Loan Charge settlement offers begin to land

HMRC has begun sending formal settlement offers to individuals and employers with outstanding Loan Charge liabilities, alongside detailed new guidance explaining how offers will be calculated and how long recipients have to respond. What’s the full story?

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HMRC’s new Loan Charge settlement guidance confirms that eligible taxpayers are now being contacted. Everyone will have at least 90 days to accept an offer, although many people with open enquiries or unresolved appeals will have longer.

The settlement terms can substantially reduce what is payable. Subject to an overall maximum reduction of £70,000, HMRC recalculates the liability by reference to the years in which the disguised remuneration income was originally received, gives a reduction for promoter fees and then deducts a further £5,000. Late-payment interest, relevant IHT liabilities and most penalties attached to the original Loan Charge liability are generally excluded from the settlement amount.

Where an employer should have accounted for PAYE and still exists, HMRC will normally try to recover the tax and NI from the employer first. The employee will also receive an offer but can generally wait while HMRC pursues the employer without losing the opportunity to settle. Anyone unable to pay the settlement amount immediately should contact their HMRC caseworker before accepting the offer. Payment plans of up to five years are available under the new terms, with longer arrangements possible depending on individual circumstances, although interest will be charged on instalments.

The deadline in the settlement letter should not be ignored. In particular, some taxpayers whose Loan Charge liability is already final will have only 90 days to accept the new terms. If they do not, HMRC says it will pursue the full liability instead.

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