Disguised remuneration—the loan charge

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Disguised remuneration—the loan charge
  • Outstanding loan charge
  • The 2019 Morse review and resulting FA 2020 amendments
  • Disguised Remuneration Repayment Scheme 2020
  • Settlement opportunity
  • Future measures
  • Compatibility with human rights
  • Accelerated payments
  • Postponement of the loan charge for approved fixed term loans (historical)
  • Loans and quasi-loans made in currencies other than sterling and depreciating currencies

Disguised remuneration—the loan charge

Coronavirus (COVID-19): in light of the coronavirus crisis, the government announced temporary measures to support the self-employed. For more detail, see Practice Note: Self-Employment Income Support Scheme—CLOSED. HMRC confirmed that, where a claim is to be made through the Self-Employment Income Support Scheme (SEISS) and the individual in question had loans impacted by the loan charge and had not agreed a settlement with HMRC before 20 December 2019, HMRC will work out the individual’s eligibility for an SEISS based on either: (a) the average of the tax years 2016–17 and 2017–18, or (b) solely tax year 2017–18 if the individual was not self-employed in tax year 2016–17. The self-assessment tax return for the tax year 2018–19 did not have to be submitted by 23 April 2020, but should have been filed by 30 September 2020 (in accordance with the extension provided as part of the government’s response to the Morse review of the loan charge (see below)).

One of the criticisms of the disguised remuneration legislation, introduced as Part 7A of the Income Tax (Earnings and Pensions) Act 2003 by Finance Act 2011, was that it did not adequately deal with both the historic (ie pre-9 December 2010) and the continued use of loan schemes. As a result, Budget 2016 proposed measures aimed at encouraging users of such schemes to settle outstanding

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