The government has announced a package of changes to the Disguised Remuneration Loan Charge, this follows the conclusion of Sir Amyas Morse’s independent review of the loan charge policy and its implementation.

The key changes are that the Loan Charge:

  • Will apply only to outstanding loans made on, or after, 9 December 2010.
  • Will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take any action (for example, opening an enquiry).

Changes to payment schedules

Taxpayers can now elect to spread the amount of their outstanding loan balance (as at 5 April 2019, recalculated in line with the above changes) evenly across 3 tax years: 2018 to 2019, 2019 to 2020 and 2020 to 2021. This will give greater flexibility when the outstanding loan balance is subject to tax and may mean that the loan balance is not subject to higher rates of tax.

  • HMRC will refund voluntary payments (known as ‘voluntary restitution’) already made in order to prevent the loan charge arising and included in a settlement agreement reached since March 2016 (when the loan charge was announced) for any tax years where:
    • The loan charge no longer applies (loans made before 9 December 2010).
    • Loans were made before 6 April 2016, the avoidance scheme use was fully disclosed to HMRC and the department did not take action (for example, opening an enquiry).

There are also number of changes that will give taxpayers additional flexibility over the way they pay:

  • If you do not have disposable assets and earn less than £50,000, HMRC will agree Time to Pay arrangements for a minimum of 5 years.
  • If you earn less than £30,000, HMRC will agree a minimum of 7 years.
  • If you need longer to pay, you will need to provide HMRC with detailed financial information.
  • There is no maximum time limit for a Time to Pay arrangement.
  • In line with existing practice, if you need Time to Pay, you will pay no more than 50% of your disposable income, unless you have a very high level of disposable income.

Outstanding settlement and tax returns

If you have not filed their tax return, or agreed a settlement with HMRC, you should submit a Self Assessment tax return for the 2018 to 2019 tax year.

  • You can either submit by 31 January 2020, giving your best estimate of the tax due, or file by 30 September 2020. 
  • HMRC will waive penalties for late filing, late payment and inaccuracies in respect of the loan charge entries in these returns. It is important to note that this is only in respect of the loan charge entries and not other entries in the 2018/19 return.
  • Late payment interest will not be payable for the period 1 February 2020 to 30 September 2020, as long as a return is filed, and tax paid or an arrangement made with HMRC to do so, by 30 September 2020.

Legislation to enact the above changes will be put to parliament in 2020.

For further details see HMRC Disguised Remuneration Guidance

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