HMRC have released a new policy paper on operational activity following the independent review of the loan charge. HMRC are now reviewing taxpayers' disguised remuneration arrangements and issuing letters to those affected.
The loan charge was introduced to tackle disguised remuneration tax avoidance schemes, but has faced significant criticism in light of a number of suicides linked to the policy.
The government committed to a New independent review of the loan charge at Budget 2024, with the review commencing in January 2025. It was undertaken by Ray McCann, former President of the Chartered Institute of Taxation and the government's response to the review was published in the Autumn Budget 2025.
HMRC have now provided a new, more favourable settlement opportunity for those impacted by the policy and who have not yet settled.
Whilst the review was ongoing, HMRC issued letters to those affected advising them that their disguised remuneration arrangements would be considered by the review.
Following the Outcome of the review, HMRC are now examining taxpayers' arrangements:
- Further letters are now being issued, providing taxpayers with a direct named contact at HMRC.
- The letter will also state how the taxpayer's position is affected by the outcome.
- At a later date, an invitation to settle should be issued.
HMRC have also said that taxpayers can let them know directly if they are interested in settling, advising that it would be useful if taxpayers provided the following information when contacting them:
- Names of the Disguised Remuneration (DR) schemes used.
- The tax years in which the schemes were used.
- The amounts received from the scheme in each year.
The policy paper also outlines the key features of the new settlement opportunity:
- Tax year-based calculations.
- Instead of charging the full amount at the 2018-19 tax rates, each year will be taxed at the rates that applied in the year the loans were paid.
- Promoter fee deduction.
- An adjustment will be made for any fees paid to promoters, up to £10,000.
- Flat deduction.
- A £5,000 deduction will be applied to every taxpayer.
- Late payment interest.
- Will be written off when calculating the new amount due.
- Cap on reduction.
- There will be a maximum reduction cap of £70,000.
- Inheritance Tax (IHT) Relief.
- Any IHT due will be written off.
- Penalties.
- Will not be charged.
- Payment Plan.
- Taxpayers will be allowed to pay over a period of five years without having to discuss affordability with HMRC.
- Promoters.
- Will not be able to access the new opportunity.
HMRC have also highlighted the training and guidance already in place for taxpayers who need additional support. HMRC advise that anyone suffering hardship or who is vulnerable should contact HMRC directly for assistance.
Useful guides on this topic
Loan charge and disguised remuneration
When do the disguised remuneration rules apply? How do they apply? When does the loan charge apply? What options for settlement are available?
Disguised remuneration loan charge
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?
Disguised remuneration 2020 settlement opportunity
What is HMRC's position on disguised remuneration loans where settlement was not reached by 30 September 2020? Can a settlement still be reached?
FAQs for disguised remuneration settlements
Can I just repay my loans? What if I have paid the loan charge? Can I still settle? How much will it cost to settle? And many other FAQs.
External link
HMRC operational activity following the new independent review of the Loan Charge