Disguised remuneration loan charge
Loan Charge review – what’s next?
“The changes should reduce the tax bills of over 30,000 people, with 10,000 plus now not having to pay anything.”
The loan charge was introduced to counteract the tax advantage gained by many who used disguised remuneration schemes, often known as Employee Benefit Trusts, or ‘EBTs’.
HMRC contacted the individuals who had used these schemes and encouraged them to settle and repay the tax advantage they’d obtained prior to the rule change.
The legislation was substantial, allowing HMRC to retrospectively examine relevant transactions for up to 20 years.
But it was widely criticised in the media and even resulted in HMRC reporting itself to the Independent Office for Police Conduct following the suicides of at least four people that had used the scheme.
The independent loan charge review was conducted by Sir Amyas Morse and further to his recommendations, changes have now been announced by the government.
- The loan charge will now only apply to outstanding loans made on, or after, 9 December 2010 (previously the charge applied to loans outstanding from 6 April 1999)
- The loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take any action
- The government have proposed an extension to time-to-pay arrangements
- Taxpayers can now elect to spread the amount of their outstanding loan balance evenly across three tax years (from 2018-19 to 2020-21)
Are you affected?
If this affects you, consider whether any new action is required in light of the proposed changes.
HMRC have agreed to refund payments previously made by taxpayers, known as ‘voluntary restitution’, where:
- The loan charge no longer applies (ie relating to loans made before 9 December 2010)
- Loans were made before 6 April 2016, the avoidance scheme use was disclosed to HMRC and the department did not take action (for example, opening an enquiry)
Legislation is anticipated in 2020 to enshrine these changes into statutory law.
In the meantime there’s further guidance directly from the HMRC here, or contact us if you’d like to discuss your situation personally – we’d be glad to help.