LITRG calls for HMRC to pause to loan charge probing letters

The Low Incomes Tax Reform Group (LITRG) is calling on HMRC to pause any further action against taxpayers yet to meet their loan charge obligations. 

According to the group, this decision will take account of people on low incomes who remain unaware that they were placed in loan arrangements, and such a pause will “enable HMRC to consider alternatives to sending formal enquiry letters and to address outstanding issues with the charge”.  

The plea follows the Lords Economic Affairs Finance Bill Sub-Committee short inquiry into the loan charge last December – with the committee stating that HMRC appears finally to “recognise that lower-income taxpayers got caught up in disguised remuneration schemes without being aware of the risks”, but HMRC “must do more to take account of their specific circumstances”.

Victoria Todd, head of the LITRG, said: “Low-income workers who have filed a 2018/19 loan charge tax return, without including the loan charge, now face the prospect of having to deal with an enquiry. 

“A formal HMRC enquiry is not something most taxpayers should deal with alone, without professional advice and assistance, as the subject matter is often complex.”

She added: “HMRC should refrain from issuing formal enquiries while there are so many outstanding issues, including those highlighted by the Committee, with the loan charge. Instead, HMRC should undertake some analysis as to why so many people appear to have overlooked the loan charge on their tax returns.

“HMRC should write, informally, to people who missed the loan charge off their 2018/19 tax return, setting out the specific information that they hold about their use of loan schemes. This could help act as a trigger or prompt for taxpayers to investigate and take the first step to bring their tax affairs up to date.”