In its letter HMRC makes clear it believes the recipient will be affected by the loan charge which comes into effect on 5 April 2019 as it applies to all disguised remuneration loans which are outstanding at that date.
The taxpayer is then encouraged to come forward to reach settlement so as to avoid the impact of the loan charge. Come April paying the loan charge on outstanding loans could be more expensive in the long run. If settlement isn’t reached and the loan charge applies, the taxpayer will have to (all of the following apply):
- include the outstanding disguised remuneration loans or credits on a Real Time Information (RTI) submission in April 2019 and use PAYE to work out the tax and NICs dues
- treat these amounts as income from employment for each employee on 5 April 2019
- pay the PAYE tax and NICs due by 22 April 2019 (if paying electronically) or earlier if paying by post
For the purposes of the loan charge, ‘outstanding loans’ has a specific definition. A loan is outstanding if the total amounts loaned are more that the total repayments made. This means that a loan is treated as outstanding if it has not been repaid in full, even if it has been written off or the lender has released it.
The Bedrock team is working with a significant number of clients who are seeking settlement prior to the 5 April 2019 so as to avoid the loan charge. These include people who have used contractor arrangements or other loan based schemes to reduce the amount of tax they had to pay. You can find out more about our approach to settlement here.
Give us a call today as it’s not too later to start the HMRC settlement process with our assistance. We will prepare your settlement pack for submission and ensure HMRC’s calculations are correct. It’s worth being aware that HMRC have said they are struggling with the volume of work related to settlement cases. However they have assured us that you will be able to settle under the current terms and will not be disadvantaged subject to starting the process now.