One HMRC employee has now been assigned over 18,000 of these cases to now pursue! With many of these having connected customers (taxpayers to you and I) i.e. husband / wife & company, the 18,000 cases being looked at by just one person could mean the overall number will rise exponentially.
So why the sudden burst of activity from within HMRC about the Loan Charge?
Well, quite simply the time for HMRC to pursue these debts is running out.
The year in question for the Loan Charge was the 2018/19 tax year. Under the Loan Charge, any outstanding loans were to be simply added together and subject to tax and NIC all in one year. PAYE is assessed on the company under Regulation 80 Income Tax (Pay As You Earn) Regulations 2003. But the NIC is not a tax! Consequently, a separate route using assessments on the company under S 8 Decisions of the Social Security Contributions (Transfer of Functions etc.) Act 1999 is pursued for the NIC. Such claims incur court costs as the debt is made through the County Courts by HMRC.
Moreover, HMRC has only 6 years to pursue the claims, meaning the deadline to do this is April 2025.
Standstill Agreements
So, HMRC will be looking to write to your clients affected by the Loan Charge. But this time HMRC will pursue a ‘Standstill Agreement’. A Standstill Agreement is a contract between your client and HMRC.
HMRC will offer Standstill Agreements well before the 6 April 2025 deadline as a way of HMRC keeping their debt and the cases alive for another 6 years. If your client signs the Standstill Agreement, your client is agreeing to extend the time limit for HMRC to pursue their claim against your client. Your client also accepts the statutory interest that accrues during that period.
Your client has every right to decide not to sign the Standstill Agreement for whatever reason. Your client is under no obligation to sign the Standstill Agreement and if they don’t it shouldn’t prejudice the ultimate outcome of the case or lead to higher penalties. But a Standstill Agreement benefits HMRC by literally making ‘time stand still’ and gives them unlimited time to pursue their claim for NIC.
If a Standstill Agreement isn’t signed, then HMRC has to pursue the claim through the County Court as soon as possible and thereafter every 6 years. However, with one HMRC employee having over 18,000 cases at least to deal with and there are multiple teams in HMRC. How likely is it that HMRC will get all these cases processed and lodged through the courts by the 5 April 2025 deadline?
What should your client do if they are offered a Standstill Agreement?
So, what should you or your client do if they receive a letter from HMRC about the Loan Charge and offering them a Standstill Agreement?
Your client has choices. Which choice they should follow will depend upon all the relevant facts rather than a one-size-fits-all approach.
If you want help and advice to deal with HMRC’s letter, contact Paul Malin on 07979 313 010 or email [email protected]
