Posted: February 21, 2019
The deadline for Disguised Remuneration (DR) scheme users to reach a settlement with HMRC to ensure that the 2019 Loan Charge does not apply is now only six weeks away. Users of DR schemes must settle historic tax liabilities or repay the relevant loans ahead of 5 April to avoid the 2019 Loan Charge.
DR schemes are a wide variety of structured, and complex, tax avoidance schemes where income was drawn as some form of loan rather through traditional routes such as dividends or salaries. HM Revenue and Customs have put in place various measures to restrict the use of these schemes over recent years and the most recent measure is what is termed the 2019 Loan Charge.
The 2019 Loan Charge has been somewhat controversial due to the retrospective application of the legislation and the potentially severe impact on scheme users. Burgess Hodgson Partner Tom Saltmer advises that the tax liabilities arising from the 2019 Loan Charge can be substantial “the legislation underpinning the 2019 Loan Charge is complex and can have potentially severe impact on scheme users, the legislation effectively takes all outstanding loans from DR schemes over the previous 20 years and subjects them to tax on 5 April 2019”
Tom Saltmer advises “DR scheme users do need to be considering their position now ahead of 5 April 2019 – should DR scheme users decide that settling the tax liability with HMRC is the best option then this needs to be concluded by 5 April 2019 to avoid the 2019 Loan Charge.”
Finally, Tom Saltmer advises that scheme users do need to take some action ahead of 5 April 2019 “there are effectively three options for scheme users either to pay the 2019 Loan Charge, settle their tax affairs with HMRC or to repay the loans – doing nothing is not an option.”
Tom Saltmer BBA FCA CTA