The UK’s tax authority has made a final appeal to contractors facing the controversial loan charge to settle ahead of an imminent deadline. The 2019 loan charge is aimed at tackling a type of employment tax avoidance the authorities call “disguised remuneration”. Instead of facing a large tax bill in one year, HM Revenue and Customs says people can settle and spread the cost.
But many of those facing the charge argue that it is unfair. Some say they face “financial ruin” as a result, and an influential Lords committee said it had heard “disturbing evidence” about HMRC’s approach. MPs are debating the topic, and there have been calls for a delay to the charge – which effectively comes into force on Friday.
Under these schemes, an estimated 50,000 workers – mostly contractors – were paid by way of a loan, an arrangement that was intended to avoid tax and National Insurance contributions. HMRC said it never approved these schemes and had always said they did not work. The charge will add together all outstanding loans, over the course of up to 20 years, and tax them as income in one year. Those affected will have to pay by the end of January next year.