If you have outstanding disguised remuneration loans, you can settle them under the 2020 terms.
This guidance has been updated, following changes made to the loan charge in Finance Act 2020.
If you have outstanding disguised remuneration loans, you can settle them under the 2020 settlement terms. These terms should be used for settlements in relation to all disguised remuneration liabilities.
By contacting HMRC to settle your tax affairs, you can agree what you owe and, if you need to, arrange a manageable payment plan. Settling your disguised remuneration scheme use will give you certainty about your tax affairs and help you get out of tax avoidance for good. It may also mean you do not face a bigger tax liability if the scheme you used is referred to the tribunal.
If you received a disguised remuneration loan through an employer, and that employer is currently in an insolvency process, we may engage with the Insolvency Office Holder dealing with the insolvency before we can agree to settle with you. Due to the way the insolvency interacts with settlement in this situation, we recommend that you seek professional advice before you contact HMRC to discuss settlement.
These terms should be used for settlements in relation to all disguised remuneration liabilities. There is a different process if you want to settle your tax affairs for other types of tax avoidance scheme.
Paying what you owe
Agreeing a settlement with HMRC allows those with disguised remuneration liabilities to bring their avoidance use to a conclusion.
The settlement terms are different depending on if you’re classed by HMRC as:
- a contractor
- an employer
- an employee
Tax years subject to an open enquiry or assessment will need to be resolved, either by way of settlement with HMRC or by closure notice. The way an open enquiry is resolved will depend on factors such as:
- the type of scheme used
- if there is any residual tax owing
- if an accelerated payment notice has been paid
Where residual tax is owed it will need to be paid to resolve the open enquiries, apart from where certain criteria are met. Read section 6 of Disguised remuneration settlement terms 2020 for more information.
Where a case isn’t resolved through settlement, an appeal may be referred to the tribunal. This means that an independent tribunal or court will decide how much tax is owed.
Where more than one Income Tax and National Insurance contributions liability has occurred on the same underlying income, double taxation relief will be available. Read section 5 of Disguised remuneration settlement terms 2020 for more information.
You’re classed as a contractor if you provide your services to clients that do not directly employ you. You may be employed or self-employed and provide your services through:
- an umbrella company
- a partnership
- an agency
- your own company
If you’re not sure if this affects you, check if you’ve used a contractor loan scheme.
You’ll need to pay:
- Income Tax on the amount of all disguised remuneration loans or payments made, net of any scheme fees paid — this will be calculated using the bands and rates in the years the loans or payments were made
- late payment interest for any years where we have an open enquiry into your tax affairs, or where HMRC is within time limits to open an enquiry, or where an assessment is in place
- National Insurance contributions, if you’re a self-employed contractor — including if you work through partnerships
- any penalties and Inheritance Tax, depending on your circumstances
The overall amount may be reduced by any Income Tax you’ve paid because you or your employer declared a benefit in kind on the basis of receiving a beneficial loan. This is only an option if the relevant tax year is in time to be amended, or for an overpayment relief claim to be made.
You’re classed as an employer if you used a disguised remuneration scheme to reward your employees.
You’ll need to pay:
- Income Tax and National Insurance contributions on the amount contributed to or allocated within the scheme — this will be calculated using the bands and rates in the years you contributed to the scheme or allocations were made
- late payment interest for any years where we have an open enquiry into your tax affairs — or where we are within time limits to open an enquiry, or where an assessment is in place
- any penalties and Inheritance Tax, depending on your circumstances and the type of scheme you entered into
The overall amount may be reduced by any National Insurance contributions paid by you or Income Tax paid by your employee, on the basis of getting a loan as a benefit in kind. This only applies for tax years in time to be amended or for an overpayment relief claim to be made.
You’ll get Corporation Tax relief on the fee paid to the promoter for entering into the scheme.
You’re classed as an employee if you’re not a contractor and you were paid through a disguised remuneration scheme your employer used.
If your employer has not already settled their tax affairs, you’ll need to pay:
- the Income Tax and National Insurance contributions that your employer would have paid if they were settling their tax affairs on the amounts paid to you through the scheme
- late payment interest for any years where we have an open enquiry into your employer — or where we are within time limits to open an enquiry, or where an assessment is in place
- any penalties and Inheritance Tax, depending on your circumstances and the type of scheme
This amount may be reduced by any Income Tax paid by you, where you or your employer declared a benefit in kind on the basis of receiving a beneficial loan. This is only an option if the relevant tax year is in time to be amended, or for an overpayment relief claim to be made.
Providing HMRC with settlement information
So that you can settle your tax affairs, you’ll need to provide us with the following information:
- names of the disguised remuneration schemes used (if known)
- scheme reference number or disclosure of tax avoidance scheme (DOTAS) number for each scheme used (if known)
- tax years that you used a disguised remuneration scheme
- disguised remuneration loan amounts in each tax year
- if the lender is writing off any loan amounts
Individuals who want to settle their disguised remuneration scheme use will also need to provide HMRC with further information:
- National Insurance number
- Self Assessment Unique Taxpayer Reference (UTR) if you have one
- if you were employed, self-employed or a member of a partnership when you used the scheme
Employers who want to settle their disguised remuneration scheme use will also need to give HMRC the:
- names and National Insurance numbers of the individuals who received loans
- amount and dates of the contributions to the trust (if applicable)
When you provide HMRC with your settlement information, we’ll consider it and contact you to let you know the next steps of the settlement process. We may also need to ask you for more details.
How to provide settlement information for individuals
Individuals (contractors and employees) who used disguised remunerations schemes should give HMRC their settlement information electronically using the online form.
To use the online form, you need a Government Gateway user ID and password. Find out more about registering for Government Gateway if you do not have log in details.
If you’re not able to use the online form, contact HMRC and we’ll discuss next steps with you.
How to provide settlement information for employers
Employers who used disguised remunerations schemes should send HMRC their settlement information to email: email@example.com.
Problems paying what you owe
If you think you’ll have difficulty paying what you owe under the settlement terms, we can help you settle your tax affairs and get out of disguised remuneration avoidance schemes by spreading payments over a number of years.
There is no maximum time period for payment arrangements under these terms and you will not pay more than 50% of your disposable income, unless you have a very high level of disposable income. If you think you’ll need an extended period to pay what you owe, you should contact HMRC.
You can pay the amount due over a period of up to 5 or 7 years, without needing to give any detailed financial information.
If you do not have disposable assets and your income is less than £50,000 in the 2017 to 2018 tax year, HMRC will agree time to pay arrangements for a minimum of 5 years. If your income is less than £30,000 in the 2017 to 2018 tax year, we’ll agree a minimum of 7 years.
If your income is higher or you need a longer period to pay, we can still help you. There are no defined minimum or maximum time periods for payment arrangements, but we’ll need more information.
If you’re providing HMRC with settlement information using the online form, and you need to pay your settlement by instalments, have the following information ready:
- monthly income and outgoings
- details of any outstanding loans (not disguised remuneration loans) or regular payment arrangements
- the upfront payment and monthly amount you can afford to pay
- details of any certificates of tax deposits you want to use towards settlement
- take into account any changes in your circumstances and discuss options to manage your case in the best way
- always take a realistic look at your income, assets and essential outgoings, alongside what you owe and any other debts
- always consider how much you’re able to pay, and over what period
- expect you to pay the outstanding amount in the shortest possible time
If you think you have no realistic way of paying what you owe, you should discuss this with us when we contact you about your settlement.
If you already have one, you can speak to your HMRC contact about settling your disguised remuneration scheme use. If you do not have an HMRC contact, you can use the following contact methods.
For contractor loan schemes, email: firstname.lastname@example.org or Telephone: 03000 534 226.
For all other disguised remuneration scheme users, email: email@example.com.
We’ll talk with you about your options and work with you to resolve your tax matters in the best way.