The government has published ‘Independent Loan Charge Review summary of evidence’ which sets out the evidence provided to Sir Amyas Morse as part of the independent loan charge review undertaken in December 2019.

The ‘loan charge’ applies to all outstanding third party Disguised remuneration loans which, if they had been made on 5 April 2019, would have fallen within the disguised remuneration rules.

  • The review resulted in changes to the charge, including loans taken out before December 2010 falling out of charge and the ability to spread loans over three tax years.

The evidence which resulted in these changes is very detailed and makes interesting reading.

The impact of the Disguised Remuneration and Loan charge rules

The first significant new legislation here was the Disguised Remuneration (DR) rules or Part 7A of ITEPA 2003, introduced in December 2010.

  • The evidence shows this resulted in many large corporate businesses, who had previously been using schemes such as Employee Benefit Trusts (EBTs) and Employer-Financed Retirement Benefits Scheme (EFRBS) to reward employees, ceasing to do so.

The DR rules were expanded in 2016 with the loan charge being announced to take effect in April 2019.

  • This resulted in a fairly significant drop in scheme usage in 2016/17.
  • 2017/18 saw a rise back up towards 2008/09 levels with almost 8,000 users. For the first time since 2005, new scheme users in 2017/18 far outweighed those who had used schemes before.

The effect of the Disclosure Of Tax Avoidance Scheme (DOTAS) rules, follower notices and Accelerated Payment Notices (APNs)

  • The total number of schemes notified to HMRC under DOTAS in the five year period from 2014/15 to 2018/19 were fewer than they were for each year between 2004 and 2013.
  • It is possible, given the number of scheme users in the five year period, that there were schemes in operation which were not being notified.
    • This could be due to DOTAS registration being one of three conditions required for APNs to be issued and to there being a smaller pool of promoters who were purposefully deciding not to notify schemes. By not notifying under DOTAS promoters may have been able to avoid the issue of APN’s to scheme users.
    • Of six cases heard to date on DOTAS registration the four which have been decided were in HMRC’s favour.
  • Even where a lead case has been defeated in the courts, other users of that scheme are reluctant to settle. 

Off-Payroll Working and Personal Service Companies (PCSs)

  • The government estimates around 90% of PSCs in scope of the Off-Payroll rules do not comply with them but could find no evidence of public sector organisations actively promoting the use of Disguised Remuneration tax avoidance schemes.
  • Several public sector bodies were identified who were not aware that an avoidance scheme was being used by contractors working for them, or that an offshore employer was involved.

Attitudes and views of scheme users affected by the Loan Charge

Submissions from the All-Party Parliamentary Group about the loan charge were considered.

  • 84% of the individuals about whom submissions were made stated they entered DR arrangements because they were told by the promoter it was legal and/or approved by HMRC or a QC but only 19% fully disclosed the use of their scheme to HMRC.
  • This is supported by the fact that, where schemes were notified under DOTAS, the majority of individuals subject to HMRC enquiry did not correctly disclose their scheme.

HMRC powers to tackle tax avoidance and compliance action

  • HMRC will double the resources devoted to tacking promoters, profiling Real-Time Information data and working with partner agencies and accountancy and taxation professional bodies.
  • In 2018/19 HMRC sent out over 100,000 awareness letters about the loan charge.
  • Between 2017 and 2019 the GAAR advisory panel considered nine DR avoidance schemes and found all to be abusive and not reasonable.
  • HMRC have identified 12 new DR schemes since April 2019 aimed at individuals, which have been used by around 8,000 individuals, over 3,000 of whom are first-time users.
  • Between 2016 and June 2019, HMRC agreed c.8,000 settlements bringing in around £2 billion. 40% were on extended payment terms. The average settlement amount was £26,000.


General Anti-Abuse Rule: GAAR At a glance
This note looks at the key features of the General Anti-Abuse Rule (GAAR) contained within the Finance Act 2013 and the basics of what you need to know about the provisions it contains when considering tax planning.

Disguised remuneration
An at a glance, freeview introduction to the Disguised Remuneration rules.

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?

Accelerated Payments & Follower Notices (subscriber)
A follower notice might be issued if you use a tax avoidance scheme with the same or similar arrangements to one that HMRC has successfully challenged in court.

FAQs for Disguised Remuneration Settlements (subscriber)
This guide looks at Frequently Asked Questions for settling Disguised Remuneration schemes.

General Anti-Abuse Rule – GAAR (subscriber)
This briefing note looks at the key features of the General Anti-Abuse Rule (GAAR) contained within the Finance Act 2013, what areas of tax it covers and what you need to know about the provisions it contains when considering tax planning.

External link

‘Independent Loan Charge Review summary of evidence’