2019 Loan Charge – What are my options?

2019 Loan Charge – What are my options?

 

The finance (No.2) Act 2017 enables HMRC to bring into charge any loans which remain outstanding by the 6th April 2019. This will apply to any disguised remuneration schemes which were entered into on, or after, the 6th April 1999.

If you think this charge will affect you, there are three main options;

 

1.Individuals repay the trust

You can avoid the 2019 loan charge by paying any outstanding debt before the 5th April 2019, moreover, if you’ve already paid an Advance Payment Notice (APN), this may be utilised depending on the circumstances.

The substantive tax position will still need to be determined on the underlying planning arrangement, which, in the future, could lead to additional liabilities.

 

2.Individuals do not repay the trust, instead the company or individual pays the 2019 loan charge

As of 6th April 2019, any outstanding debt will be classed as remuneration and therefore will be charged to income tax and NIC collected through PAYE.

If a company no longer exists, HMRC will try to transfer the tax liability onto the individuals.

The substantive tax position will still need to be determined, which could give rise to an additional liability in the future.

 

3.The company settles its underlying tax position with HMRC

HMRC have recently released details of a new settlement opportunity.

If you want to settle with HMRC, you will have to register your interest by the 31st May 2018. We can assist you with registering your interest in the settlement terms on a ‘without prejudice’ basis in time for the deadline.

The settlement terms will include income tax, NIC, interest and possibly IHT. Once you have settled with HMRC you won’t have to pay the new loan charge.

We can also help you with the next step of providing HMRC with all the information required to calculate the settlement amount, this will be required by 30th September 2018. We will then check HMRC’s computations for you.

 

Settling now will give you certainty about your disguised remuneration scheme. It may also mean that you:
  • Generally do not need to gross up the payments or face additional penalties 
  • Can obtain a deduction for PAYE and NIC
  • Don’t face extra costs of the scheme moves to litigation
  • Can choose to include or exclude IHT in the settlement

 

If you would like any additional information regarding the 2019 loan charge, or would like to discuss your tax affairs in general, please contact.

 

Steve Crompton
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
email: steve.crompton@jsllp.co.uk

 

Chris Barrington
Tax Partner
direct dial: 01942 292505
mobile: 07730 436070
email: chris.barrington@jsllp.co.uk

 

 

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