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The 2016 Budget included a clause on future measures to tackle the current and historic use ‘disguised remuneration’ schemes. These are generally schemes that involve individuals being paid in loans through structures such as an offshore Employee Benefit Trust (EBT) or Contractor Loans. In both instances, whilst the loans are theoretically repayable, the Loan Agreement is drawn up in a such a way to ensure that, in reality, these loans are never repaid.
The clause ended “…this will include a new charge on loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5th April 2019.”
Two years on and this date is drawing close, especially considering that it is the last date of the current 2018-19 tax year.
The HMRC has assured everyone that submitted their information to request a settlement by 30th September that “you will receive a response which will allow you sufficient time to settle ahead of the April 2019 Loan Charge”.
The question is what constitutes “sufficient time”? In our view, this has to a minimum of three months. In practice, this means that HMRC need to issue settlement offers before the Christmas holiday season.
In a landscape dominated by Brexit, we have a real concern as to whether this is going to be achievable by HMRC and to what the implications will be if a loan is outstanding on 5th April 2019 despite the best efforts of the tax payer. From this perspective, we are looking to the Budget at the end of the month to see if there is any movement on this.
On the settlement terms, faced with the real prospect of families being driven into bankruptcy, there has been a softening in tone from HMRC.
For someone with current earnings of up to £50,000 and who is no longer participating in a tax avoidance scheme, you can request time to pay of up to five years without needing to provide detailed information on your circumstances.
If your income is higher or you need a longer payment period, HMRC say “we will work with you to agree a suitable arrangement”.
At CooperFaure, we are representing a number of clients working under a raft of these schemes. If you are concerned about your situation, please contact us at tax@cooperfaure.co.uk for a free and informal consultation.
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