Independent loan charge review recommends major changes

Independent loan charge review recommends major changes

The loan charge should not apply to loans entered into before 9 December 2010.

Peter Honeywell

Director, Head of Tax Governance for National Markets

KPMG in the UK


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The government has announced that it will change the loan charge legislation following the recommendations of Sir Amyas Morse’s independent review, including accepting that the loan charge should not apply to loans advanced between 1999 and 2010.

The Finance Act (No 2) 2017 introduced the loan charge in respect of employment related third party loans made since April 1999 that remained outstanding as of 5 April 2019.

Following its introduction a number of MPs, including Boris Johnson before he became Prime Minster, had called for a review of the loan charge.

What has happened?

Campaigners have pressed for a review of the loan charge as it potentially seeks to tax up to 20 years of income in one financial year.

During Prime Minister’s Questions on 7 September 2019, in response to a question from Conservative MP Ross Thompson, the Prime Minster announced that the loan charge legislation would be reviewed.

Sir Amyas Morse was appointed to carry out an independent review, but publication of his report was delayed due the General Election.

The report was published in December 2019.

What does this mean?

This report’s recommendations will be welcome news to the many thousands of affected taxpayers.

However, the recommendations fall short of campaigners’ requests that the loan charge should be scrapped altogether.

The key recommendations are that:

  • Taxpayers with loans advanced between 1999 and 8 December 2010 will no longer be liable for the loan charge, and if they/their employer have already settled they may be able to claim a refund where no HMRC open enquires were in place;
  • Although the loan charge will not apply to loans advanced before 9 December 2010, where HMRC have open enquiries they will still seek settlement for the earlier years;
  • The loan charge will also not apply to loans advanced between December 2010 and April 2016 where full disclosure had been made on the relevant tax returns and HMRC failed to open enquiries;
  • Where the loan charge does apply taxpayers may seek to spread (‘unstack’) these over three tax years; and
  • Affected taxpayers also have an extended period, until 30 September 2020, in which to file their 2018/19 self -assessment tax returns without penalties or interest charges.

How can KPMG help?

It is important to remember that although major changes have been announced, the loan charge remains in place for loans made after 9 December 2010.

Some loans made between December 2010 and April 2016 may also be outside the scope of the loan charge.

However, where HMRC have any open enquiries for earlier years, taxpayers may still need to consider settlement of all historic or future liabilities.

Although some initial basic guidance has been published by HMRC, focusing mainly on the application of the 2019 loan charge, this is a complex area and more detailed guidance is set to be released.

The initial guidance does not make any reference to the implications of future events of the trust structures that remain in place where the loans are held as assets. The full implications need to be considered before making any claim for a repayment. Additionally, claims for refunds cannot be considered until new legislation is in place, which is expected in the summer of 2020.

It is therefore important to understand, explore and take advice on any outstanding disguised remuneration loan arrangements still in place and those that have been settled.

KPMG has extensive experience of assisting employers, end users and individuals understand the tax planning arrangements entered into and the options available to them, including negotiating and agreeing settlements with HMRC.

If you have any queries, please get in touch with Peter Honeywell, Jay Lad, your normal contact, e-mail or

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