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  • Loan charge and Finance Bill Second Reading

    26 April 2020

    Andy Wood

    Loan charge and Finance Bill Second Reading


    Do you remember the Finance Bill 2020?

    Its a document that has slithered along like the most tenacious mollusc from its first draft version in July last year.

    Neither the boots of Brexit, the shovels of general elections or the sprinkled salt of Coronavirus have managed to make it shrivel up and die.

    Our legislative gastropod has a couple of elements for those affected by the loan charge to look out for.


    As we know, the loan charge effectively created a date (5 April 2019) at which relevant and outstanding contractor loans would be subject to income tax and national insurance contributions in full.

    Loans were within the scope of the charge if they were advanced after A-Day.

    Initially, A-Day was 1999. As such, the provisions reached back 20 years.

    However, the independent Morse review concluded that loans issued before December 2010 should no longer be within its range.

    Further, where loans were taken out after that date and were unprotected years from HMRC’s standpoint, then the charge would also no longer apply.

    So this meant that only loans issued after the December 2010 cut off date and were also protected years from HMRC’s perspective were in the scope of the loan charge.

    That said, where HMRC had also opened an enquiry (or had otherwise intervened in a timely fashion) then these can still be pursued by HMRC under normal statutory powers. Even if the loan was advanced after December 2010.

    So being outside of the loan charge does not necessarily mean one is home and hosed. It is also necessary that HMRC did not manage to intervene in the scheme within the relevant statutory time limits.

    However, I do not have any personal gripes with this. Absent the loan charge, these individuals would still be being pursued by HMRC, who have a right to exercise their statutory powers. Of course, a criticism is they may not have done this in an efficient manner. From my perspective, it is the retrospective nature of the loan charge that needs to be removed.  

    What would I like to see?

    Simply, I would like the loan charge to apply from the date of the consultation in 2016 (I have also seen that Royal Assent in 2017 has also been tabled as an alternative).

    These changes are incorporated in to Finance Bill 2020 and its passing through Parliament is a chance for these to be discussed further in Parliament

    Ending the promotion of contractor loan schemes

    This was a key question posed by the Morse review. It is clear the contractor loan schemes have moved on from third party loan schemes and are arguably neither caught by the original scope of Part 7A or its number of recent revisions.

    So, on the assumption that the Government does want to prevent further schemes on a timely basis, changes are needed.

    What I don’t want to see is another sticking plaster added to Part 7A.

    Instead, there should be a well thought out and targeted anti-avoidance rule that applies to employment intermediaries / umbrellas. I have set out details of what I think this should look like in the past and have already shared this with interested parties.

    I would expect that any changes are more likely to be the subject of consultations over the summer and any changes being part of the next Finance Bill.


    If you have any queries about the loan charge and Finance Bill Second Reading then please get in touch.