As the Loan Charge date of 5th April 2019 draws closer, the first of Lifecycle’s free CPD update seminars on the new legislation surrounding legacy tax avoidance schemes took place yesterday. The events run at 12 further venues across the UK during March and some spaces are still available.
Many interesting points were raised during the seminar and the subsequent Q&A session, with delegates keen to leave the event with the knowledge to advise their clients most effectively on how best to protect against certain complex loan arrangements – or ‘disguised remuneration’ schemes as they have become known.
The number of clients potentially affected is significant. In a policy paper published in 2017, HMRC said that it expects the 2019 Loan Charge to impact some 50,000 individuals at a cost of around £3.2billion in unpaid tax. Most will be working in the ‘business services’ industry – in jobs like IT and management consultancy and financial advisory – and many potentially face six-figure bills.
Fortunately, tax expert and guest speaker Chris O’Hara was at hand at the Lifecycle seminar to discuss the changes and answer these most pressing of points:
#1 The 2019 loan charge affects anyone who used one of these schemes and hasn’t paid the intended amount of tax over the last 20 years
The 2019 Loan Charge is a tax on any outstanding loans that exist from disguised remuneration schemes that have been taken out since 6th April 1999.
So, due to the retrospective nature of this tax, HMRC is examining arrangements that span 20 years. This means that those found to be using them could face a two-decade income tax charge in a single tax year. It’s been reported that one taxpayer was given just 18 days to pay a tax demand of £153,000.
#2 This isn’t just a corporate issue. It impacts on individuals too
The 2019 Loan Charge is being introduced to widen the net to catch new structures that would not have been caught by previous rules.
And despite it being the responsibility of the employer to pay the charge under PAYE legislation, since these schemes were implemented – many more than a decade ago – a great number of companies have either folded or now don’t have the funds to pay, which will leave many technically insolvent.
So, despite PAYE and NIC liabilities falling on the employer in the first instance, liability is transferred to the employee where they can’t pay – taking us back to the above point and the taxpayer who was reportedly given just over a fortnight to pay over £150,000 to HMRC.
#3 If you reach a ‘settlement’ with HMRC before 5th April the loan charge will not apply
HMRC is encouraging those involved in these schemes to come forward and settle their tax affairs before the loan charge applies as it is more beneficial and cost effective for them.
If a settlement has been agreed and signed before the imminent deadline – some arrangement terms have been agreed for up to ten years – the individual does not need to include it in their tax return.
If not, whatever portion of the loan is still outstanding by this date will automatically be subject to the charge, which must be paid in cash only.
Practical and informative – as well as free of charge for Lifecycle members – these seminars are being delivered by Chris O’Hara and insolvency and legal specialists from Leonard Curtis Business Solutions Group – providers of the Lifecycle accountancy network.
They will give a general update on HMRC activity, policy and legislative changes to tackle historic tax avoidance schemes. The seminars will also share important information on settlement, restructuring and legal options available to clients – whether that’s individuals or companies – who have used such schemes to mitigate tax.
Spanning Glasgow to Southampton, 12 sessions remain and are being hosted as combination of breakfast and afternoon events. Each will qualify for 1.5 hours CPD.
Book a place at one of Lifecycle’s update seminars on legacy tax avoidance schemes here.
Become a member of the Lifecycle network here.
About the Lifecycle network
Lifecycle is a unique network for accountants – provided by the Leonard Curtis Business Solutions Group (LCBSG).
It provides member accountants with a comprehensive range of specialist services – and the expert support required – to improve their client offering at every stage of a business’ lifecycle. From company formation to cessation and all stages in between.
Lifecycle is free to join and also offers members many additional benefits. These include access to competitively priced Professional Indemnity insurance cover, a regular programme of free training and education and discounts on products and services relevant to their business and clients’ needs.
Services offered by Lifecycle include: Company secretarial and formation; equity finance for SMEs; debt advisory for SMEs; personal debt advice; corporate restructuring, insolvency and cessation; debt finance for SMEs; cashflow maximisation; property solutions and legal services.
For more information on Lifecycle click here.
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