News from the tax charities
Welcome to our latest update, which this month has information on letters that HMRC are sending about ‘tax avoidance’ that your clients may be asking you for help with. In addition, some clients may also be receiving demands for the repayment of a loan that originated from a previous employment.
As always, we are here to help and if you or your clients have any burning tax questions, please don't hesitate to get in touch with us.
HMRC letter about 'tax avoidance'
You will be familiar with your clients working through umbrella companies and receiving often confusing paperwork that provides details of their pay. Sometimes these arrangements can result in the worker not having all the appropriate tax deductions taken from their pay. HMRC letters currently being sent are with the purpose of making sure that employees understand how they are being paid and take any steps that are needed. If your client receives this letter and asks for help, there is guidance at https://www.litrg.org.uk/latest-news/news/210527-received-a-letter-from-hmrc-tax-avoidance. You can also contact TaxAid, details below, if you need further help.
Remuneration by a loan from an employer - often called contractor loans and demands of repayment of the loan
For the last few years HMRC have been cracking down on ‘disguised remuneration’ anti-avoidance schemes with the contractor loan charge. The way these schemes work is that employers (again often using umbrella companies) pay their employees part in salary and part in ‘loan’. The ‘loan’ was considered to be non-taxable and employees were assured it would never have to be repaid. However HMRC passed legislation which means that any of these ‘loans’ that were still outstanding at 5 April 2021 are taxable as earnings. HMRC have been pursuing taxpayers to pay tax on remuneration they have received in the past in the form of loans.
However we are now aware that some individuals are being contacted about the recall of these loans. The organisations recalling these loans are often based offshore and may be liquidators of the original loan providers or are often unconnected organisations who claim that the original provider of the loan has sold the loans on to them.
In the cases we are aware of, these organisations are issuing statutory demands in order to seek repayment of the loans. If these statutory demands are not dealt with appropriately and within the statutory deadlines it may be incredibly difficult for individuals to get these overturned. Therefore, it is vital that these are taken seriously and appropriate legal advice sought.
To access guidance on these statutory demands that originate from these schemes that provided remuneration, please see the guidance from the Low Income Tax Reform Group: https://www.litrg.org.uk/latest-news/news/210525-contractor-loan-loan-recall-issue-faqs. If you need further help please get in touch with TaxAid.