Delay to loan charge review outcome – self assessment implications

The outcome of the independent loan charge review has been delayed by the upcoming general election. However, that has a knock-on effect for those currently in the process of agreeing a settlement with HMRC.

In its guidance for those in the process of settling and where all of the required information was provided to HMRC by 5 April 2019, HMRC states:

“HMRC recognise you may want to wait for the government’s response to the review before finalising your settlement. You will need to report the loan charge on your tax return if your settlement is not finalised by 31 January 2020. Reporting your loan charge will not prevent you finalising your settlement. Once your settlement is finalised you can amend your tax return if necessary.”

Despite the current independent loan charge review, the loan charge is enacted in law. It is therefore correct that in cases where a settlement is not reached with HMRC by 31 January 2020, the loan charge should be included in the self assessment return. For some taxpayers, this might trigger a requirement to register for self assessment for the first time.

The guidance says very little concerning the payment of tax arising as a result of including a loan charge on the self assessment return, aside from commenting:

“If you choose to settle, HMRC will continue its existing practice of not charging statutory late payment interest from 1 October 2018, or, if later, the month in which you provided the required information to HMRC.”

It is our understanding that if a settlement is subsequently reached with HMRC and an amended return is submitted to reflect this and remove the loan charge, any automatically generated late payment penalties should be cancelled.