The 2019 Loan Charge - Don't be caught out!
With just on a month to go until the one-off tax charge on disguised remuneration loans comes into effect, there is no sign that HMRC is backing off introducing the measure, or that the concern being stated in many corners, including the House of Lords, is going to be effective in stopping the implementation of the charge. Indeed, in an interview on Moneybox on BBC Radio 4 last week, Treasury minister Mel Stride gave no indication that HMRC would be abandoning the 2019 Loan Charge.
All of this means that tax payers who are affected by the 2019 Loan Charge should ensure they are not caught out by the media and political interest surrounding this legislation and ensure that they are fully engaged with HMRC before the 2019 Loan Charge crystallises on 5 April 2019.
Simply put, you may be affected by the 2019 Loan Charge where:
- instead of receiving remuneration for services provided as a paid director, employee or self-employed consultant, you received a loan instead; and
- the basis on which the loan was made was that it would never be repaid.
Where such a loan was made at any time after 6 April 1999 and it remains outstanding as at 5 April 2019, the amount of the outstanding loan will be added to your other income for the 2018/2019 tax year and you will be taxed at the relevant rate.
Where you are caught by the 2019 Loan Charge, you can either:
- pay the outstanding loan in full before 5 April 2019; or
- engage with HMRC in order to reach a settlement as to any tax which may be payable.
HMRC has issued guidance on how taxpayers can settle their potential tax liability should the disguised remuneration loan charge apply. Initially HMRC had set 31 May 2018 as the date by which taxpayers were required to register their interest to settle their tax affairs. However, HMRC are now saying that they will continue to accept approaches and receipt of information, provided this is received by them no later than 5 April 2019. You can read HMRC's guidance here or you can contact Cathy Bryant for further information.