Guidance

Disguised remuneration: settling your tax affairs

If you’re in a disguised remuneration tax avoidance scheme, you should settle your tax affairs and pay HMRC what you owe.

Overview

By contacting HMRC to settle your tax affairs now, you can agree with us what you owe and if required, arrange a payment plan.

Settling now will give you certainty about your disguised remuneration scheme and may also mean you:

  • do not have to pay the new loan charge that is being introduced
  • pay a lower rate of tax on your disguised remuneration loans - the loan charge will add all your loans together and tax them in one year
  • settle on the terms in this guide - if a scheme moves to litigation, these terms may no longer be available
  • do not face extra costs if the scheme moves to litigation

There’s a different process if you want to settle your tax affairs for other types of tax avoidance scheme.

How to settle your tax affairs

To start settling your tax affairs, you should register your interest with HMRC as soon as possible and provide all of the required information by 30 September 2018.

Register your interest

If you’re already speaking to someone in HMRC about your use of a disguised remuneration scheme, or if you have a customer compliance manager, you should register your interest with them.

If you’re not already speaking to someone at HMRC, register your interest by emailing:

Information you must send to HMRC

So that we can settle your tax affairs before the loan charge arises on 5 April 2019, you or your agent must send us all of the required information. If we do not receive all the information by 30 September 2018 we may be unable to reach a settlement with you before the loan charge arises. If possible, you should also send us your tax calculation for each year.

If you’re a contractor, or employee settling separately to your employer, you must tell us:

  • your unique taxpayer reference (UTR)
  • your National Insurance number
  • the amount of contractor loans or contributions made in each tax year
  • whether you want to claim a benefit in kind offset - if so, how much and for which years
  • the name of your employer

If you’re an employer, you must tell us:

  • your company name and company reference number
  • your PAYE reference number
  • the amounts and dates of funds paid into the scheme
  • details of any Corporation Tax relief you claimed on the contributions to the scheme
  • whether you want to claim a benefit in kind offset - if so, the relevant employees’ details, how much and for which years

For contractors, employees and employers, if known you must also tell us:

  • the date any trust, sub-trust or other entity was created
  • the amount of the contribution paid into it
  • assets held in that trust, other than cash or the loan agreements

You must tell us the correct amounts paid through disguised remuneration schemes. If we later find you’ve given us incorrect information, we can reopen your case and take other actions, like charging penalties.

Pay what you owe

The settlement terms are set out here and in the detailed guidance for tax agents. The settlement terms are different depending on whether you’re classed by HMRC as a contractor, employer or employee.

Contractors

You’re classed as a contractor if you provide your services to clients that do not directly employ you. You may provide your services through an umbrella company, agency, partnership or 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 net amount of all disguised remuneration loans or payments made - 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 HMRC has an open enquiry into your tax affairs, is within time to open one, or an assessment is in place
  • National Insurance contributions, if you’re a self-employed contractor, including 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 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.

Employers

You’re classed as an employer if you entered into a 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 HMRC has an open enquiry into your tax affairs, is within time to open one, or 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 receiving a beneficial loan and declaring 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 will not have to pay Corporation Tax on the fee paid to the promoter for entering into the scheme.

Employees

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, to settle yours you’ll need to pay:

  • the same amount of Income Tax and National Insurance contributions that your employer would have paid if they were settling your tax affairs
  • late payment interest for any years where HMRC has an open enquiry into your employer, is within time to open one, or 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 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.

If you have problems paying what you owe

If you have difficulty paying, HMRC can help you settle your tax affairs and get out of disguised remuneration avoidance schemes by spreading payments over a number of years.

If the new loan charge will apply and you want to settle your use of these schemes before it takes effect, you can pay the amount due over a period of up to 5 years, as long as:

  • your expected current year taxable income is less than £50,000 (for employees, this is your expected gross earnings, for self-employed people, this is your expected net profit)
  • you’re no longer engaged in tax avoidance

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. We will:

  • take into account any changes in your circumstances and discuss options to make sure we 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 fastest possible time

Even if you think you have no realistic way of paying what you owe, you should still call us as soon as possible.

Telephone: 03000 534 226

We’ll talk with you about your options and work with you to resolve your tax matters in the best way.

Published 7 November 2017
Last updated 18 July 2018 + show all updates
  1. The disguised remuneration settlement terms in section 'If you have problems paying what you owe' have been updated.
  2. Amendments made to the disguised remuneration settlement terms.
  3. First published.