Following a government crackdown on illegal Employee Benefit Trusts (EBTs) and wider Disguised Remuneration tax avoidance schemes, a deadline was drawn up whereby employees and contractors who had received funds via these methods could voluntarily settle any tax they owed as a result.
This deadline allowed recipients of Disguised Remuneration schemes to:
- Come to a settlement with HMRC regarding the amount of tax they owe
- Set up a payment plan over 5-7 years or more
- Pay a lower rate of tax on any required loan charge
- Avoid any extra costs if the scheme in question was to move to litigation
However, that deadline has now passed, and the only remaining options for recipients of Disguised Remuneration schemes are to repay their loan in full, or to pay a loan charge.
Despite this, however, many individuals are still asking questions regarding the loan charge of 2019, e.g. “should I settle?”
So what exactly is disguised remuneration, when was the deadline to settle your tax affairs, what is the loan charge 2019 latest, and how much is the loan charge?
Disguised Remuneration Settlement “Rules”
In 2011, a set of “rules” were applied by the UK government to seize control of these illegal schemes and to ensure that tax was paid correctly. These rules included the following orders:
- Loans made by Employee Benefit Trusts in place of wages or salaries must be made subject to the same amount of
- and National Insurance Contributions
- Only if the loan is repaid will those contributions be waived
- Those with salaries under £50,000 who have stopped using Disguised Remuneration Schemes can spread the cost over at least 5 years, while those earning under £30,000 can do so over more than 7 years.
- Those who fail to begin to settle their affairs with HMRC before the deadline must pay a loan charge in full before 31st January 2020.
In 2016, additional clauses were added, stating that this same legislation would also apply to loans made prior to 2011.
The above rules apply to users of Disguised Remuneration Schemes whose loans have remained unpaid to date, and who have failed to provide HMRC with information regarding the settlement of their outstanding taxes by the deadline.
They also affect employers who provided any loans involved in Disguised Remuneration schemes and had not settled their affairs with HMRC by the deadline.
When is the Deadline for HMRC Disguised Remuneration Settlements?
Loan charge legislation terms were drawn up in November 2017 to assist any recipient of Disguised Remuneration schemes in settling their tax affairs with HMRC.
The deadline for action of this kind to be taken was 5th April 2019, so if you were the recipient of a disguised remuneration scheme, the time to negotiate your position with HMRC has now passed.
Everyone who has outstanding loan balances and has not discussed a settlement agreement should send all information about your loans to HMRC by 30 September 2019.
How Much is the Loan Charge 2019 & Should I Settle?
The size of a loan charge applied to the recipients of a disguised remuneration scheme depends directly on the amount of Income Tax and National Insurance Contributions that would otherwise have been required to be paid during the tax year on the amount that was “loaned”.
All amounts received through a Disguised Remuneration loan will be combined and made subject to the charge at the same time. HMRC has quoted the median settlement as £13,000.
For those who know they are likely to be affected by the loan charge 2019 and wonder “should I settle my tax affairs with HMRC?”, it is now too late to do so.
This means that anyone who still owes tax repayments connected to Disguised Remuneration will be required to pay the loan charge in full, and if the scheme in which they were involved is made the subject of litigation, they may receive further fines or charges.
If you are in the process of settling and began before the 5th April deadline, the aforementioned November 2017 terms still apply to you and you can continue to work with HMRC towards a settlement.
I Missed the Deadline – What Can I Do?
When it comes to the loan charge, as of 2019, the latest ruling is that you are simply required to pay it in full. However, as of April this year, HMRC have extended their support services to provide assistance to those who are unable to pay.
For further information on this subject, you should call HMRC directly, or contact firstname.lastname@example.org for contractor loan schemes or email@example.com for all other disguised remuneration schemes. If you don’t arrange to pay the loan charge, you may be prosecuted for tax evasion.
It’s important to take immediate action if you’re concerned that you may need to pay the disguised remuneration loan charge. DPP Law can assist any individual who has missed the deadline to voluntarily settle their tax liabilities.