In their submission to Rishi Sunak’s forthcoming Budget (due on 27 October 2021), the Low Incomes Tax Reform Group (LITRG) have urged him to pause all loan charge activity, and to review the current loan charge situation.
Many people are still being paid via disguised remuneration schemes, often by umbrella companies which are not even attempting to hide what they are doing. This indicates that HMRC’s stance (which has driven their approach throughout the loan charge) of ‘individuals re responsible for their own tax affairs’, is an oversimplification.
Furthermore, the recommendations of the Morse Review have not reached their full potential because:
- The bar has been set too high in terms of what counts as reasonable disclosure;
- It is very likely there are some individuals who still do not recognise themselves as being affected by the loan charge, let alone be able to understand how to take advantage of the
spreading election; - For those who missed the extended 30 September 2020 filing and payment deadline, late filing and payment penalties will be charged as if the 31 January 2020 original deadline was not met (that is, accruing from 1 February 2020). The fact that late filing and payment interest and penalties could have a totally disproportionate impact in some cases, may be acting as a barrier to people taking the remaining steps required.
A review is clearly needed, and should critically assess the implementation and effectiveness of the Morse review recommendations as well as exploring options on how best to move forward with resolving outstanding cases. External bodies must have the opportunity to contribute to any such review.
The rationale is compelling given the volume of people who have been significantly and disproportionately affected, and would:
- Allow for a thorough consideration of all the different strands (some of which are still emerging);
- provide extra time for those that can comply, to comply, without their problems continuing to snowball;
- mean that scrutiny and necessary improvement of HMRC’s communications and processes could take place;
- would demonstrate that the concerns of MP’s (and their constituents) are being listened to.
We have long been concerned about the validity of the Loan Charge policy, particularly the disastrous impact on innocent people and their families, plus HMRC’s dogged pursual of the policy despite widespread criticism. LITRG are a lifelong friend of IWORK, and we fully support their budget submission.
