In a recent meeting of the House of Lords Economic affairs committee the Financial Secretary to the Treasury Jesse Norman MP was quizzed about the disguised remuneration loan charge.

The loan charge was introduced on 5 April 2019 for all outstanding disguised remuneration loans from both employment based and self-employed contractor loan schemes. It has been the subject of much discussion and debate in both the media and parliament.

The Lords’ questioning on this occasion focussed on HMRC’s indiscriminatory application of the new rules to all disguised remuneration scheme users whether they had intentionally participated in the schemes or whether they were part of the group of taxpayers who do not have a full understanding of their tax affairs.

The Committee was particularly concerned about reports of and from taxpayers who had apparently been told by their employers that unless they joined a disguised remuneration scheme they could lose their jobs, and about the employment of workers under such schemes by local authorities, with specific reference being made to the NHS.

Mr Norman, who opened his comments by reminding the committee he has only been in his current role for 9 weeks, was at pains to say that there was no evidence of the public sector pushing workers towards disguised remuneration schemes, but agreed he would go away and look at ways to prevent such behaviour by local authorities going forward.

He confirmed that HMRC will:

  • shortly provide clarification as to how the charge works in practice which should ‘settle some of the public concerns’.
  • not apply the charge to a closed tax year, assuming full disclosure has been made.
  • not continue seeking payment of the charge where the taxpayer has no realistic chance of paying it.

He commented that the charge is not retrospective because it does not create any tax liability which did not exist at the time. He did agree that the charge is retroactive in nature, but it is not, he said, the function of the tax system to discriminate between people who have sought to avoid tax.

Links to our guides:

Disguised remuneration loan charge (subscriber guide)

Disguised Remuneration final settlement opportunity

FAQs for Disguised Remuneration Settlements

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