Waiting for the new loan charge review?

The government announced at Autumn Budget 2024 that there will be a further independent review of the loan charge ‘to help bring the matter to a close for those affected whilst ensuring fairness for all taxpayers’.

At the moment, we do not know what the review will cover, who will lead it, or the expected timings. While we wait for more details, we thought it would be helpful to clarify the following:

• As things stand, the loan charge legislation remains in force.
• If you have agreed a payment plan with HMRC, either under a Time to Pay arrangement or as part of a settlement agreement, you should continue to pay the agreed amounts. If you do not continue with your payments you may find yourself in ‘default’, which could result in a range of consequences, such as HMRC cancelling the payment plan.
• If you are in the process of trying to agree a settlement with HMRC, you can continue to discuss your settlement if you wish to do so.
• However, agreeing a settlement is a voluntary process which taxpayers enter into - the process can be paused or withdrawn from at any time. As such, if you are in the process of agreeing a settlement for the loan charge, you can choose to pause discussions with HMRC if you want to wait for the review before finalising your settlement.
• If you decide to pause your settlement discussions, you may want to consider making a payment on account to stop late payment interest being charged on that amount.
• Note that the government intends to increase the late payment interest rate charged by HMRC on unpaid tax liabilities from 2.5% to 4% above the Bank of England base rate from April 2025. At the time of writing the interest rate is 7.25% per annum, that is, the base rate of 4.75% plus 2.5%. Assuming the bank base rate stays the same from April 2025, the interest rate will be 8.75% per annum. However, bear in mind the bank base rate may change before April 2025.
• HMRC have told us that any payments on account will be refunded with repayment interest, if the review later provides that the tax owed does not need to be paid. At the time of writing, the repayment rate of interest is 3.75%. Again, this rate may change in line with the bank base rate.

We assume HMRC will update their main page of guidance on the loan charge once the government announces further details about the review.

In due course, we expect full terms of reference for the independent review to be released. These should outline the purpose, scope, and guidelines for the independent review, and will be crucial in helping everyone impacted by the loan charge understand the review’s objectives and expectations. 

Once the terms of reference are published, we will produce further information to help you understand what the loan charge review means, and how to have your say. Do check back for any updates.