If you, or your employees, have ‘disguised remuneration loans’ outstanding on 5 April 2019, a charge to PAYE and NIC will arise. If you are involved in such arrangements, you can take any necessary action before 5 April 2019.
On 1 April 2019, HMRC issued guidance on how to calculate and report the PAYE and NIC due on these payments. See our news update on Disguised Remuneration loan charge.
The charge applies where a loan was made to an employee/officer (or person connected to them) at any time if it was made on or after 6 April 1999 and part or all of it is outstanding (i.e. the principal has not been repaid in full) at the end of 5 April 2019 and it falls into one of the following three categories:
Participators in close companies: similar to the provisions for employees but:
Self-employed (sections 23A to 23H ITTOIA 2005): applies if an individual provides their services to clients that do not directly employ them. they may provide services through:
If the arrangement does not fall into one of the three 'buckets' above the 5 April charge will not apply. But where it does
On 14 February 2019, HMRC published a new policy paper on the DR loan settlement arrangements. There is one comment in particular which we believe is helpful. This is as follows:
“The charge on outstanding disguised remuneration loans, known as the 2019 loan charge, was announced at Budget 2016 and was introduced in the Finance Act (No 2) 2017. The charge will apply to all loans made since 6 April 1999 if they are still outstanding on 5 April 2019. The charge will not arise on outstanding loans if the user has agreed or is progressing towards settlement with HMRC before 5 April 2019.”
Therefore, a charge will not arise on 5 April 2019 in respect of the amounts where you are currently progressing the settlement. HMRC are encouraging taxpayers to commence settlement discussions if they have not already done so. If you would like to settle and avoid the 5 April 2019 charge you need to submit the settlement pack as soon as possible. This will close the matter for earlier years whereas the loan charge will not.
If you are already speaking to someone in HMRC about their use of a disguised remuneration scheme, or if you have a customer compliance manager, you should tell them they want to settle their disguised remuneration tax affairs.
If you are not already speaking to someone at HMRC but want to settle, you can contact HMRC by emailing:
The taxpayer would have to declare the outstanding loan in order to pay the PAYE due on 5 April 2019. HMRC issued guidance on what has to be done on 26 February 2019 (this is very new guidance), so the obligations are now clear:
If you are concerned that you may have facilitated or received disguised remuneration loans then it is important that you follow the steps above. HMRC have issued helpful guidance for tax payers and tax advisors:
If you have queries on technical points please contact Caroline Harwood or your usual Crowe advisor.