Published On: Wed, Aug 21st, 2019

Loan Charge 2019: Iain Duncan Smith urges end to tax hunt – are you facing HMRC tax bill? | Personal Finance | Finance

The 2019 Loan Charge has been introduced by HM Revenue and Customs (HMRC) in order to recover unpaid taxes by those who have used a tax loophole since April 6, 1999. HMRC have said that there were instances in which tax was avoided being paid, by using “disguised remuneration” schemes involving loans. They involved workers being paid using tax-free loans from offshore trusts, with a mutual understanding that they did not need to be paid back. As it was paid via a loan, employers did not pay Income Tax and National Insurance contributions.

Under the Loan Charge, any outstanding loans on April 5 this year have become taxable income.

As such, freelancers who used the legal loophole face a retrospective tax bill on all their income since 1999, if it was paid using the loans.

The government policy paper “Tax avoidance loan schemes and the loan charge”, updated in January 2019, states that people who have used these schemes had the choice to either repay the original loan, agree a settlement with HMRC, or pay the loan charge when it comes in to force.

Estimates suggest that there were around 50,000 users of the scheme.

The amount HMRC expects to get back is £3.2 billion before the repayment deadline of January 31.

HM Treasury said in March this year that around 75 per cent of this sum is expected to come from employers rather than individuals.

At the time, Financial Secretary to the Treasury Mel Stride said: “We introduced measures to tackle disguised remuneration schemes, an aggressive and contrived form of tax avoidance which cost the taxpayer hundreds of millions of pounds a year, depriving our vital public services of funding.

“99.8 per cent of people in the UK go nowhere near these sorts of schemes, and we know that many contractors looked at these arrangements, were appalled and ran a mile.”

However, today, former Work and Pensions Secretary Iain Duncan Smith has called on Boris Johnson’s new government to suspect the tax hunt immediately, and launch a review.

Writing in Money Mail, he said that many constituents caught up in the matter are facing bankruptcy and worried about the future for themselves and their families.

The MP also said that those affected believed the loans were “perfectly acceptable practice” and claimed HMRC had “full knowledge” of the schemes.

He also wrote that the new government needed to “recognise the genuine threatening nature of these issues” and act to hold an inquiry.

Mr Duncan Smith also wrote that many people are facing tax bills of more than £100,000, adding: “…and so great is the effect on their lives I understand a number have either committed, or contemplated, suicide directly as a result.”

The Loan Charge works by adding together all outstanding loans and taxing them as income in one year.

Who may be affected by the Loan Charge? states that of those affected, 65 per cent of people work in business services – such as IT consultants, financial advisers, and management consultants.

It adds that 10 per cent of those affected work in construction, while this figure is four per cent for those who work in engineering.

It also says that fewer than three per cent work in medical services, such as doctors and nurses, and teaching.

Fewer than two per cent work in the social and community services sector.

According to, two per cent of those affected are in the accountancy industry, with another two per cent working in dentistry – likewise retail distribution.

The Loan Charge Action Group (LCAG) has launched a campaign for a judicial review into the charge.

For confidential support call the Samaritans in the UK on 116 123 or visit a local Samaritans branch.

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