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Contractors warned of loan charge deadline

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Written by: Emma Lunn
24/09/2020
The Low Incomes Tax Reform Group (LITRG) is warning people that they have until 30 September to meet their loan charge reporting and payment obligations.

The tax campaign group is urging anyone who has worked through an ‘umbrella’ company to double check whether they are liable for the loan charge.

The loan charge is a tax charge on all outstanding disguised remuneration loans (arrangements that paid loans instead of ordinary income to avoid income tax and National Insurance contributions), made on or after 9 December 2010, and outstanding on 5 April 2019.

An umbrella company is a business that employs agency workers or contractors who work at different end clients’ premises.

Some people who were employed through umbrella companies were encouraged to sign up to loan arrangements. However, in some cases, it seems that workers may not have known about the loan arrangements in the background.

Victoria Todd, head of LITRG, says: “Time is running out for people to tell HMRC about any loans subject to the loan charge and to pay what they owe or arrange a payment plan.”

“There are still some people out there who do not realise that they have loan charge issues because they were paid in loans by their umbrella companies without their full knowledge or understanding. If you have recently received a ‘notice to file’ a tax return by 30 September 2020 from HMRC, it is likely that HMRC have some information that suggests that you may have been paid through a loan scheme. HMRC will expect you to report and pay the loan charge.

“It is vital that you do not ignore any ‘notice to file’ from HMRC, even if you think you did not have any loans. Our website contains a lot of helpful guidance about the loan charge, including how to recognise if you were in a loan scheme and how to quantify the amount you received in loans.

“If you need further help understanding and complying with your obligations, you should consider obtaining urgent advice from a qualified tax professional, even if it means having to pay. If you are on a low income, the charity TaxAid2 may assist you.”

People affected by the loan charge must do the following by 30 September 2020:

  • Report the loan amounts (if they have not done so already) via the online loan charge reporting form. A paper version can be obtained by calling HMRC on 03000 599110.
  • Decide whether to elect to spread the loan amounts over three years.
  • File their 2018/19 tax return and report the loan income in the relevant pages and boxes.
  • Pay the loan charge and any other tax due (or agree a payment plan).

Late filing and late payment penalties and interest may apply if people fail to meet next Wednesday’s deadline.

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