Loan Charge Action

If you received loans in place of your salary and did not fully repay those loans before 5 April 2019 you may be liable to pay PAYE and NIC on the outstanding amounts as if they were paid as salary on 5 April 2019. This tax is known as the loan charge and it has been viewed as deeply unfair, especially for people who did not realise that they had received loans.

Following an independent review of the loan charge in late 2019 the rules were changed with retrospective effect. The loan charge will no longer be due on:

  • loans taken out before 9 December 2010; and
  • loans taken out between 10 December 2010 and 5 April 2016 where the loan scheme was fully disclosed on tax returns and HMRC failed to act on that disclosure.

If your tax returns for these years are under investigation or you are negotiating a settlement to pay the tax, those tax collection procedures will continue with a recalculation of the tax due.

Loans paid in place of salaries on or after 6 April 2016 and which were outstanding on 5 April 2019 remain subject to the loan charge.

Where the loan charge was due you were required to declare it on your income tax return for 2018-19. As the announcement of the amended scope of the loan charge was not made until 20 December 2019, HMRC have granted those affected a further eight months (until 30 September 2020) to submit their 2018-19 returns and pay the tax due.

If you have already submitted your 2018-19 tax return you can amend it to reduce the amount subject to the loan charge and spread the charge over three tax years: 2018-19 to 2020-21. This may mean the loans do not push your total income into the higher tax bands for those tax years.

We can help you recalculate your loan charge liability and assist in negotiating a payment schedule with HMRC.