Tax Avoidance – Assistance Letters & Loan Charge Enquiries

On 20 December 2019, the Independent Loan Charge Review report by Sir Amyas Morse was published, along with the Government’s response to the various recommendations he made.

One of the recommendations made was for HMRC to update tax payers at least annually about the status of any open tax enquiries. Sir Amyas Morse said that if HMRC fail to do this, such non-communication should be taken into account by the First-tier Tribunal (FTT) if a taxpayer has to apply to have an open enquiry closed.

As a result of this recommendation, we are now seeing the first “wave” of communications from HMRC in relation to tax avoidance schemes and open enquiries. We refer to these as ‘Assistance Letters’.

These assistance letters include a table of the arrangements the taxpayer has participated in, along with an Information Sheet Reference number. The information sheets are also enclosed with the Assistance Letters. We have not seen HMRC use such reference numbers in corresponding about tax avoidance schemes before, which suggests this is a new way for them to monitor taxpayer participation in the schemes and keep them up to date more easily. The last thing HMRC want is a repeat of the situation they found themselves in with disguised remuneration tax avoidance schemes (and the subsequent independent review).

It is important to note that HMRC may not necessarily have protected their position through enquiries and/or assessments in respect of all tax years for all tax avoidance schemes listed on the Assistance Letters. 

HMRC’s Assistance Letters also set out what settling now vs waiting means in respect of these schemes. They invite taxpayers to contact them if they want to find out what settling means for them. The key point being made by HMRC here is that settling now will stop late payment interest continuing to build up on any additional tax that is due. 

The information sheets provided with these letters in respect of the various tax avoidance schemes set out:-

  1. What has been happening;
  2. The current position; and
  3. What happens next.

If you receive one of these letters, you should read it extremely carefully and speak to your Tax Adviser. It may include settlement opportunities for some of the tax avoidance schemes which you may wish to explore. 

In addition to these assistance letters, we are now seeing a number of Section 9A Taxes Management 1970 (“TMA 1970”) enquiries being opened into the tax returns of those individuals who participated in a disguised remuneration tax planning arrangement and either reported the loan charge or settled in advance of 30 September 2020. As a reminder, there was a tax return filing extension to 30 September 2020 for taxpayers filing their 2018/19 tax returns who were potentially subject to the loan charge. 

These enquiries ask a long list of questions about the taxpayers participation in the disguised remuneration scheme. In a number of instances, the enquiries have been opened and questions asked even where a taxpayer has settled in full with HMRC in advance of the 30 September 2020 deadline. Again, it is important you seek the appropriate advice where any such enquiry is opened into your tax return.

Specialist advice should be taken regarding such matters, please contact your usual BDO adviser in the first instance or contact Fiona Hall.

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