HMRC have released Spotlight 56 ‘Disguised remuneration: tax avoidance by owner-managed companies using remuneration trusts’.

The Loan Charge applies to all outstanding disguised remuneration; self-employed and contractor loans made since 9 December 2010 if they were still outstanding on 5 April 2019 and are not settled by 30 September 2020.

A penalty may be issued for an inaccurate return sent to HMRC on or after 16 November 2017, relating to a tax period that both began on or after 6 April 2017 and ended after 15 November 2017.

This Spotlight provides an opinion from the General Anti-Abuse Rule (GAAR) Panel on a case involving a company rewarding its director using loans made through a remuneration trust. The company had claimed a tax deduction for its contributions to the trust and both the company and its director claimed that the loans were tax-free.

Both HMRC and the Panel view these types of arrangements as tax avoidance and that entering into and carrying out these arrangements was not a reasonable course of action.

The Panel has given other opinions on similar cases and had agreed with HMRC in each of the cases that the arrangements were not a reasonable course of action or in line with the employment Income Tax rules.

The Panel advises that:

  • The arrangements as a whole are contrived and abnormal and appear to serve no purpose other than to avoid tax.
  • The Panel cannot believe that Parliament intended loans to a person from a trust made out of funds deriving from economic value earned by that person’s activities as a director to escape the employment income through third-parties rules.

HMRC will use powers to pursue those who promote or enable tax avoidance including using the enablers of tax avoidance penalty regime which applies to promoters of failed tax avoidance arrangements.


Disguised Remuneration loan charge 
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.

Penalties: Enablers of Tax Avoidance (subscriber version)
A guide to the new penalties applying from 2017 to ‘Enablers’ of failed tax avoidance arrangements.


Spotlight 56: Disguised remuneration: tax avoidance by owner-managed companies using remuneration trusts