Tax campaign group calls on govt to pause loan charge probing letters

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

The campaign group suggested this would take account of people on low incomes who remain unaware that they have been placed in loan arrangements.

Such a pause would also enable HMRC to consider alternatives to sending formal enquiry letters and to address outstanding issues with the loan charge, LITRG said.

In December, the Lords Economic Affairs Finance Bill Sub-Committee launched a short inquiry on the loan charge – to which the LITRG ave evidence – and the Committee has recently written to the Treasury to highlight its key findings on HMRC’s progress on tackling issues with the loan charge.

The Committee’s findings suggested that HMRC has made progress in improving the way it manages the charge, and added that HMRC appears to recognise that lower-income taxpayers got caught up in disguised remuneration schemes, without being aware of the risks.

However, the same findings suggested that HMRC must “do more” to take account of their specific circumstances, and head of the LITRG, Victoria Todd, indicated that the campaign group welcomes the Committee’s findings.

She commented: “HMRC must do more to take account of lower-income taxpayers caught up in the loan charge, such as those put into such payment schemes by the ‘umbrella’ companies they were working through, without their full knowledge or understanding.

“It is likely there are some individuals who still do not recognise themselves as being affected by the loan charge, let alone be able to fulfil their tax filing and payment obligations.”

There are a variety of reasons why people have not met their obligations, according to the LITRG, which added that it is “incumbent” on HMRC to fully understand these and tailor their response accordingly.

“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,” Todd added.

“HMRC should refrain from issuing formal enquires 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.”

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