Following the government’s report on the review of the loan charge HMRC has weighed in with new guidance. What steps should you and your business take if the charge applies?

The final

After considerable campaigning the government caved in to pressure and ordered a review of the controversial loan charge. The outcome, published in its report in December 2019, was a partial but significant success for those affected by the charge ( yr.20, iss.8, pg.8 ). This review is the end of the road for those who campaigned against the charge and action is now needed.

New guidance

HMRC published its guidance on the changes to the loan charge on 21 January 2020. This sets out the steps required because of the review. These vary depending on whether you have reported the loan charge to HMRC and, if so, what stage of the settlement process has been reached.

Unreported loan

If you’re an individual and haven’t notified HMRC of a loan arrangement you should include details on a self-assessment tax return for 2018/19. If you’ve submitted your return you should amend it. You have until 30 September 2020 to do this. Employers who used schemes for their employees should contact HMRC by that date.

Reported loan

If you’re an individual and have told HMRC about a loan arrangement on a tax return and it hasn’t taken any action, e.g. started an enquiry, the loan charge won’t apply for 2015/16 or earlier years and you’re now not required to notify HMRC. If for any year you told HMRC about a loan scheme and it has responded, you don’t need to amend the information even if your loan charge liability has changed. HMRC will contact you about the revised loan charge. If you’re an employer who used loan schemes for your employees you don’t need to take any action, HMRC will contact you.

Tip. If you haven’t heard from HMRC by 31 August 2020 you should contact it.

You must report a loan arrangement by 20 September 2020. If you have notified HMRC it should contact you with revised details of the loan charge, but if you haven’t heard by 31 August you should make contact.

Follow up

To HMRC’s new guidance