UK to review 'appropriateness' of disguised remuneration loan charge

Out-Law News | 18 Sep 2019 | 8:45 am | 1 min. read

The UK Treasury has commissioned a review of the disguised remuneration loan charge, to establish whether it is an "appropriate" way of tackling potential tax avoidance.

Sir Amyas Morse, former chair of the National Audit Office (NAO), will carry out the review. He will report back by November, in order to "give taxpayers certainty ahead of the January self assessment deadline".

Disguised remuneration, or contractor loan, schemes were designed as a way of avoiding income tax and national insurance contributions (NICs). They involve the payment of a loan in place of income to an employee or contractor by a third party, such as a remuneration trust or employee benefit trust (EBT). These loans were not designed to be repaid.

In 2016, the government announced that a 'loan charge' would apply to any such loan paid out by a disguised remuneration tax avoidance scheme after 6 April 1999 which was still outstanding as of 5 April 2019, unless the individual had agreed a settlement with HM Revenue and Customs (HMRC). The loan charge has been heavily criticised by campaigners, including freelancer and contractor organisations, who have argued that it is retrospective in effect.

Disguised remuneration schemes were used by "tens of thousands" of taxpayers, according to the government.

Jesse Norman, financial secretary to the Treasury, said: "These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the loan charge is the appropriate way of tackling them".

The review will focus on the impact of the loan charge on affected individuals who directly entered into disguised remuneration schemes, according to the government. The loan charge will remain in force while the review is underway.