A Midlands law firm is preparing for a Judicial Review claim against HMRC on behalf of taxpayers who have been left financially disadvantaged as a result of a major parliamentary review.
The loan charge was introduced by legislation in 2016 as a way of recovering taxes that had not been paid due to taxpayers’ participation in tax avoidance schemes, whereby people were paid in the form of a loan rather than a salary or dividends – often facilitated by an Employee Benefit Trust.
The legislation for the loan charge initially stated that any “disguised remuneration loans” made after 1999 would be subject to income tax if those loans remained outstanding as of 5 April 2019. All outstanding loans as of 5 April 2019 were to be treated as income tax for the 2019/20 financial year.
Following the intervention of a number of MPs, the chancellor commissioned an independent review of the loan charge legislation.
The Morse Report made various recommendations which were adopted by the government, resulting in a change to the original legislation.
The primary changes were such that any loans made prior to December 2010 are no longer subject to the loan charge legislation, and neither are any loans received between 9 December 2010 and March 2016 provided they were declared to HMRC and are not subject to any HMRC enquiry. This is currently being implemented into law under the Financial Bill 2020.
Leamington-based law firm Wright Hassall has, however, highlighted that the loan charge review/revised legislation does not go far enough, as it does not reimburse those who acted in good faith and repaid their disguised remuneration loans prior to the Morse Review and subsequent change in legislation.
Nathan Talbott, Partner in the tax and financial services litigation team at Wright Hassall, is leading the claim.
He said: “Sir Amyas Morse’s loan charge review and the subsequent changes to legislation do not help individuals who have already taken drastic steps to repay loans in line with HMRC’s guidance/correspondence prior to the Morse Review.
“Taxpayers who have repaid their loans before the Morse Review concluded are now in a worse position than they would otherwise have been than those people who did not engage in the process as communicated by HMRC.
“The money is stuck in their trust; trust fees are being incurred, and any attempt to re-withdraw the money will be treated as taxable income.
“That is what HMRC has decided. That is what our Judicial Review is challenging.
“We are, as a result, looking to launch a Judicial Review, as we believe there are many people out there who will be impacted by this, and would urge them to get in touch with us if they feel they are victims of the Morse Review and amendment to the loan charge legislation.”
