HMRC have issued further guidance about how to report and pay the disguised remuneration loan charge which takes effect on 5 April 2019.
The Loan Charge applies to all disguised remuneration, self-employed and contractor loans taken since 1999 and outstanding on 5 April 2019, unless a settlement is in progress with HMRC before that date.
The new guidance provides further clarity on what individuals and employers must do and when to avoid incurring penalties and pay the tax due on time.
Reporting the charge
HMRC have confirmed that the online tool for loan charge reporting will be available from 6 April 2019.
- Employees must notify their employer about their loans by 15 April 2019.
- All individuals with outstanding loans must also provide a report to HMRC by 1 October 2019. Full details of what is required are included on the HMRC guidance note.
- All individuals must include details of their loans on their 2018/19 self-assessment return. This may trigger a requirement to register for self-assessment or face penalties for failure to notify.
- Penalties will apply for late (starting at £300) or incorrect (up to £3,000) reporting.
Paying the loan charge
Employment related schemes
The charge is payable by the employer under PAYE. If the employer still exists:
- The loan amounts must be treated as employment income of each employee, arising on 5 April 2019.
- They should be input under RTI in 2018/19 but as an earlier year update (EYU).
- It will be possible to do this from 20 April 2019 and submissions must be made as soon as possible after that date.
- As the charge falls into 2018/19 the PAYE tax and NICs due must be paid by 22 April 2019 if paid electronically, or 19 April 2019 paid by post.
- If the employer is able to they can deduct the tax from the employee under PAYE.
- If this is not possible the employer and employee must agree how the employee will ‘make good’ the tax, by 5 July 2019, to avoid grossing up and a benefit in kind charge.
- If the employer cannot pay HMRC can transfer the charge to the employee.
- HMRC are advising employers who do not have enough funds to pay the PAYE due to contact them as soon as possible to discuss their options.
If the employer no longer exists or is not in the UK:
The liability is transferred to the employee individual who must:
- Include it as employment income in their 2018/19 self-assessment
- Pay the tax alongside their self-assessment liabilities by 31 January 2020
Self-employed/contractor schemes
The self-employed should:
- Include the charge as additional trading profits on their 2018/19 self-assessment return using SA103 and the SA101 additional information return.
- Pay the tax by 31 January 2020.
- If their trade has ceased it must be included as profits from the year of cessation.
Comment:
The timescales for employers are tight.
Their employees have until 15 April to provide details of their loans, the EYU system is not available until 20 April (which is a Saturday) and the tax must be with HMRC by 22 April.
Those with many affected employees with multiple loans should ensure they are aware of their obligations in advance if they are to avoid interest and penalties.
The HMRC guidance includes more detailed information on the payroll processes required to deal with the charge.
Links to our guides:
Disguised Remuneration
A guide to everything you need to know about disguised remuneration schemes, the loan charge, and how to reach a settlement with HMRC.
FAQs for disguised remuneration settlement
This guide looks at Frequently Asked Questions for settling Disguised Remuneration schemes. The FAQs relate to EBTs, EFRBS and contractor loan schemes (employed and self-employed).
Disguised remuneration final settlement opportunity
A detailed guide to the November 2017 final settlement opportunity for all disguised remunerations schemes.
External link:
HMRC: Report and account for your disguised remuneration loan charge