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UK: Guidance on disguised remuneration and loan charge implementation

UK: Guidance on disguised remuneration and loan charge

HM Revenue & Customs (HMRC) provided further details as to how HMRC will approach settlement of disguised remuneration schemes and implement the loan charge.

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Amended legislation for the loan charge became law in July 2020. Following this, on 13 August 2020, HMRC published details about the settlement of disguised remuneration schemes and how the loan charge will be implemented 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 when 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 do not settle, 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.
  • Individuals who wants to spread their disguised remuneration loan balances evenly across the 2018-19, 2019-20 and 2020-21 tax years also need to do so by 30 September 2020 and make the relevant election.

HMRC stated that there will not be special terms offered for calculating or paying the loan charge.

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 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.

Read an August 2020 report prepared by the KPMG member firm in the UK

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