reduce tax responsibilities by authorizing payment over several years.

Despite these changes, loan costs remain very controversialWith in progress debates on its equity, its legality and its impact on affected taxpayers.

What can we expect from the new criticism?

Unlike the first review, which examined the history and equity of loan costs, this new review is not to review the legislation itself. Instead, it focuses on the guarantee of exceptional responsibilities can resolve them with the HMRC in a fair and structured manner, without compromising general equity for taxpayers.

McCann was responsible for examining:

• THE Current payment conditions in place for affected taxpayers.
• THE Effectiveness of HMRC debt settlement and management processes.
• The ways to help those who have not yet settled reach resolution with HMRC.
• How the new settlement proposals can be effectively targeted while avoiding excessive administrative charges for HMRC.

From the information available, the examination seems to focus more on Procedural improvements and ability of individuals to payrather than Reduce tax responsibilities or reconsider the fundamental equity of loan costs.

An HMRC declaration makes it clear:

“Solutions should not undermine the fundamental principles of the tax system – that individuals are responsible for their own tax cases and that taxes must be paid. Given our approach to fill the tax gap and the budgetary position, we will not be able to accept the recommendations that do not meet these criteria. »»

The exam should conclude in Summer 2025With the Response from the government planned in the following fall budget.

How will it affect you?

The HMRC also explained how it will communicate with affected taxpayers:

• Assign an HMRC contact named For each case (if it is not already affected).
• Clarify if the arrangements of a taxpayer situate yourself as part of the exam.
• Explain the next steps For people affected.

Unlike the previous journal, it makes not seem to consider the repeal or the softening of the accusation of loan itself. Instead, he focuses on how HMRC can Improve processes and encourage taxpayers to settle.

If you are affected, you may have the possibility of Break any request for HMRC in progress until the exam is finished. However, it is not clear:

1. If HMRC will allow it in all cases.
2. If a break from an investigation will even be beneficialBecause interests on unpaid tax will continue to accumulate.

In the end, loan costs remain in force, and this examination not seem to offer significant relief in terms of reduction in tax responsibilities.

Following steps

For those affected, it is advisable to Look for a professional tax notice And stay up to date on developments as the examination progresses. Please contact