When do the disguised remuneration rules apply? How do they apply? When does the loan charge apply? What options for settlement are available?

This is a freeview 'At a glance' guide to disguised remuneration and the loan charge.

At a glance

At a glance

What is the loan charge?

  • Disguised remuneration loans taken out since 9 December 2010 (1999 prior to the Morse review) which were not repaid by 5 April 2019 or settled by 30 September 2020 were subject to a Loan Charge on 5 April 2019.
    •  Unless they were taken out before 6 April 2016, were reasonably disclosed to HMRC and HMRC have not taken any action such as opening an enquiry or raising an assessment or determination.
  • Up until 1 January 2019, it was possible to postpone the loan charge in certain restricted circumstances. It is now too late to postpone. See How to apply to postpone your loan charge.
  • An election could be made to spread the Loan Charge equally across three years. The deadline was 30 September 2020 but HMRC will consider late elections in some circumstances. See Statement of Practice 1 for details.
  • In September 2019 the Chancellor commissioned an independent review of the loan charge by Sir Amyas Morse which was reported upon on 20 December 2019. This announced several changes included in Finance Act 2020 which excluded certain loans from the charge. See Disguised remuneration loan chargefor full details. 

What is a Disguised Remuneration (DR) loan?

  • If you worked for someone as a paid director, employee or on a self-employed basis and you agreed to receive a loan instead of any salary or wages that you understood you would never have to repay, the loan is described as a disguised remuneration loan.
  • The aim of this is to avoid tax and NICs and where there is an employer they also avoid NICs.
  • In some industries, low-paid employees were paid with loans via umbrella and similar companies and some of these employees appear to be genuine victims and unintentional tax avoiders.

What settlement options are there?

  • 30 September 2020 was the final settlement date under the 2017 settlement opportunity for outstanding disguised remuneration loans to which the loan charge applies. This settlement opportunity is now closed.
  • In August 2020 HMRC issued details of a new settlement opportunity for taxpayers with loans not subject to the loan charge. In October 2020 details were released of how this applies to loans subject to the loan charge. This settlement opportunity remains open but does not avoid the loan charge. See Disguised Remuneration 2020 settlement opportunity


Squirrel ad


Are you enjoying our content? 

Thousands of accountants and advisers and their clients use rossmartin.co.uk as their primary TAX resource.

Register now to receive our FREE weekly SME Tax News update