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Disguised remuneration: the Close Company Gateway and 2019 loan charge reporting

Disguised remuneration: the Close Company Gateway ...

The draft clauses for future Finance Bill 2017-18, expected later this year, confirm the Government’s intention to introduce the Close Company Gateway and to impose a duty on taxpayers to provide information to HMRC relating to the 2019 loan charge

Colin Ben-Nathan


KPMG in the UK


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On 10 August 2016, HMRC issued its consultation document entitled “Tackling Disguised Remuneration”. Amongst the suite of proposals were both the 2019 loan charge and the “Close Company Gateway” (CCG). We wrote about both at the time.

As it transpired, the Government decided to defer the introduction of the CCG to allow HMRC time to ensure it was properly targeted.

The 2019 loan charge on the other hand was included in the Finance Bill currently making its way through Parliament and expected to be enacted into law shortly.

The draft clauses for inclusion in the future Finance Bill 2017-18 confirm that the Government still intends to introduce the CCG. It also confirms that the Government has decided to impose a duty on taxpayers affected by the 2019 loan charge to report information to HMRC.

Missing from the draft clauses are the “transfer of liability” provisions that will supplement the 2019 loan charge. The accompanying explanatory notes to the draft clauses say that these provisions will be published later in 2017.


As HMRC’s consultation document put it: “some schemes try to avoid being caught by [the disguised remuneration legislation] by claiming that the disguised remuneration received by an employee or director of a close company is not in connection with their employment. The government considers that these schemes are ineffective. In order to put beyond doubt that these schemes do not work another gateway will be added to [the disguised remuneration legislation] specifically for close companies.

The original intention was for the CCG to be enacted before the summer. However, this was deferred due to concerns that it was too wide and would inadvertently catch commercial arrangements.

The draft clauses to be included in future Finance Bill 2017-18 contain changes from the previous draft that seek to narrow the scope of the CCG. Specifically, the timing of the taxpayer’s ownership of the close company has been specified and an overriding tax avoidance/motive test has been introduced.

The consultation on the draft clauses runs until 25 October 2017 and we are currently considering how the draft clauses would apply in various commercial scenarios, to determine whether the amendments are sufficient to protect against unintended consequences. We shall be responding to HMRC in due course.

The 2019 loan charges

The main provisions relating to the 2019 loan charge are included in the Finance Bill currently before Parliament and are expected to become law shortly. Our comments on the 2019 loan charge can be found here.

One of the main issues which was raised during the on-going dialogue between HMRC and stakeholders is the fact that information required to impose the 2019 loan charge is held by the taxpayer and the intermediary but the operation of the charge (under PAYE) means that it needs to be conveyed to the employer (or former employer). This inevitably creates complications.

The provisions in the current Finance Bill impose a duty on both the taxpayer and the intermediary to share information with the employer in order that the employer can operate the 2019 loan charge.

The draft clauses for inclusion in future Finance Bill 2017-18 also require affected taxpayers to provide prescribed information to HMRC. This information must be provided after 5 April 2017 and before 1 October 2017. Penalties apply where there is a failure to comply or where information is inaccurate and the inaccuracy is careless or deliberate.

The transfer of liability provisions

While the draft clauses do not contain any of the anticipated “transfer of liability” provisions for the 2019 loan charge, the explanatory notes do confirm they will be published later this year.

We have included reference to them in this summary as we anticipate that they could have a material impact on how the 2019 loan charge will operate in practice.

It would not be unusual for certain disguised remuneration arrangements to involve offshore or now-liquidated employers or intermediaries. And while the current law does contain transfer of liability provisions designed to deal with these scenarios, the process can be unwieldy. Coupled with the recent judgments in Rangers and Toughglaze, the 2019 loan charge could see HMRC bogged down in lengthy, fact specific disputes about who is liable for the tax.

We anticipate that the promised transfer of liability provisions will make clear who is responsible for the tax in different scenarios, e.g. offshore intermediary with a UK based client and so remove upfront the potential for long running disputes.

Once the draft clauses are available we will be posting an update on Employers’ Club and responding to HMRC, assuming the clauses be subject to consultation.

Next Steps

If you have any queries, please do not hesitate to get in touch with your normal contact or e-mail

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