The government’s much awaited and anticipated response to Sir Amyas Morse’s Loan Charge review (the Review) has been published, with substantial changes being made to tackle the more draconian impacts of the Loan Charge.

Key Points

The key points are:

  1. The loan charge now only applies to outstanding loans since 9 December 2010;
  2. The loan charge will not apply to outstanding loans made before 6 April 2016 where the scheme was fully disclosed to HMRC and HMRC took no action;
  3. Outstanding loan balances can now be repaid over 3 tax years (up to 2020/2021);
  4. HMRC will refund any voluntary payments already made in settlement agreements reached since March 2016 (when the loan charge was announced) where 1 or 2 above apply;
  5. HMRC will continue to pursue the underlying tax liability where it has open enquiries or has otherwise protected its position.

The Review

The Review document is scathing of the Loan Charge, its implementation and the manner in which it has impacted people since 2016.  Some key passages from the Review are:

“the evidence provided to the Review prompts serious questions about how proportionate the Loan Charge was in terms of its design and effect on individuals.”

“elements of the Loan Charge go too far in undermining or overriding taxpayer protections”

“For the twenty year look-back period of the Loan Charge to be proportionate and justified, taxpayers would need to have acted in a way that was perverse in light of a clear legal position. This was not the case. I therefore conclude that the Loan Charge should not apply to loans entered into by either individuals or employers before 9th December 2010”

“No individual in scope of the Loan Charge should have to pay more than half of their disposable income in a single year and a reasonable proportion of their liquid assets, and they should not be forced into losing their house or existing pension pot, or being made bankrupt.”

The Government’s Response

It would appear that the government has taken a pragmatic and sensible approach to considering the Review.  Some key points from the response include:

“While loans made before 9 December 2010 are removed from the scope of the Loan Charge, the underlying tax liability for loans made prior to this date remains. HMRC will continue to pursue those liabilities through enquiries and assessments, and where necessary through litigation. HMRC will publish updated settlement terms for all taxpayers in this position as set out above.”

“HMRC will repay Voluntary Restitution that has been paid by individuals and employers since the Loan Charge was announced in March 8 2016, for years that would be no longer subject to the Loan Charge because the year was unprotected.”

Overall, Sir Aymas’ thorough Review has been well considered by the government and the proposed changes look set to bring the Loan Charge into a much fairer light moving  forward.  How long it will take HMRC to repay those settlement funds they are no longer entitled to remains to be seen.


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About the author

Matthew Goodwin Associate - Solicitor-Advocate

Matthew regularly acts for corporates and individuals, dealing with a variety of disputes relating to investments, negligent tax planning, tax avoidance schemes, pensions and HMRC enquiries and negotiations. In addition, Matthew advises financial institutions and FCA regulated firms on their regulatory obligations.