Recent changes to the scheme
HMRC targeted certain disguised remuneration schemes by introducing a tax charge on any loans outstanding on 6 April 2019. Consequently, many individuals and companies entered into settlement agreements with HMRC to avoid paying the loan charge.
Following criticism of HMRC’s settlement scheme and a subsequent recent independent review, the Government announced the following changes:
- the loan charge applies only to outstanding loans made on, or after, 9 December 2010;
- the loan charge does not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme was fully disclosed to HMRC and HMRC does not have an open enquiry;
- affected taxpayers can elect to spread the amount of their outstanding loan balance evenly across three tax years: 2018/19, 2019/20 and 2020/21.
Action to take before 30 September 2020
For individuals who have settled with HMRC, or those who have outstanding loans which remain within the charge, they have until 30 September 2020 to file, report and pay the Loan Charge to HMRC.
A Loan Charge online reporting form must be completed via .Gov.uk. Those who have previously completed this form may need to amend it if they want to spread the outstanding loan balance over 3 years. You will also need to complete your 18/19 self-assessment return by the 30 September deadline.
Further information
You can find further information on this within the .GOV website here.
Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.