The government published its response to the independent review of the disguised remuneration loan charge on 20 December 2019. It has accepted the majority of the recommendations and announced a significant reduction in the scope of the loan charge.
On 21 January 2020 HMRC published draft legislation to implement the changes.
Under the changes, the loan charge will now apply only to loans outstanding at 5 April 2019 that were made on or after 9 December 2010. In addition, the charge will not apply to loans made before 6 April 2016 where use of the scheme was fully disclosed and HMRC took no action to protect its position.
The government announced that affected taxpayers will be allowed to spread their loan charge balance across three tax years. Those who have not yet settled with HMRC may provide an estimate of the tax due with their self-assessment return by 31 January 2020, or delay filing until 30 September 2020 (with penalties and interest waived between these dates).
Note that while loans entered into before 9 December 2010 are no longer within the scope of the loan charge, an underlying tax liability may remain. Such liability may be pursued by HMRC through its normal powers. We understand that HMRC intends to publish settlement terms for these liabilities in due course.
HMRC’s guidance on settling your tax affairs and how to report and account for your loan charge has been updated to reflect the main changes announced to date, and we would expect it to continue to be updated as further settlement terms are published. On 20 January 2020 HMRC published additional guidance on key aspects of the changes, including the self-assessment process.
The position is complex, and affected taxpayers should obtain advice on their own personal position and the action they should take.