Contractors’ Questions: How do I know if I’m due a Loan Charge refund?

Contractor’s Question: How can I tell before getting involved in the Loan Charge refunds process if I am due a refund or not?

Also, is the fact that HMRC has been told to be more lenient going to help me if I am due a refund? And if I am due a refund, and if I apply, I’ve heard I must pay a little extra to get my application ‘recorded delivery’ and ‘time-stamped.’    Why and is it good advice?

Expert’s Answer: I will take it you are referring to refunds in relation to ‘voluntary restitution.’ These are not related to HMRC leniency (which you link to) but instead are a direct result of the outcome of the Morse review.

See the guidance, check your dates

You should be aware that HMRC has issued guidance on how they will administer the Disguised Remuneration Repayment Scheme 2020. This is applicable to those who used schemes between April 6th 1999 and April 5th 2016 from which loans were made, and they settled the outstanding tax due with HMRC on or after March 16th 2016 and before March 11th 2020.

If this applies to you, and you paid sums as voluntary restitution for some or all of the tax or National Insurance to avoid the loan charge, you may be eligible for a refund, or a waiver.

You should already know

However, HMRC should have already written to you inviting you to apply if they believe that you are eligible. If you’ve not heard from them, and you still think you are eligible, then you can contact them by phone on 03000 534 226 or by email to [email protected]. They will provide you with an application form and details of how to apply.

These voluntary payments relate to certain loans made:

• before December 9th 2010 where HMRC did not have the power to recover the tax at the date the settlement agreement was made;
• or on or after December 9th 2010 and before April 6th 2016 where:
  • you made a ‘reasonable disclosure’ of your scheme use at a time when HMRC had the power to recover the tax and National Insurance
  • at the date the settlement agreement was made, HMRC did not have the power to recover the tax or National Insurance

Better to have proof that you made the deadline

In terms of applying, you simply complete the application form and send to HMRC by September 30th 2021.

How you send your application is your choice although it always seems sensible to use the ‘Signed For’ service (previously known as ‘recorded delivery’), as that way you will be able to prove that HMRC received it ahead of the deadline.

And finally, you decide...

Once received, HMRC may contact you again if they need more information. Once they have all the information required, they will send you a repayment decision. If you agree or disagree with HMRC’s decision, you must either accept it or notify them that you disagree and would like the decision reviewed, within 2 months. If accepted they will then provide you with the legal documentation to sign. Good luck!

The expert was Brian Burke, managing director of independent financial and business advisory Quantuma.