Revised terms – Disguised Remuneration Settlement Opportunity

Executive Summary

HMRC have announced new (favourable) payment terms under the Disguised Remuneration settlement opportunity;

They will now accept instalment plans of up to five years where a tax payer has earnings (or self-employed earnings) of less than £50,000;

The settlement opportunity will close on 30 September 2018

Individuals who have received untaxed income under historic loan arrangements should review their affairs and consider making a voluntary disclosure to take advantage of the new terms.

HMRC have updated the available payment terms of the Disguised Remuneration settlement opportunity.

Under the revised terms, published on 18 July 2018, HMRC are prepared to offer an instalment period of up to five years to individuals with current year earnings or self-employment profits of less than £50,000.

Furthermore, according to the current guidance, payment plans under these terms will be granted without the need to provide detailed supporting information. Whereas, historically, it has been necessary to provide a meticulous analysis of household income and expenditure in order to justify any payment plan in excess of twelve months.

This represents a substantial policy change on the part of the Revenue, which will allow a great many more taxpayers to achieve a sustainable payment plan.

What’s happening?

On 5 April 2019, the balance of all outstanding loans made under contractor loan or employee benefit trusts will be immediately subject to income tax and may also be subject to national insurance contributions.

In advance of this HMRC are offering a final chance to settle the historic use of loan arrangements by 30 September 2018. The settlement opportunity is available to:

  • Employees
  • Employers
  • Contractors

However, the exact terms of the settlement will vary depending on which of the above is seeking to settle their affairs.

HMRC are writing to taxpayers who they suspect have used loan arrangements to encourage them to consider settling their affairs in advance of the loan charge.

Who is affected?

The forthcoming charge affects employed and self-employed individuals who have received loans from a trust or company.

There are many similar historic planning arrangements which fall within the scope of the ‘2019 loan charge’.

Although individuals will typically have received a loan from a company, remuneration trust, employee benefit trust or other “contractor loan” arrangements. In consequence of the loan arrangements the individuals concerned will typically have been advised that they will not pay any tax in respect of the loans received.

What should you do?

Individuals or employers who have received a letter from HMRC in relation to settling their affairs or who are concerned that they may be subject to the forthcoming loan charge should contact us now to discuss their historic tax affairs and consider settling by 30 September 2018. 

Edge Tax can assist taxpayers by reviewing the terms of historic loan arrangements together with any amounts received in order to determine the extent of any liabilities that may arise. We will prepare calculations for discussion for the taxpayer and, should they decide they wish to settle, can contact HMRC on their behalf to manage the process to conclusion.