HMRC Targets 2,000 Expats In Loan Tax Crack Down

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Nearly 2,000 expats have received tax demands from the UK tax man relating to loan charge rules going back almost two decades.

HM Revenue & Customs has sent out 39,200 ‘awareness’ letters to individuals and businesses believed to owe tax on money taken as tax-free loans.

Around 50,000 active cases are under investigation.

The demands relate to complicated and controversial disguised remuneration tax calculations going back to April 1999 on loans that are outstanding on April 5, 2019.

HMRC expects to raise £3.2 billion in unpaid income tax and national insurance contributions. Since the loan charge was announced, HMRC has agreed settlements on disguised remuneration schemes with employers and individuals worth more than £1 billion.

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Tax-free loans taken as income

HMRC says many contractors set up schemes to pay themselves with tax-free loans from their companies that they never intended to repay – but updated rules brought the loans back into the tax system leaving them with a liability.

“Disguised remuneration schemes are tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions by paying scheme users their income in the form of loans,” says HMRC.

“The loans were never intended to be repaid, so they are no different to normal income and are taxable.

“HMRC is encouraging people to come forward and settle their tax affairs before a charge on these outstanding loans comes into effect on 5 April 2019.”

Expats in more than 70 countries have been contacted, but HMRC may never recover most of the money they owe due to problems in enforcing British laws through foreign courts.

Where /wanted’ expats live

Some countries have reciprocal tax collection arrangements, such as Australia.

“In addition to awareness letters, HMRC is actively encouraging disguised remuneration scheme users to come forward and settle through its regular contact with customers and has raised additional awareness through its series of Spotlight publications, tweets and webinars,” said an HMRC spokesman.

Most of the expats targeted by HMRC live in Australia (720), New Zealand (260), South Africa (90), Ireland (90), the USA (80), Poland (50), Switzerland (50), Canada (40) and Singapore (40).

HMRC identified who should receive an awareness letter from analysing tax data, employment records and compliance work.

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