On 10 August 2017, HMRC published a new anti-avoidance ‘Spotlight 39’. This confirms HMRC’s view that re-describing a loan as money held in a fiduciary capacity will not work to avoid a charge under the new provisions due to apply to any loans outstanding on 5 April 2019, which extend the scope of the disguised remuneration rules.
Changes to the disguised remuneration rules (contained in Part 7A of ITEPA 2003), included in Finance (No.2) Bill 2017, impose a Part 7A charge on loans outstanding at 5 April 2019. This measure is intend to persuade companies with employee benefit trusts (EBTs) that made loans to employees before Part 7A came into force, to wind up the arrangements.
According to the new Spotlight, HMRC have become aware that some taxpayers are being advised that re-describing an existing loan as money held in a fiduciary capacity will avoid the new charge. HMRC’s message is clear; this will not work and “the only way you can avoid the new loan charge in 2019 is by making a repayment of the loan balance or settling your tax liability with HMRC in advance”.
The Spotlight can be viewed here.