Disguised remuneration—the loan charge
Disguised remuneration—the loan charge

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

  • Disguised remuneration—the loan charge
  • Outstanding loan charge
  • The Morse review and proposed legislative amendments
  • Compatibility with human rights
  • Postponement of the loan charge for approved fixed term loans
  • Accelerated payments
  • Loans and quasi-loans made in currencies other than sterling and depreciating currencies

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 the historic (ie pre 9 December 2010) and continued use of loan schemes. As a result, Budget 2016 proposed measures aimed at encouraging users of such schemes to settle outstanding liabilities. Those measures were introduced by Finance (No 2) Act 2017 (F(No 2)A 2017). Pursuant to those measures, there is a tax charge on outstanding loans or quasi loans which come within the amended Part 7A gateway which (in most cases) remained unpaid at the end of 5 April 2019. This provision is known as the loan charge.

For more detail on the disguised remuneration provisions generally, see the other Practice Notes in this subtopic and also: Disguised remuneration and EBTs—overview.

Originally, the loan charge applied to loans made on or after 6 April 1999. However, following the loan charge review (see below), it was announced on 20 December 2019 that legislation will be included in Finance Bill 2020 to ensure the loan charge only applies to loans taken out on or after 9 December 2010. The draft legislation was published on 20 January 2020.

Outstanding loan charge

F(No 2)A 2017, Sch 11 introduced provisions to charge to