A major regulator will lead an independent review into the controversial Loan Charge scheme after concerns that taxpayers were “not ready” to face the penalty.
HM Revenue & Customs (HMRC) announced the Loan Charge last year as a penalty for dealing with ‘disguised remuneration schemes’ – where a person’s income is paid as a loan which does not have to be repaid.
Companies can reduce their employment tax bill by routing the loan through a low tax jurisdiction with the intent for it never to be repaid, meaning minimal national insurance contributions (NICs) are paid on the sum.
With the penalty being backdated as far as 20 years, the Loan Charge would see the appropriate amount of tax repaid in full –- meaning those involved could face huge tax bills.
With significant penalties on the line, HMRC has now asked the National Audit Office (NAO) to undertake an independent review of the Loan Charge and consider whether the policy is an “appropriate way of dealing with disguised remuneration schemes”.
Commenting on the review, the Financial Secretary to the Treasury Jesse Norman said: “Everyone should pay their fair share of tax. These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the Loan Charge is the appropriate way of tackling them.
“The Government fully appreciates the concerns expressed by individuals, campaigners, and MPs who have raised concerns about the Loan Charge, and the Chancellor has today appointed Sir Amyas Morse, former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), to lead an independent review of the policy.”
To learn more about the review and the disguised remuneration scheme Loan Charge, please click here.
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