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Are you at risk of a loan charge from the tax office?

What Her Majesty's Revenue and Customs has to say about its loan charges

THE UK TAX authority - Her Majesty's Revenue and Customs (HMRC) is cracking down on people who have been "paid" in the form of loans. Campaigners highlight nurses and social workers being hit with massive demands for back tax.

Typically, though, it seems that what happens is that a freelance who sells their services through a company had that company make loans to them. This can avoid tax. The freelance does not book the loan as income, so they don't pay income tax. Their company books it as business spending, so does not pay corporation tax.

Since 2019 HMRC has been saying that this is not mere tax avoidance but tax evasion. It says "that's clearly income - you've evaded tax - and here's a huge tax bill." Loans outstanding for many years can all be taxed at once.

Where agemcy nurses and social workers may get caught out is if their agency pulls this trick on their behalf.

HMRC says:

"The loan charge works by adding together all outstanding loans and taxing them as income in one year. The result is that you’re likely to pay tax at higher rates than you would have at the time you were paid in loans. If you settle your tax affairs before the loan charge arises you will pay tax at the rates for the years you received the loans."

If you are a National Union of Journalists member who may be affected by this, please get in touch immediately, in strict confidence. We will pass your questions to the NUJ Freelance Office and the Organisers there will seek any necessary advice on, for HMRC's desire that you contact them before they contact you.

Tax avoidance loan schemes and the loan charge HMRC