Taxpayers prepare for 2019 loan charge
HM Revenue & Customs (HMRC) is expecting to raise some £3.2 billion in taxes as part of its crackdown on “disguised” remuneration schemes.
It said it will take a closer look at the arrangements in place for businesses which offer loans instead of ordinary income to avoid income tax and National Insurance Contributions (NICs).
The latest figures suggest that 50,000 workers are currently paid via loans instead of cash, which often contain terms that mean they are unlikely to be paid in full or at all.
Under its proposed plans, the tax office will introduce a charge – known as the 2019 loan charge – which will place a levy on loans issued between April 1999 and April 2019 which have yet to be repaid.
HMRC says these schemes are typically used to limit the amount of tax an individual and a business pays on income, with those involved earning on average twice as much as the average UK taxpayer.
According to Economia, the accountancy publication, scheme users will be able to spread their charge payments over five years if their taxable income in the tax year 2018-19 is estimated to be less than £50,000.
Commenting on the announcement, an HMRC spokesperson said: “We recognise that the cost of settlement will be significant for some people and we want to make the process as simple as possible for those who want to settle ahead of the loan charge arising. These revised terms make it easier for people to put their past avoidance behind them and settle what they owe.
“Anyone not covered by these terms should get in touch, as we will consider extended payment periods based on individual circumstances.”
HMRC added that users of such schemes should contact a tax official by 30 September 2018.