Further details have been made available on how HMRC will approach settlement of disguised remuneration schemes and implement the loan charge.
Parliament approved amended legislation for the loan charge which became law in July 2020. Following this, on 13 August, HMRC published details on how they will approach settlement of disguised remuneration schemes and how they will implement the loan charge to reflect these amendments.
The loan charge applies to loan balances that were outstanding on 5 April 2019 and arose from the use of disguised remuneration tax avoidance schemes where the tax due has not already been settled. Those affected need to file their 2018/19 self-assessment tax return by 30 September 2020, including a report of any loan balances subject to the loan charge.
Individuals who are not settling, and therefore become liable to pay the loan charge, will need to pay the charge that is due on 30 September or agree a time to pay arrangement with HMRC before then. In addition, anyone who wants to spread their disguised remuneration loan balances evenly across the 2018-19, 2019-20 and 2020-21 tax years also needs to do so by 30 September 2020 and make the relevant election.
HMRC have stated that they will not be offering special terms for calculating or paying the loan charge. HMRC states they “cannot apply a different rate to that provided in legislation and have to be fair to all taxpayers, including those who have already settled their use of disguised remuneration tax avoidance schemes and those who have never used tax avoidance schemes”.
For disguised remuneration loans that are not within the scope of the loan charge under the amended legislation (for example loans entered into before 9 December 2010), HMRC have now published updated settlement terms to reflect the amended legislation changes.
For taxpayers who need to pay the loan charge, HMRC will publish the settlement terms in autumn 2020 for any remaining liabilities that arise from open enquiries into disguised renumeration scheme use.
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