Government acts on Disguised Remuneration Loan Charge Review recommendations

23 December 2019

The review by Sir Amyas Morse of the controversial loan charge has been released. In summary, most of his recommendations have been accepted by the Government and their impact is significant. There is more detailed guidance to come but the headlines are:

  • The loan charge will now only apply to loans made on or after 9 December 2010 – which is 11 years later than originally proposed. This date coincides with the change in law to target the use of disguised remuneration (DR) tax planning arrangements.
  • The loan charge will also not now apply to loans made before 6 April 2016 where the DR tax planning was fully disclosed and HMRC did not open an enquiry. The meaning of what is “fully disclosed” will be advised separately.
  • Payment of the loan charge where it is due can be spread evenly across three tax years and flexible payment plan terms will remain.
  • Taxpayers who settled with HMRC by making “voluntary restitution” in lieu of the loan charge for the years before 9 December 2010 (or qualifying periods before 6 April 2016) will be repaid by HMRC.
  • The filing of the 2018/19 tax returns can either be made by the normal due date of 31 January 2020, or 30 September 2020 without incurring any late filing penalties or interest on payment of the tax from the normal due date of 31 January 2020.

The changes set out above will be welcomed by many affected by the loan charge as it was originally enacted - campaigners should be congratulated for their successful lobbying.

The Government has, however, not simply thrown in the towel. It always maintained that the loan charge did not conclude the tax liabilities arising on the underlying DR tax planning and it has repeated this statement in its response to the loan charge review.

It goes further by saying that a new team will be set up in HMRC to conclude enquiries and bring in tax due for the users of DR tax planning arrangements and other forms of tax avoidance. It says that whist the team will urge individuals to settle (a formal settlement opportunity will be announced in 2020), it will have the skills and recourses to pursue cases through the Courts where necessary. 

What was already a complicated situation has just become more complicated and taking specialist advice is recommended.