The Budget, IR35 and the Loan Charge
The Autumn Budget is going to be published on the 6th November 2019, but will there be any surprises or reprieves in store for contractors? What about people who have been caught under the disguised remuneration rules, who could potentially suffer the biggest tax penalty ever devised by the government – the Loan Charge?
Unfortunately, I can’t see anything of interest for contractors coming up, i.e. no new policies. The government seems pretty much set on enforcing IR35 through the back door, which some large hirers seem more than happy to close on behalf of HMRC – let’s hope they don’t bolt that door and avoid using skilled contractors in their businesses permanently .
There have been very few challenges to the introduction of the IR35 reform in the private sector, not of many of real substance in any case, so there is no pressure on the government to relax the rule change which comes into effect in April 2020.
Meanwhile, HMRC counter avoidance teams have been placed on stand down while the Loan Charge review is underway, but will spring back into action when the Morse review is published, but as the closing day for submissions was the 14th October, we have to expect its publication in late November at the earliest, which is too late for any changes to be put forward on the 6th November.
For what it’s worth I think the Loan Charge will be given a ‘glowing write up’ by the review, and the ‘tax avoiders’ will get their fingers publicly rapped i.e. ‘everyone should pay their fair share of tax’, and of course that is agreed, but I am really sure that the requirement for taxpayers to pay tax on their loans in one tax year will be relaxed, which effectively means the Loan Charge won’t come into force.
However, this still means that people will pay the taxes on the loans they received over a number of years, which after following the official guidance they have now reported to HMRC.
The penalties which are levied under the disguised remuneration rules can reach up to 60% of the taxes avoided, but in my opinion these will now be reserved and used against taxpayers who did not report their loans to HMRC before the deadline.
As for the Budget, it’s just going to be focused on vote winning post Brexit, and a general election is being forecast for early next year.
For more opinions on the Budget, IR35 and the Loan Charge, have a look at this article.