Were you sold a disguised remuneration tax avoidance scheme?

Promoters of disguised remuneration tax avoidance schemes claimed that the schemes successfully avoided income tax and national insurance contributions. They were sold to employers and individuals (those used by contractors, are known as contractor loans). 

These schemes usually involved a ‘loan’ or other payment from a third party which, in reality, would never be repaid.

A specific tax charge on disguised remuneration schemes, called the Loan Charge, was introduced on 5 April 2019 to defeat the schemes once and for all. 

Exemptions

If an employee or employer has accounted for all tax and national insurance contributions due on the income received as a loan by 5 April 2019, they are exempt from the Loan Charge.

The Loan Charge also does not apply to loans made before 9 December 2010 and to loans made from 9 December 2010 to 5 April 2016 if those loan arrangements were reasonably disclosed to HMRC for that tax year, and HMRC had not taken any other action (for example, by opening an enquiry).

Are you liable? 

A loan is classed as outstanding if the total sums loaned are more than the total repayments made. 

All disguised remuneration loans that are not exempt as above and were outstanding on 5 April 2019, are treated as employment income received on that date, or as trade profits arising in the tax year 2018 to 2019, depending on the type of scheme used.

This means that loans outstanding on 5 April 2019 have incurred an income tax and national insurance contributions charge as if the amount of the loans were earnings or profits received in the tax year 2018 to 2019.

Contact Patrick Cannon today for further assistance and help with the disguised remuneration calculation.

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