The New Disguised Remuneration Loan Charge
Posted on 14th August 2018
I wrote recently about Tax Avoidance Schemes to remind you of the basics. Now to appraise you of the developments this year, including the new legislation giving HMRC more power to tackle this tax avoidance.
For a reminder on what a Tax Avoidance Scheme is, please refer to my recent blog.
Latest developments
In March 2018, the Finance Act 2018 was confirmed. This introduced a “Disguised Remuneration Loan Charge”, giving HMRC the power to go back 20 years (back to 1999) to tax any outstanding loans.
Tax avoidance legislation is common, as you would expect, as the treasury seeks to plug loop-holes in the legislation and ensure compliance.
However, what makes this legislation different is the length of time that HMRC can look back – 20 years is a very long time.
What does this mean?
This means that any contractors involved in a tax avoidance scheme or so-called “contractor loan scheme” since 1999, even if no longer involved in the scheme, where the “loan” has not been repaid are likely to be contacted by HMRC in the near future with an unexpected tax bill!
How does this tax charge work?
Essentially, any loan received whilst working through such a scheme, will be taxable in full in the 2018/19 tax year, unless:-
- The loan was written off on or before 16 March 2018 (date the legislation was confirmed)
- The loan was/is repaid in full before 5 April 2019
Settlement Opportunity.
HMRC have extended the deadline for those affected to come forward voluntarily to settle their tax to 30 September 2018.
By going forward voluntarily you will be more likely to receive some level of sympathy from HMRC and support for making repayments. You may also escape with little or no penalties. Those that choose not to go to HMRC of their own accord will no doubt find themselves in a less favourable position once HMRC catch up with them.
Take Action!
1. If you think you may be affected get in touch with us at Effective Accounting to talk through the scheme and confirm if you are in HMRC’s firing line.
2. If affected, you may want to calculate the tax due on the loans in the years you received the funds as this may lower amount of tax. It is vital to seek expert assistance with this.
3. Work with a specialist to open communications with HMRC before the settlement opportunity closes on 30 September.
Effective Accounting are contractor specialists and know how to spot these schemes. Get in touch to arrange a free, no obligation review.
Written by:
Nicola J Sorrell -
Effective Accounting
Founder | Xero Champion | IR35 Expert
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