News & Insights

Disguised remuneration: Independent Loan Charge review

The government has now announced the outcome of its review of the disguised remuneration and the loan charge.

As detailed in the announcement,,  the government has announced it will make a package of changes to the loan charge, a measure designed to tackle a form of tax avoidance known as disguised remuneration.

The key changes to the loan charge are:

  • the loan charge will apply only to outstanding loans made on, or after, 9 December 2010
  • the loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action (for example, opening an enquiry)
  • people can now elect to spread the amount of their outstanding loan balance (as at 5 April 2019, recalculated in line with the above changes) evenly across 3 tax years: 2018 to 2019, 2019 to 2020 and 2020 to 2021. This will give greater flexibility on when the outstanding loan balance is subject to tax and may mean that the loan balance is not subject to higher rates of tax.
  • HMRC will refund voluntary payments (known as ‘voluntary restitution’) already made in order to prevent the loan charge arising and included in a settlement agreement reached since March 2016 (when the loan charge was announced) for any tax years where (HMRC will note be able to process any refunds until changes to the loan charge legislation have been enacted):
    • the loan charge no longer applies (loans made before 9 December 2010)
    • loans were made before 6 April 2016, the avoidance scheme use was fully disclosed to HMRC and the department did not take action (for example, opening an enquiry)

The package also includes a number of changes that will give customers additional flexibility over the way they pay:

  • if you do not have disposable assets and earn less than £50,000, HMRC will agree Time to Pay arrangements for a minimum of 5 years. If you earn less than £30,000, we will agree a minimum of 7 years. If you need longer to pay, you will need to provide HMRC with detailed financial information. There is no maximum time limit for a Time to Pay arrangement
  • in line with existing practice, if you need Time to Pay, you will pay no more than 50% of your disposable income, unless you have a very high level of disposable income.

This article contains public sector information licensed under the Open Government Licence v3.0 (