Loan recall – what to do if you get a demand
We are aware that some people are still receiving loan demands from certain companies asking them to repay loans which they have already settled the tax on or paid the loan charge to HMRC. We have been monitoring the situation since the publication of our original FAQs on this issue in May 2021. Here we recap on what you need to do to protect yourself.
We understand that there are a number of legal grounds on which loan demands can be challenged.
However, those that are sending the demands may be using something called a ‘Statutory Demand’. A Statutory Demand is a formal way of one person asking another person to pay a ‘debt’. This process is used because it is often cheaper and easier than other ways to collect debts, for example by taking you to court. It can be problematic however, because Statutory Demands can quickly escalate into a serious situation, if they are not properly dealt with – for example if you don’t take steps to have the Statutory Demand set aside where the debt is disputed.
Some key extracts from our original article, on what to do in the face of a Statutory Demand, are reproduced below.
- If you have been involved in a loan scheme and receive either a letter from an organisation (or their solicitors) purporting to now own your loan, or a Statutory Demand for payment – do NOT ignore it.
- We suggest that you take specialist, independent, legal advice – this may not be as difficult to find or as costly as you think.
- There may be strict time limits involved if you have received a Statutory Demand, you must ensure that you are aware of these and act promptly.
- Statutory Demands are not supposed to be used as a debt collection tool where the debts are disputed.However, the process for issuing one is quick, cheap and easy, so sometimes Statutory Demands are used as a tool by creditors to try and recover debts they say they are owed.
- Usually, recipients of a Statutory Demand need to contact the organisation that is claiming that money is owed and state that the debt is disputed, set out why it is disputed and ask them to withdraw the Statutory Demand. If they do not withdraw it, then an application to a court is needed to get a demand set aside – there is a strict 18-day time limit for this application. The Statutory Demand should tell you how and where you should apply to set it aside.
- You can find more information about Statutory Demands on UK. You can find step by step help on how to complete the forms to dispute a Statutory Demand on the Citizens Advice website.
- If you do not dispute it (or you do not dispute it properly) and it is not set aside by a Court following an application made by you within 18 days, then this paves the way for the organisation to initiate insolvency proceedings. Even if they don’t actually do this, this obviously leaves them in a powerful position.
- Free legal advice can be obtained from a Law Centre or Citizens Advice, however given the complexity of the topic, we do not know what level of assistance these organisations can provide, although they may be able to help you dispute a basic Statutory Demand.
Further reading
For our full article please visit this page on our website. There is at least one other helpful article now available in the public domain (on ContractorUK website), highlighting what people should do.
For the official government guidance on repaying a disguised remuneration loan to a third party, go to GOV.UK.
National Debtline have some good information on how to dispute a Statutory Demand, including a list of grounds that can be used to set aside a Statutory Demand.
The Chartered Institute of Taxation (CIOT) have made a Budget representation on the assignment and enforcement of loans which have been the subject of the loan charge.