Are You Affected By The 2019 Loan Charge?

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contractor loan schemes

Are you affected by the 2019 ‘loan charge’?Help is available

HMRC are taking action (the April 2019 ‘loan charge’) against certain loan arrangements (‘disguised remuneration’ schemes) that were designed to avoid tax, leaving many workers with potentially huge bills to pay. HMRC appreciate that not everyone entered into these arrangements knowingly to avoid tax. Indeed, some agency workers may have had little choice to participate in such schemes, if they wanted to work. If you are such a person, you may be finding it difficult to understand what is happening or be worried about how you will pay back any tax you owe. This article explains where you can get further help.

Most loan schemes seek to pay an individual for work done in the form of an interest free, non-repayable loan that is not subject to income tax or National Insurance contributions (NIC), rather than ordinary salary, which would be. HMRC call this ‘disguised remuneration’. HMRC’s view is that these schemes don’t work and indeed, in 2011, the law was changed to try and stop people using them.

However, scheme providers exploited various loopholes in the law, which meant that these types of schemes continued to be offered, including – increasingly – by some umbrella companies (e.g. intermediaries that assume the role of paying agency workers, rather than the agencies themselves) to agency workers like locum nurses and supply teachers.

The Government has recently closed these loopholes and given HMRC powers to impose a second taxing point for historical schemes, in the form of the April 2019 ‘loan charge’. This charge will basically affect anyone who used one of these loan schemes and who hasn’t paid the intended amount of tax over the last 20 years.

Help is available through Churchill Tax and although you may be worried about the situation you find yourself in and concerned about how to repay any tax owed, contact us sooner rather than later.

FAQ’s

How do I work most compliantly as a contractor with IR35 in mind?

The landscape for IR35 is constantly changing and with the introduction of IR35 into the public sector beginning in 2020, contractors must begin to prepare themselves.

In addition, recent case law surrounding Personal Service Companies shows that running a ltd company as a contractor is perhaps not the safe and compliant route it has typically been considered to be. To discuss the expected pitfalls and new legislation with a member of the team to ensure your future planning is compliant please contact us.

I’ve received a follower notice from HMRC and I don’t know what to do.

Receiving a follower notice and APN is a shock for many. It may come out of the blue and indeed we have seen follower notices arrive after ten years of inaction by HMRC. Dealing with the subsequent process does not need to be stressful and there are sometimes ways to challenge. You can find more information about challenging demands from HMRC here.

My client has an outstanding enquiry with HMRC, how much information should I give?

This will largely depend on the type of enquiry received. For example, if a s.9a has been received this is a more informal request for information and we can therefore be more selective about the questioning. Conversely if a schedule 36 notice is received then failure to comply is met with penalties and so a fuller response is required to protect your client. It is recommended that you speak with one of our advisers who will be able to assist you further in drafting suitable responses and reviewing your drafts.

I want to challenge HMRC’s demands but don’t want to do it on my own.

Depending on the demand you’ve received it is possible that Churchill Tax has already organised a group to defend HMRC’s assertion that tax is due. We currently manage groups of individuals defending tax demands from the following products, Contractor Loan Arrangements, Offshore Tax Structuring, Film Partnerships, Enterprise Investment Schemes (EIS), Enterprise Zones Trusts (EZT’s), Business Premises Renovation Allowance Schemes (BPRA’s), Property Syndicates, Share loss Schemes, EBT’s and Discounted Security schemes.

It is therefore likely that Churchill Tax is already working with a group on your scheme and you should not fear challenging the demand alone. Please contact us to find out more about our groups or find out more about challenging HMRC’s demands here.

My end client has given me a contract to sign that makes me liable if my IR35 status is challenged.

The continuous changes that we’re seeing in the IR35 arena is causing confusion for all parties which is leading to ill-drafted contracts seeking to protect positions which are not appropriate. Churchill Tax Legal’s expert team spend significant time on contract negotiations between contractors and end-clients. For a no-obligation review of your contract please contact our legal team.

My scheme operator has demanded I repay a loan from years ago. What can I do?

It is becoming more and more common that trustees and scheme operators are recalling loans received many years ago in an effort to legitimize the schemes they marketed following new legislation and precedent. These demands can be terrifying, but commonly lack substance and can be defended easily. Churchill Tax has successfully defended a number of these demands to date and we are confident that we have arguments for the vast majority of contractor loan arrangements.

Please contact us immediately if you receive a demand of this nature.

I’m unsure of my liability if I settle with HMRC, how do I work this out?

Churchill Tax offers potential clients a no-obligation review of their position which includes a free calculation of potential liability. To take up this opportunity please contact the team.

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