HMRC have published Statement of Practice 1 (2020) (SP1/2020), which outlines their approach to the loan charge and spreading elections.  

This is a freeview 'At a glance' guide to Statement of Practice 1 (2020) (SP1/2020) and HMRC's approach to the loan charge and spreading elections. 

The deadline for making a spreading election has now passed. HMRC may accept late elections in certain very limited circumstances if the taxpayer is reaching a settlement for their scheme, see below.

SP1/2020 At a glance

  • The total loan balance caught by Disguised Remuneration rules was to be entered on the 2018-2019 tax return.
  • Taxpayers could elect to spread this and the liability over three years.
  • The deadline for the election was 30 September 2020.
  • HMRC automatically accepted elections made by 31 December 2020.
  • Elections made post-31 December 2020 will be subject to review and only accepted if there are exceptional reasons for the delay.

Disguised Remuneration Loan Charge

The Disguised Remuneration Loan Charge (Loan Charge) applies to loans that fall within the Disguised remuneration rules that:

  • Were made on or after 9 December 2010. 
  • Had not been repaid in full or fully taxed, including by Settlement by 5 April 2019.

If subject to the loan charge, the total loan balance of an individual was taxable in full in the tax year 2018-2019. The amount was to be included on the tax return for the year, and by 30 September 2020:

  • The return was to be filed.
  • All tax was to be paid unless a Time to Pay arrangement was agreed with HMRC.

2018-2019 returns filed with all tax paid are subject to no further action.

Time to Pay arrangements that have been agreed require all instalments to be paid on time.

Where a return has been filed but no payments or arrangements to pay have been made, the taxpayer should contact HMRC immediately to discuss the options.

Where no tax return has been filed and no tax has been paid, the taxpayer will be liable for late filing and payment penalties, with effect from 1 February 2020.

The election

Instead of taxing the balance in full in 2018-2019, an election could be made to spread the charge over three years:

  • A third of the balance to be taxable in each of the years 2018-2019, 2019-2020 and 2020-2021.
  • The election had to be made by 31 December 2020 (extended from 30 September 2020).
  • Once made, the election is irrevocable.

Where the election was made in time, there is no further action required, except to file the remaining two returns and either pay the relevant taxes for each year or have instalments agreed under Time to Pay arrangements.

Late elections 31 December 2020

After the original deadline for the election had passed, HMRC stated that they would automatically accept any elections made after 30 September 2020 but by 31 December 2020. No further information outside of the Loan Charge Reporting Form was required.

Late elections post 31 December 2020

After 31 December 2020, any elections submitted will be considered on a case-by-case basis by HMRC. Further information will be required, with only cases with exceptional reasons for the delay being accepted. All cases must show the late election was outside of the individual's control and all of the following:

  • The individual was ill or otherwise absent for good reason.
  • The absence arose at a critical time to prevent timely submission for either 30 September or 31 December deadlines.
  • There was good reason why the election was not made in good time before the absence.
  • No-one else could have made the election on the individual's behalf.

HMRC will not consider:

  • Oversight or negligence on the part of the individual or adviser.
  • Illness or absence of the adviser.

If a late election fails to meet the above criteria, but it would be unreasonable to deny the election, HMRC will consider the following factors when looking at the case on the whole:

  • The reason for the late election.
  • The extent to which the election was late.
  • The consequences of refusal.
  • Any unusual features of the case.


On or before 31 December 2020:

  • The loan charge reporting form had to be filled in, with the option to spread the balance over three years selected.
  • If correct and filed by this extended deadline, the election was valid.
  • One-third of the loan balance had to be reported on each of the tax returns for the years 2018-2019, 2019-2020 and 2020-2021 and the tax paid.
  • If having missed the 30 September deadline, the taxpayer was planning to submit an election on or before 31 December, they could include one-third of the balance on their 2018-2019 tax return, marking it as provisional.
  • The election cannot be revoked.

After 31 December 2020:

  • Late elections should be submitted using the paper version of the form.
  • Additional information provided should include:
    • The date their 2018-19 tax return was submitted.
    • The reason for the late election.
  • The form should be emailed to This email address is being protected from spambots. You need JavaScript enabled to view it. and have 'late loan charge election' in the subject line.
  • Until the election has been confirmed, the total loan charge balance is fully taxable in the tax year 2018-2019.
  • Taxpayers are advised to check the current accuracy of their return and the latest date for amendment.
  • Penalties will be due for late filing and payment as well as inaccurate returns.

Useful guides on this topic

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?

FAQs for Disguised Remuneration Settlements 
Can I just repay my loans? Which is cheaper: the loan charge or settling? How much will it cost to settle? And many other FAQs.

Disguised Remuneration final settlement opportunity 
An overview of the 2017 settlement opportunity for those involved in disguised remuneration schemes. What are the potential liabilities? What is the settlement process?

Disguised remuneration 2020 settlement opportunity
What is HMRC's position on disguised remuneration loans outside of the Loan Charge? Is there still a tax liability? Can this be settled?

External Links

Statement of Practice 1 (2020)

HMRC briefing: settling disguised remuneration scheme use and/or paying the loan charge

Oak ad
Are you enjoying our content? 

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

Register with us now to receive our receive our FREE weekly SME Tax News updates.