In a recent agent webinar HMRC advised that they will soon be issuing determinations of Income Tax and NICs to taxpayers affected by the loan charge who have failed to include the charge on a 2018/19 Self Assessment return.

The Disguised remuneration loan charge had to be declared on the 2018/19 tax return by an extended deadline of 30 September 2020. A taxpayer affected needed to have paid the tax due or agreed a payment plan with HMRC by the same date.

By issuing a determination to a taxpayer who has missed this deadline, HMRC create a charge on the taxpayers record together with an enforceable tax debt. This can only be displaced by filing the necessary return and paying any tax due.

  • Where tax assessed under a determination is not either paid or reduced to nil by the filing of a correct return, HMRC can take action to collect the tax, and interest begins to accrue just as if a Self Assessment has been made.
  • Determinations of this type cannot be appealed, nor can the tax assessed be postponed.

The filing of a return including the loan charge will also prevent further Penalties from accruing. Although the 31 January 2020 Self Assessment deadline was extended for declaring the loan charge, the waiver of late filing penalties only stands if the 30 September 2020 deadline was met.

Anyone who did not report the loan charge by 30 September has already incurred six and 12-month late filing penalties, though HMRC have waived daily penalties due to COVID-19. There is an exception for anyone subject to the loan charge who did not receive a notice to file a return until July 2020. These taxpayers should file their 2018/19 return by 31 March 2021 to avoid a six-month late filing penalty of the greater of £300 or 5% of the undeclared tax due.

Penalties can be appealed if the taxpayer has a Reasonable excuse. In some circumstances, HMRC accept that COVID-19 qualifies as a reasonable excuse.

Useful guides on this topic

Disguised remuneration loan charge (subscriber guide)
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?

How to appeal a tax penalty (subscriber version)
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?


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