HMRC have updated their policy paper ‘HMRC issue briefing: settling disguised remuneration scheme use and/or paying the loan charge' making it clear that no further changes will be made to the loan charge.
The loan charge is an Income Tax and National Insurance Contribution (NIC) charge applying to Disguised remuneration loans taken out since 9 December 2010 and outstanding on 5 April 2019.
- It does not apply to loans taken before 6 April 2016 which were disclosed to HMRC where HMRC took no action.
Following a review of the loan charge in late 2019, taxpayers now have until 30 September 2020 to report their loans under Self Assessment and pay the loan charge.
The policy paper now sets out what happens next for taxpayers according to their circumstances.
- Taxpayers who have settled with HMRC and are not due a refund. No further action is needed in relation to the loan charge.
- Taxpayers still settling with HMRC. They must engage with HMRC and reply by the dates specified in correspondence from HMRC to enable a settlement agreement to be finalised before 30 September 2020, this to include agreed payment arrangements. They will only have to file a tax return by 30 September if they have non-loan charge income to declare.
- Taxpayers who have not settled and will pay the loan charge must file a 2018/19 tax return by 30 September 2020. They can either include all of their outstanding loan balance in their 2018/19 tax return or make an election to spread it evenly over three tax years (2018/19, 2019/20 and 2020/21). By 30 September 2020, they must either pay their 2018/19 liability in full or agree a Time To Pay arrangement by calling the loan charge helpline on 03000 599110 after filing their tax return.
- Taxpayers who have settled and are due a refund or waiver following the independent review do not need to contact HMRC, they will write to you.
- Taxpayers who no longer have to pay some, or all, of the loan charge but have not settled all of their use of DR schemes may be able to settle their scheme under new settlement terms issued in August 2020 (see below) and should contact HMRC and provide information accordingly.
In issuing this updated guidance HMRC have made it clear that taxpayers should not hold out in the hope that they will offer some special terms for calculating or paying the loan charge. HMRC also states that they can only settle for an amount that is consistent with the legislation, as to apply a different rate is not fair to other taxpayers, such as those who have already settled their schemes and those who have never used tax avoidance schemes.
The new ‘August 2020 settlement terms’ issued alongside the policy paper update only apply to loans not subject to the loan charge, that is those taken before December 2010 or before April 2016 where the conditions detailed above are met.
HMRC say, “For customers who choose not to settle we will continue enquiries until we can issue conclusions and assessments which can be appealed before the tribunals and courts. We estimate it could take between one and ten years to reach finality depending on the complexity of the case and progression of any litigation, with additional legal costs and interest continuing to accrue on top of the tax.”
Links
Disguised Remuneration 2020 settlement opportunity
HMRC have issued guidance for agents on a new settlement opportunity for disguised remuneration loans which are not subject to the loan charge.
Disguised Remuneration 2017 settlement opportunity
In November 2017 HMRC released details of a new settlement opportunity for disguised remuneration schemes ahead of the new loan charge being introduced on 6 April 2019.
FAQs for Disguised Remuneration Settlements
This guide looks at Frequently Asked Questions for settling Disguised Remuneration schemes under the November 2017 settlement opportunity.
Disguised remuneration loan charge (subscriber guide)
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?
External links
HMRC issue briefing: Settling disguised remuneration scheme use and/or paying the loan charge
Policy paper: How HMRC deals with and supports customers who have a tax debt
