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The 30 September 2018 deadline has passed, so what happens in terms of reaching a Disguised Remuneration Settlement with HMRC?

In the very short term nothing much is likely to change.  Published Guidance is unchanged.  The door remains open.

In the medium term the hard deadline is 5 April 2019.  The Loan Charge looms.


What HMRC Say

The only way to make sure the Loan Charge will not apply is to:

  • settle before the Loan Charge takes effect; and
  • repaying all loans in full

HMRC will now agree instalment plans of up to 5 years if a taxpayer wishes to settle a Disguised Remuneration scheme before the Loan Charge arises.

The limited requirements are:

  • expected current year income is less than £50,000; and
  • a promise not to use tax avoidance schemes again

An arrangement will still be considered even if income is £50,000 or higher, or a longer period to pay is required.  More information will be required in these circumstances.

Schemes Affected by the Loan Charge

Most disguised remuneration schemes will be affected by the Loan Charge in 2019.

Legislation is not limited to loans, it also includes other forms of credit.

Self Employed individuals will be liable to the April 2019 Loan Charge.

HMRC’s view is that a scheme to “fix” a scheme does not work.

This view is highlighted in Spotlight 36 and Spotlight 39.

What Happens if no Settlement

What happens if Loan Charge arises before settlement?

All outstanding loans will be treated as income and taxed on 5 April 2019.

The deemed income will be taxable at the taxpayer’s marginal rate of tax.  This could elevate their tax rate beyond 40% and into the additional rate, 45%.

This may impact some income dependent charges or benefits including:

  • entitlement to tax free childcare
  • the high income child benefit charge
  • entitlement to some tax credits

If there is no settlement before 5 April 2019 and a taxpayer fails to return/pay the Loan Charge the taxpayer is likely to face:

  • continued HMRC scrutiny
  • higher tax bills
  • interest
  • possible penalties

The HMRC message is clear; the longer a taxpayer takes to settle, the more they are likely to pay.

Anyone seeking to exit any form of tax avoidance can contact me at amaxfield@hwca.com, or Paul at pmalin@hwca.com, to explore their options, while options exist.

If you cannot find the information you need on our website, please contact Paul Malin or Andy Maxfield using our contact form or email directly to pmalin@hwca.com or amaxfield@hwca.com

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Haines Watts Birmingham
Sterling House
71 Francis Road
Edgbaston
Birmingham
B16 8SP

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Leeds

Haines Watts Leeds
Sterling House
1 Sheepscar Court
Meanwood Road
Leeds
LS7 2BB

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Haines Watts London
New Derwent House
69 – 73 Theobalds Road
London
WC1X 8TA

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