HMRC has recently issued updated Guidance regarding the settlement terms for Employees wishing to settle planning arrangements with HMRC.
Is now the time to start thinking about a settlement? The loan charge legislation in April 2019 may focus minds?
Firstly, who is are Employees?
HMRC define Employees as those individuals who have been paid via a disguised remuneration scheme their employer.
Employees can settle even if their employer does not wish to do so.
The employee will have to pay Income Tax and National Insurance (NIC).
Income Tax will be applied on all loans. HMRC refer to loans as disguised remuneration loans or DR loans.
Income Tax is due for years in which loans were paid, or other payments were made. Tax is calculated at the rates and bands applicable in the year of the loan or payment.
The 2019 loan charge will apply to loans not taxed above unless the employee makes Voluntary Restitution. Again taxes will be evaluated at the rates and bands applicable in the year the loan or payment was made.
Late payment interest is due for years where HMRC can or have assessed. No late payment interest will be payable on Voluntary Restitution.
HMRC have intimated penalties may be charged albeit none have yet been seen by the author. Penalties do not apply to Voluntary Restitution.
Why seek Voluntary Restitution? It can be cheaper than incurring the 2019 loan charge.
If the employer no longer exists, the employee will not have to pay any NIC’s.
HMRC currently interpret “no longer exists” as struck off the Companies House (or similar) Register.
Benefit in kind legislation
The settlement can be reduced by any Income Tax the employee has paid because they declared a benefit in kind.
Albeit such a reduction is only available if a tax year is in time to be amended or alternatively an overpayment claim can be made.
Anyone seeking to exit any form of tax avoidance contact me at firstname.lastname@example.org, or Paul at email@example.com, to explore their options.