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A call for the 2019 Loan Charge to be amended

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Posted by Nathan Talbott on 11 May 2018

Nathan Talbott Partner

Members of Parliament call for the 2019 Loan Charge to be amended

On 8 May 2018, Stephen Lloyd, Liberal Democrat Member of Parliament for Eastbourne, made an Early Day Motion calling for the 2019 Loan Charge (introduced under the Finance Act (No2) 2017) to be amended.

Introduced by the Finance (No. 2) Act 2017, the 2019 Loan Charge is a tax charge on any outstanding loans that exist as a result of a disguised remuneration tax avoidance scheme (a DR scheme). It applies to any loans that were taken out under a DR scheme since 6 April1999. The 2019 Loan Charge takes effect on 5 April 2019 and represents one of the most significant changes in tax legislation in recent memory, potentially affecting a large number of individuals and businesses.

Avoidance schemes have different names and descriptions. The most common structures that will be affected by the 2019 Loan Charge are Employment Benefit Trusts (EBTs) and Employee Funded Retirement Benefit Schemes (EFRBS).  However, over the years those structures have been given brand names, such that participants may not know they are involved with an EBT or EFRBS.

The Early Day Motion states:

...this House expresses its concern at the 2019 Loan Charge; notes that it is retrospective applying back to 1999...notes that HMRC are aggressively pursuing individuals through Advanced Payment Notices with no independent right of appeal; further believes that the Charge is likely to cause financial distress and bankruptcies, impeding HMRC's ability to recover these tax liabilities and causing a devastating impact on people; believes that retrospectively taxing something that was technically allowed at the time, is unfair; calls on the Government to revise the legislation to avoid significant damage to independent contractors and freelancers in the UK; and calls for the Charge to apply only to disguised remuneration loans entered into after the Finance Act 2017 received Royal Assent.

Stephen Lloyd, Liberal Democrat Member of Parliament for Eastbourne

What is an Early Day Motion?

An Early Day Motion is a formal statement put forward by a Member of Parliament for debate in the House of Commons. They are primarily designed to draw attention to and publicise a cause. Parliament’s website describes Early Day Motion’s as follows:

“Early day motions (EDMs) are tabled by MPs to publicise a particular event or cause, and to gather support among MPs for that event or cause. MPs demonstrate their support for an EDM by signing the motion. Each EDM is given a unique number, starting at 1 at the beginning of each parliamentary session.”

The 2019 Loan Charge Early Day Motion has been supported by a number of Members of Parliament. The majority of support to date has come from 5 other Liberal Democrat Members of Parliament. The Early Day Motion has also received support from Labour’s John Cryer (MP for Leyton and Wanstead) and the Democratic Unionist’s Party’s Jim Shannon (MP for Strangford).

Too little too late?

It is early days for this Early Day Motion. It remains to be seen whether this will be cause for a Parliamentary debate on the subject or whether, like most Early Day Motions, no further action will be taken. In any event, this Early Day Motion may be too little too late given that, whilst the 2019 Loan Charge does not take effect until 5 April 2019, the HMRC Settlement Opportunity that allows users of disguised remuneration schemes to reach a settlement with HMRC and avoid the 2019 Loan Charge, closes to new applicants on 30 September 2018, which has been extended from 31 May 2018.

2019 Loan Charge General Guide

2019 Loan Charge General Guide

Frequently Asked Questions

Frequently Asked Questions

An outline of the 2019 Loan Charge

About the author

Nathan is a member of our tax and financial services litigation team dealing with disputes relating to investments, tax schemes, pensions and HMRC enquiries and negotiations.

Nathan Talbott

Nathan is a member of our tax and financial services litigation team dealing with disputes relating to investments, tax schemes, pensions and HMRC enquiries and negotiations.

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