HMRC is aware of claims to avoid the 2019 loan charge on disguised remuneration being made by promoters of tax avoidance schemes, and warns that these do not work. Last month the Revenue published Spotlight 39 to explain its rationale.
Participants of tax avoidance schemes that employ the use of loans are being told that they can sign documents saying that the sums they have received from their disguised remuneration scheme under loan arrangements are not loans at all. Instead, these sums of money are merely held by them in a ‘fiduciary capacity’; for example, an individual acts in a fiduciary capacity if they hold money, or assets, for the benefit of someone else and not themselves.
HMRC state that renaming something now doesn’t change what happened in the past. Attempting to describe a loan as something else doesn’t mean it is not a loan.
The loan charge will apply to more than just loans, including any form of credit or other right to a payment regardless of what it’s called. Anyone adopting this approach and choose not to reflect the loan charge on their tax return may face a significant penalty in addition to the tax charge.
Deliberately misleading, or concealing information from HMRC may result in criminal prosecution.
Reflecting the legislation, the only way to avoid the loan charge in 2019 is by making a repayment of the loan balance, or settling their liability with HMRC in advance.
If you are already speaking to someone at HMRC about your use of a disguised remuneration scheme, you should contact them. Alternatively, if you are not in contact with anyone at HMRC, you can e-mail firstname.lastname@example.org.