Guidance

Disguised remuneration: schemes affected by the loan charge (Spotlight 44)

Information about the loan charge on disguised remuneration schemes which came into force on 5 April 2019.

• From: HM Revenue & Customs
• Published: 30 July 2018
• Last updated: 31 May 2019 — See all updates

It’s HMRC’s view that disguised remuneration schemes that replace income with loans or other forms of credit do not work.

The loan charge on disguised remuneration schemes came into effect on 5 April 2019. It applies to disguised remuneration loans made since 6 April 1999 if they are still outstanding on 5 April 2019.

If you have an outstanding disguised remuneration loan you should report and account for your disguised remuneration loan charge.

If you used a disguised remuneration tax avoidance scheme and gave us all the required information by 5 April 2019, you can still settle your tax affairs under the November 2017 settlement terms and not be subject to the disguised remuneration loan charge.

Schemes affected by the loan charge

The loan charge applies to most disguised remuneration schemes which seek to replace income with loans or other forms of credit.

HMRC is aware that some promoters or agents may have told you that settling your use of these schemes would not have been beneficial, and that the loan charge would not apply to you.

The disguised remuneration legislation is not limited to just loans, it also includes other forms of credit. For example, if you used a Corporate Remuneration Trust scheme you may have been told that the loan charge would not apply to you.

HMRC does not agree and you should seek independent advice to find out whether the loan charge applies to the scheme you used.

HMRC is also aware of new arrangements being sold to try to avoid the loan charge on an existing scheme. These schemes or arrangements do not work, and HMRC will challenge them. Find out more about these schemes in:

• Disguised remuneration: schemes claiming to avoid the new loan charge (Spotlight 36)
• Disguised remuneration: re-describing loans (Spotlight 39)
• Disguised remuneration: schemes claiming to avoid the loan charge (Spotlight 49)
• Disguised remuneration: asset transfer arrangements set up to avoid the loan charge (Spotlight 50)
• Disclosure of Tax Avoidance Schemes: tax avoidance using offshore trusts (Spotlight 52)

If you did not settle or give us all the information we needed by 5 April 2019

If you did not approach HMRC to settle before the loan charge came into effect or do not settle by the date we give in our letter of offer, all outstanding loans will be treated as income and taxed on 5 April 2019. You will need to report and account for your disguised remuneration loan charge.

Only the personal allowance for the tax year 6 April 2018 to 5 April 2019 will be taken into account when you report and pay the loan charge.

This may impact some income dependent charges or benefits including:

• entitlement to tax free childcare
• the high income child benefit charge

If you did not settle before 5 April 2019 and fail to pay the loan charge you may face:

• continued enquiries
• higher tax bills
• interest
• possible penalties

The longer you take to settle your use of these schemes, the more you’ll pay in interest charges.

Published 30 July 2018
Last updated 31 May 2019 + show all updates

1. 31 May 2019

   Spotlight updated following the charge on disguised remuneration scheme coming into force on 5 April 2019.

2. 30 July 2018

   First published.