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.  

SP1/2020 At a glance

Disguised Remuneration Loan Charge

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

If subject to the loan charge, the total loan balance of an individual would be 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:

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

Time to Pay arrangements that have been agreed require the instalments to be paid.

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 can be made to spread the charge over three years:

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 will automatically accept any elections made after 30 September 2020 but by 31 December 2020. No further information outside of the Loan Charge Reporting Form will be 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:

HMRC will not consider:

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:


On or before 31 December 2020:

After 31 December 2020:

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 arethe 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