Settling Disguised Remuneration avoidance schemes
30 September 2018
Disguised remuneration schemes are arrangements which pay loans instead of ordinary income to avoid Income Tax and National Insurance contributions. A charge on outstanding disguised remuneration loans, known as the 2019 loan charge, has been introduced to tackle the use of these schemes. It will apply to anyone who has used one of these tax avoidance schemes and who have not repaid their loan or agreed on a settlement with HMRC by 5 April 2019
All relevant information should have been provided for HMRC to calculate the settlement of any disguised remuneration avoidance schemes by 30 September 2018. This date was put in place to ensure HMRC has time to process the settlement before the loan charge begins on 5 April 2019.
This date has now passed and if you haven’t contacted HMRC but you should have done, don’t delay any further, contact them now on 03000 534 226 to discuss your options. HMRC will work with you to resolve your tax matters in the best way.
HMRC can help you settle your tax affairs and get out of disguised remuneration avoidance schemes by spreading payment terms over a number of years.
If the new loan charge will apply and you want to settle your use of these schemes before it takes effect, you can pay the amount due over a period of up to 5 years, as long as:
- Your expected current year taxable income is less than £50,000 (for employees, this is your expected gross earnings, for self-employed people, this is your expected net profit)
- You’re no longer engaged in tax avoidance
If your income is higher or you need a longer period to pay, HMRC can still help you. There are no defined minimum or maximum time periods for payment arrangements. HMRC will:
- Take into account any changes in your circumstances and discuss options to make sure it manages your case in the best way
- Always take a realistic look at your income, assets and essential outgoings, alongside what you owe and any other debts
- Always consider how much you’re able to pay, and over what period
- Expect you to pay the outstanding amount in the fastest possible time
If the loan charge arises before you settle, all outstanding loans will be treated as income and taxed on 5 April 2019.
This means you’ll have only the personal allowance for the tax year 6 April 2018 to 5 April 2019 taken into account, and you’ll likely pay more tax at higher or additional rates.
This may impact some income dependent charges or benefits including:
- Entitlement to tax-free childcare
- The high-income child benefit charge
If you do not settle before 5 April 2019 and fail to pay the loan charge you may face:
- Continued enquiries
- Higher tax bills
- Interest
- Possible penalties
The longer you take to settle your use of these schemes, the more you’ll pay in interest charges.
Even if you think you have no realistic way of paying what you owe, you should still call HMRC as soon as possible.
Telephone: 03000 534 226