What is a disguised remuneration loan?
Broadly, if you worked for someone as a paid director, employee or on a self-employed basis and you agreed with them to receive a loan instead of any salary or wages, and the understanding was to be that you would never have to repay that loan, such a loan is described as a disguised remuneration loan.
The aim of paying someone via a disguised remuneration loan is that you avoid tax and NICs and the employer avoids NICs.
If you are self-employed it means that you might avoid Income Tax and Class 4 NICs.
Key features and selling points of disguised remuneration loans were that they would be written off ‘tax-free’ on death, meaning that no tax would ever be paid on your earnings.
Tax schemes or ‘tax strategies’ including disguised remuneration loan schemes have been mass-marketed over the last 20 years. The government has now introduced legislation designed to tackle scheme promoters and has also introduced a General Anti-Abuse Rule (GAAR).
What has HMRC done about these schemes?
In the 2016 Budget the Government announced the introduction of the Loan Charge – a major initiative to tackle the mass marketing of tax avoidance ‘loan schemes’. Since the legislation establishing the Loan Charge was introduced, there have been many concerns as to its design and the financial difficulties facing taxpayers who used these schemes to either settle with HMRC or pay the Charge. In the 2020 Budget the Government confirmed it would implement a series of reforms to the Loan Charge, following the recommendations of an independent review, chaired by Sir Amyas Morse.
HMRC has estimated that 50,000 individuals, and around 10,000 companies used these schemes and are potentially covered by the Loan Charge.
If you are being pursued by HMRC for tax owed in relation to a Disguised Remuneration Scheme or The Loan Charge then please get in touch, we can help.
We have obtained very lengthy time to pay agreements with HMRC for many clients in this situation.
For a free no obligation chat to discuss how we can help please call us now (24/7) on 0800 980 2662 or 0161 825 8094.