Prime Minister announces a loan charge review
09 September 2019
HMRC has put disguised remuneration loan charge settlements on hold following Prime Minister’s Questions last week The Telegraph reports.
The Prime Minister was asked if he was going to take action on the loan charge, a promise he had made in his leadership campaign. “It is a very, very difficult issue and what I have undertaken to do is have a thorough review,” he said.
Disguised remuneration schemes are schemes which pay users their income in the form of loans. The loans were never intended to be repaid, so they are no different to normal income and are taxable.
The charge on outstanding disguised remuneration loans – known as the ‘loan charge’ - was introduced to tackle the use of disguised remuneration schemes and came into effect on 5 April 2019. The charge applies to all loans made since 6 April 1999 if they are still outstanding on 5 April 2019 and the recipient has not settled the tax due. The legislation added a 45% non-refundable charge on all loans advanced through the schemes – some of them dating back to 20 years ago – unless the individual had agreed with HMRC to settle their tax affairs by midnight on 5 April.
Since the loan charge was announced at Budget 2016, HMRC has agreed on settlements on disguised remuneration schemes with employers and individuals worth more than £1 billion. Around 85% of this came from settlements with employers and 15% from settlements with individuals.
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