In April 2019 all outstanding loans from disguised remuneration schemes will become subject to an income tax and NIC charge under part 7A ITEPA 2003.
This new loan charge was introduced by Finance (No. 2) Act 2017 on all outstanding Disguised Remuneration loans, e.g. loans made via company Employee Benefit Trusts (EBTs) or EBT sub-trusts, or similar via EFRBS.
The charge will apply to a loan or quasi-loan (including loan transfer arrangements) where:
- If it had been made on 5 April 2019 it would have fallen within the disguised remuneration rules;
- It was made on or after 6 April 1999; and
- The loan, or part of it, is still outstanding at 5 April 2019.
HMRC have now released details around the reporting requirements for these loans.
By 1 October 2019 all employees who have received loans from such schemes must provide the following information to HMRC:
- contact details
- case identification including any case references, scheme reference numbers, and other information that allows the loan charge information to be linked to existing enquiries. This also includes any details of partial settlements.
- loan, or quasi-loan, and outstanding balance calculation including details of all loans, and repayments, by tax year, any repayments which are disregarded or loans that that have previously been released or written off.
The employer must report loan balances under PAYE.
For self-employed contractors who have entered into such schemes the loan balance must be included on their self-assessment returns.
Failure to provide the information by the deadline could result in penalties as will provision of inaccurate information.
This may all seem like a long way off but for many employees gathering the necessary information may be a difficult task, especially where the scheme provider is no longer in existence. For employers, trustees will need to be relied upon to provide loan balance information.
Links:
EBT loans: HMRC to go back 20 years
Disguised Remuneration 2017 settlement opportunity
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