The Low Incomes Tax Reform Group (LITRG) is urging low-paid workers affected by the 2019 Loan Charge to consider contacting HMRC to settle, after statistics from the tax authority suggests a worrying lack of engagement and understanding of the Loan Charge among workers.
LITRG has published a series of articles on its website designed to help low-paid workers affected by the Loan Charge understand what is happening and outline their options. The most recent article is a Q&A that provides urgently needed clarity around HMRC’s settlement process.
HMRC have revealed that only 25,500 out of about 50,000 people it suspects had their financial affairs managed by offshore ‘umbrella’ schemes have come forward to agree a repayment schedule.
Head of LITRG Team Victoria Todd said:
“It seems our fears about a lack of engagement and understanding of the Loan Charge among workers are being realised. We urge those who may have taken part in a disguised remuneration scheme to consider coming forward. Time is running out for workers to settle with HMRC before the Loan Charge applies on 5 April 2019.
"We encourage all workers potentially affected to read our latest article and, if they are considering settling, to contact HMRC soon. There are a number of options open to HMRC in coming to a settlement sum and in arranging repayment of any money due. However, any settlement contract will only be binding once signed by the person. They can walk away from discussions at any point before then, meaning they are not really disadvantaged by at least talking to HMRC.”
Some people may be tempted to just face the Loan Charge in April, but LITRG suggests that they do so only after careful research and with a full understanding of their other options.
Victoria Todd said:
“As the Loan Charge income will be classed as employment income for the 2018/19 tax year, this research not only needs to be about their tax position but also about their benefits position. Our understanding is that it should not impact tax credits and Universal Credit but it could trigger things like the high income child benefit charge and stop access to Tax-Free Childcare. It could also trigger higher rates of tax, student loan repayments or cause loss of the personal allowance.”
HMRC have announced that where agreement has not been reached with a taxpayer by 5 April 2019, HMRC will consider whether or not to extend settlement under the existing terms. They say each case will be considered on its own merits, and factors include whether or not the customer has met all HMRC’s deadlines and responded promptly to any queries and correspondence from HMRC. If a customer has not been able to settle by 5 April solely because of error or delay on HMRC’s part, HMRC will ‘ensure’ that the person is not disadvantaged.
Notes for editors
1. The LITRG Q&A article can be found here: Loan Charge settlement – separating fact from fiction.
2. The Times, ‘Push to track tax avoiders stalls’, 5 January 2019 – link here.
3. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk
Out of hours contact: George Crozier, 07740 477 374)