Retrospective tax measures may cause bankruptcy

The April 2019 loan charge was called into question once again last month when an MP raised concerns over the possibility of thousands of workers being made bankrupt because of the retrospective measures.

Stephen Lloyd MP, who represents the Liberal Democrats, branded the legislation as ‘immoral’ and ‘unfair’, and said that doctors, independent nurses, teachers, freelancers and contractors may all suffer as a result of it.

In case you are not aware of the bill and what exactly it constitutes, below Walsh Taylor summarises the main points:

In definition

Hidden away in last year’s lengthy Finance (No2) Act was a tax change that could impact any organisation that had benefited from employee benefit trusts (EBTs) in the past. Under the new measures, all loans made in the name of previously-disguised remuneration schemes could become subject to charges.

Will I incur a fee?

Unless you repay an outstanding loan (from an arrangement like an EBT, for example) or settle it with the HMRC before 5th April 2019, then the answer to the above question may well be yes. This is now treated as taxable income, and it is caused by the balance that has built up over the past two decades. It is therefore worth seeking advice if you are in this situation.

The regulation is not necessarily ‘fair’

Many have argued that the regulation is not fair as it punishes contractors rather than going after those that either recommended (e.g. accountants) or ran the schemes. Contractors who acted in good faith could now potentially face six-figure bills.

As outlined in one of our most recent articles, the Leeds, Harrogate, Bradford and Darlington-based teams here at Walsh Taylor are keen to stress that you can get in touch with us as soon as you foresee any future financial problems.

If after reading about the April 2019 loan charge you would like some free, confidential advice, please do not hesitate to call 03300 244 660.