Disguised Remuneration Disclosure Facility
Disguised Remuneration/EBT Loans: HMRC Settlement Facility
They think it’s all over – it’s not now.
Unlike the famous football World Cup comment in which the game was sealed with a late winning goal, HMRC has found a way of removing the goalposts completely to recover additional taxes and NIC going back as far as 1999.
For several years now HMRC has been targeting taxpayers who have been involved in avoidance schemes under which a small salary is paid and declared with the significant balance paid in the form of untaxed loans. Many taxpayers opted to settle their liabilities on the basis the loans would be treated as taxable but only for those years for which HMRC was in time to recover the duties due, the protected years. The years where HMRC was out of time, the unprotected years, HMRC took no further recovery action.
New rules were introduced and finalised in the Finance Act No2 FA2017 whereby all loans remaining untaxed would be at 5 April 2019 taxed as if they were income of the taxpayer in the tax year 2018/2019. This would include a charge for those years for which HMRC has not protected its position.
The new tax charge will apply to a loan (or loan transfer arrangement) where:
- If it had been made on 5 April 2019 it would have fallen within the disguised remuneration rules (including the Finance Bill 2016 and 2017 changes);
- It was made on or after 6 April 1999; and the loan, or part of it, is still outstanding at 5 April 2019
The charge will not apply if by 5 April 2019:
- The loan is repaid in full;
- The loan is from an amount on which income tax has been accounted for in full (including under settlement with HMRC); or
- The loan has been taxed in full under the disguised remuneration rules, or
- If any exclusions apply.
Many clients settled their dispute with HMRC by agreeing to pay the duties due for the protected years. However, the new rules, not envisaged at the time of settlement, mean the only way to avoid the new loan charge is to pay the tax due for the unprotected years as well. This can be achieved through a voluntary settlement with HMRC, see paragraph 2.1 of this link: Disguised remuneration: detailed settlement terms
The deadline for registering an interest in settling with HMRC is 31 May 2018 followed by the provision of relevant information soon after. A failure to register means the loan charge will kick in.
There may also be IHT issues to consider particularly if a trust was involved such as in an EBT arrangement.
Some clients may need to negotiate a time to pay arrangement in view of this unexpected additional liability.
Gilbert Tax understands that people sometimes make mistakes in their dealings with HMRC and that HMRC make mistakes in dealing with taxpayers. Many people do not know how to deal with HMRC or who to turn to for help resolve the tax dispute.
Gilbert Tax is a firm of tax advisors who specialise in resolving people's problems with HMRC. We have extensive expertise in dealing with all forms of tax investigations and tax disputes as well as with taking matters to the Tax Tribunal where agreement cannot be reached.
Gilbert Tax deal both directly with the individual who is under enquiry and also work with many firms of accountants supporting them in dealing with HMRC disputes and advising them on how to handle HRMC to get the best result.
The fact is that proper management of HMRC is the best way of reducing the tax, interest and penalty as well as the time taken in resolving any tax dispute.
Gilbert Tax are none judgemental and rigorously defend your position within the scope and parameter of the law. We take control and manage the process to minimise the interruptions that any form of tax investigation causes to an individual's life and business.