Under measures proposed in the Finance Bill 2017, HMRC will be able to tax any outstanding EBT loans made since 6 April 1999 on the basis that a non-repayable loan it not a loan, but is disguised pay.

The new loan charge will apply to outstanding disguised remuneration loans. These include loans made via Employee Benefit trusts (EBTs). The charge will not apply to normal employee loans that are repaid, e.g. a season ticket loan.

The new tax charge will apply to a loan (or loan transfer arrangement) where:

  • If it had been made on 5 April 2019 it would have fallen within the disguised remuneration rules (including the Finance Bill 2016 and 2017 changes);
  • It was made on or after 6 April 1999; and the loan, or part of it, is still outstanding at 5 April 2019.

The charge will not apply if by 5 April 2019:

  • The loan is repaid in full;
  • The loan is from an amount on which income tax has been accounted for in full (including under settlement with HMRC); or
  • The loan has been taxed in full under the disguised remuneration rules, or
  • If any exclusions apply.

The legislation in Part 7a ITEPA 2003 is notoriously complex and HMRC has yet to publish guidance saying that it will set it out later in 2017.

What to do now?

HMRC has announced a new Settlement Opportunity for these loans. If that is not taken up and a loan is still outstanding at 5 April 2019, the taxpayer will presumably be allowed to make a time to pay agreement, although more interest will be charged.


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