Changes to disguised remuneration loan charge

Changes to disguised remuneration loan charge

The independent loan charge review, conducted by Sir Amyas Morse, was published on 20 December, having been delayed due to the general election. The loan charge was introduced to collect tax from individuals who had benefited from schemes devised to avoid PAYE and national insurance. The date that the loan was made to the individual is critical in determining whether the loan charge will apply.

The major change, which will be legislated in the next Finance Act, is that taxpayers who took loans before 9 December 2010 will not now be subject to the loan charge. This was the day when draft legislation was published, alongside a ministerial statement, to make it clear that disguised remuneration arrangements, including loans, would be specifically taxed as earned income. The current legislation, introduced in 2018, applies retrospectively to such loans and will need to be repealed.

Those taxpayers who took loans between 10 December 2010 and 5 April 2016 and who fully disclosed the use of the loan scheme will not be subject to the loan charge if, and only if, HMRC failed to take action because of disclosure.

Loans taken out on or after 6 April 2016 and which were still outstanding on 5 April 2019, remain within the loan charge. Such taxpayers can now elect to spread the tax charge over three tax years from 2018/19 to 2020/21.

If you require any assistance or would like to discuss your tax affairs in more detail please contact our Tax Partners, Steve Crompton or Lucy Williams, on the details below:

Steve Crompton
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
email: steve.crompton@jsllp.co.uk
 
Lucy Williams
Tax Partner
direct dial: 01942 292543
mobile: 07807 053494
email: lucy.williams@jsllp.co.uk

 

 

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