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LITRG urges Chancellor to pause loan charge

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LITRG has called on the Chancellor to hold off all loan charge activity and to review the current situation in Wednesday's Budget.

24th Oct 2021
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The Low Incomes Tax Reform Group (LITRG) is urging Rishi Sunak to reassess the loan charge in his autumn statement. This has come after a significant number of people have still not met their loan charge obligations.

A diverse population of workers are affected by the loan charge, from those who sought to avoid paying their tax to those who were unknowingly put into a loan scheme by their agency in a bid to gain an advantage in the labour market.

In a plea to Sunak, LITRG outlined two main factors (amongst many others) why many inadvertently struggle:

  • HMRC is unable to segment loan charge cases into different groups based on underlying motivations, and tailor their approach accordingly.
  • There are a number of individuals who have been unable to take advantage of Sir Amyas Morse's recommendations which were intended to ease the impact of the loan charge on individuals. This is compounded by HMRC’s actions above.

LITRG’s report draws heavily on the experiences of non-profit tax information organisation TaxAid, who has assisted an increasing numbers of individuals in complying with their loan charge obligations on already stretched resources.

In December 2019, the government announced a package of changes to the loan charge which were made in response to Morse’s independent review of the loan charge policy and its implementation.

These changes had the potential to help those affected by the loan charge, however LITRG expressed concerns that they did not set out what they hoped to achieve.

Pausing the loan charge

In view of this, the report asked that the Chancellor consider pausing any further activity around the loan charge in order to take time to review the current situation before moving forward.

LITRG encouraged external bodies and individuals to use this potential pause as an opportunity to contribute evidence to their review, providing substance to their claims that the loan charge is less than functional in its present state.

Placing things on hold would also provide HMRC with an opportunity to seek a deeper understanding of the different populations involved in the loan charge, and allow for a thorough consideration of all the different strands, said the report. Additional scrutiny and improvement of HMRC’s communication and processes could also take place.

Furthermore, providing the public with some extra time would allow those that can comply, to comply, without their problems continuing to snowball. LITRG stressed the importance of demonstrating that the concerns of MP’s and their constituents are being listened to.

An impasse

LITRG's suggestion of a fresh review on the loan charge comes as things have stalled at an impasse which technical officer Meredith McCammond said is not beneficial for either taxpayers or HMRC.

"We are a small team with limited resources and we focus our efforts on the low-income unrepresented who are affected by the loan charge, and who, for lots of various reasons, haven't met their obligations. Nevertheless, we are aware that a wider group of people are affected by the loan charge and that they also face (probably different) issues that are preventing them from finalising their loan charge affairs.

"We understand that there are a number of groups, representing different pockets of the loan charge population, who are working on solutions and proposals that they feel could help bring finality for the individuals involved."

LITRG hopes a review will open an opportunity for the separare groups to be listened to and to formally put their ideas to HMRC and ministers. "Our own view is that things could be eased for some of our constituency if HMRC were able to offer a more bespoke service and were less restrictive in how they were using and applying the Morse recommendations," said McCammond.

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Replies (3)

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By Paul Crowley
25th Oct 2021 09:55

Easy to categorise, just look at current income and how much is owed

No sympathy
These were deliberate tax evaders, continuing to use the schemes, then overseas schemes long after the Rangers case
And the Rangers case was expencted by the industry to be an HMRC loss

The only person I came adross who used the scheme googled "how can I pay no tax"
Did not engage a proper accountant
If he had he would have been told that the fees were bigger than the tax he owed, he was a basic rate tax payer.
Seller did not adcvise a DOTAS number

HMRC would be better to relieve MTD misery than people engaged in Avoision that always was likely to fail

Thanks (1)
Replying to Paul Crowley:
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By Trethi Teg
25th Oct 2021 12:11

I am afraid that your response is extremely simplistic and not helpful in seeking to resolve what was and is retrospective legislation. You clearly have limited knowledge and experience of this subject.

You quote the Rangers case, but that case did not find that individual taxpayers were liable to pay tax on such schemes.

As such the individuals concerned were avoiding tax and not evading it.

As a matter of interest, if you are in practice, could you please provide an estimate of the proportion of your clients who are "evading" tax (cash taken from till, private expenses booked through business, cash accepted and not declared).

If you do have such clients do you report them to HMRC for evading tax?

If you think you have none then you are kidding yourself.

Thanks (2)
Replying to Trethi Teg:
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By Paul Crowley
25th Oct 2021 16:05

You are correct in that we chose not to sell or introduce any client into any loan scheme.
I assume you took an alternative view?
And when these schemes all jumped to foreign climes?

Dave Mitchell on the last leg
If you are rich enough............you choose how much tax to pay

https://www.youtube.com/watch?v=m2q-Csk-ktc

Thanks (0)