In what appears to be a response to recent concerns that contractors may be forced into bankruptcy because of the disguised remuneration (DR) loan charge, HMRC have recently updated their guidance Disguised remuneration: settling your tax affairs. The department have now confirmed how long a freelancer, who wishes to settle their tax affairs before the DR loan charge becomes effective from 5th April 2019, can spread their tax payments.
Tax arising on loans ex contractor loan schemes can be paid over a period of up to 5 years, provided:
Where a person’s income is greater than £50K or they need a longer period to pay, then HMRC say they can still help. Whilst there are no minimum or maximum time periods for payment arrangements, HMRC will:
HMRC are very keen that contractors should contact them by 30th September 2018 with a view to settling their tax affairs as they claim this will give individuals certainty about the DR scheme they were involved in and may also mean that they:
Freelancers wishing to settle their tax before the DR loan charge kicks in must provide HMRC with the following information by 30th September 2018:
If known, contractors must also tell HMRC of the:
A contractor is defined as someone who provides their services to clients that do not directly employ them, such as an umbrella company, agency, partnership or their own PSC.
Contractors will be required to pay:
Any Income Tax paid on a previously declared benefit-in-kind on a relevant loan will be used to reduce the tax arrears provided the relevant tax year is in time to be amended, or a valid claim for overpayment relief can be made.
An employee is someone who is not a contractor and was paid via a DR scheme used by their employer. If their employer has not already settled their tax affairs, then the employee could be left responsible for both the tax and NIC that the employer was responsible for paying, along with late payment interest, penalties and potential IHT.
For those that have not yet registered their interest in entering into settlement with HMRC, there is still time to do so by e-mailing: