On 20 December 2019, the government announced changes to the loan charge following the independent review led by Sir Amyas Morse.
HMRC has already published details of the key changes and what they mean for different customers, which has now been updated with more information.
This additional guidance provides more information on key areas.
Loans made on or after 9 December 2010
The loan charge will apply only to loans made on or after 9 December 2010 that were outstanding on 5 April 2019 subject to if the loan was made in an unprotected year.
If you were employed when you received a loan, the loan charge applies to outstanding loans made between and including 9 December 2010 and 5 April 2019.
If you were self-employed when you received a loan, the loan charge applies to outstanding loans made between and including 9 December 2010 and 5 April 2017. Any loans received after this date are still chargeable as income from self-employment and should have been included in your Self Assessment tax return for the relevant year.
You should check bank statements, loan agreements and copies of contracts to find out if you were employed or self-employed and to check when your loans were made.
If you’re still not sure what type of loan you received, or if you’re unsure if the loan charge applies to your loans, email: cl.resolution@hmrc.gov.uk for contractor loan schemes.
For all other disguised remuneration scheme users, email: CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk.
Loans received in the tax year 2010 to 2011
You’ll need to check any loans received between and including 6 April 2010 and 5 April 2011 as loans taken out before 9 December 2010 are no longer in scope of the loan charge.
You should check bank statements, loan agreements and copies of contracts to find out when your loans were made. If you still do not know, you can apportion your total outstanding loan balance on a just and reasonable basis. For example, it may be just and reasonable to apportion two-thirds of your total 2010 to 2011 loan balance to pre 9 December 2010 (April to December) and one-third to post 9 December 2010, if you received equal payments throughout the tax year.
Unprotected years and reasonable disclosure
An unprotected year, for the purposes of the loan charge, refers to a tax year where, at 5 April 2019 HMRC had not taken action to protect its assessing position, for example by opening an enquiry or issuing an assessment or determination.
The change takes unprotected years prior to 5 April 2016, where the customer made a reasonable disclosure of their disguised remuneration tax avoidance scheme in their relevant returns, out of scope of the loan charge.
This means that loans you received between and including 9 December 2010 and 5 April 2016 (inclusive) should be included in your outstanding loan balance on 5 April 2019, unless you made a reasonable disclosure of the disguised remuneration tax avoidance scheme on your return and HMRC did not take action.
For the purposes of the loan charge, HMRC will consider that a reasonable disclosure of a disguised remuneration tax avoidance scheme was made if you provided sufficient information in your return or accompanying documents so that HMRC can identify the loan scheme and specifically the person to whom the loan was made and the loan arrangement. For example, if the avoidance scheme promoter had provided the scheme user with a disclosure of tax avoidance scheme (DOTAS) number, it is reasonable for you to have enclosed this number on your return. Alternatively, where the loan scheme was not disclosed to HMRC (and there was no DOTAS number) it would be reasonable for you to refer to your loan arrangement elsewhere on your return.
The disclosure must have contained sufficient information so that it was apparent that a tax liability may have arisen as a result of the loan arrangement. Where the nature of the loan arrangement meant that only by considering its implications over more than one year could it become apparent that a tax liability arose, the disclosure will be considered reasonable if sufficient information was provided when considering all relevant returns together.
If you’re not sure if you disclosed the scheme you should check your copy of your return.
If you sent a return for any of the last 4 years, you’ll be able to access it through your Self Assessment account.
If you do not have a copy of the relevant return phone the loan charge helpline on 0300 322 9494.
Any loans made after 5 April 2016, and before 6 April 2017 if you were self-employed, or before 6 April 2019 if you were employed, will be subject to the loan charge, whether or not HMRC has opened an enquiry or raised an assessment.
How to report a disguised remuneration loan
You need to complete the loan charge reporting form to report your disguised remuneration loan, if you’re liable to the loan charge after the changes following the review.
The deadline to provide this information to HMRC was 30 September 2020. You should still report an outstanding disguised remuneration loan balance if you’ve not already done so, but you may be liable to interest and penalties.
You can request a paper version of the form to report your disguised remuneration loan by either:
- emailing us at ca.loancharge@hmrc.gov.uk using ‘loan charge reporting form request’ in the subject line
- telephoning 0300 322 9494
If you’ve already provided HMRC with full and accurate information regarding your outstanding loan balance you do not need to resend this information, even if your loan charge liability has changed.
If you’ve already completed the loan charge reporting form to report your disguised remuneration loan, but are no longer within scope of the loan charge as a result of these changes, you’re not required to complete another form.
Spreading your outstanding loan balance
On or before, 30 September 2020, you could have chosen to either:
- include all of your outstanding loan balance in your 2018 to 2019 return
- spread it evenly over 3 tax years (2018 to 2019, 2019 to 2020 and 2020 to 2021) which will give greater flexibility on when the outstanding loan balance is subject to tax and may mean that the loan balance is not subject to higher rates of tax
To do this and file and pay your 2018 to 2019 Self Assessment tax return on time, you had to make an election on the loan charge reporting form on or before 30 September 2020.
If you did not make an election on or before 30 September 2020, you may be able to make a late election. There are limited circumstances where we can accept a late election. The Statement of Practice sets out the criteria that we’ll consider for late elections and the process for making an application.
You will need to apply for a late election on a paper copy of the loan charge reporting form. You should email ca.loancharge@hmrc.gov.uk to ask for a copy of the form. You should include ‘late loan charge election’ in the subject line of the email.
Alternatively, you can call the loan charge helpline on 0300 322 9494 to ask for a form.
When you send the form back, you should tell us why you are making a late election.
If you apply for a late election, you should include your full outstanding loan balance in your 2018 to 2019 Self Assessment tax return, until an officer of HMRC has provided confirmation that the late election has been accepted.
We’ll consider late elections on a case by case basis and we’ll write to you to let you know our decision.
If you’ve only registered for Self Assessment to report the loan charge you may be automatically removed from the list of people required to send in a return for the tax year 2019 to 2020. If that happens, you’ll receive an automated letter from HMRC to say you no longer need to complete a return. You’ll then need to re-register for Self Assessment for tax year 2019 to 2020 to report the remaining years.
If you cannot pay your tax bill on time
If your income was less than £50,000 in the tax year 2017 to 2018 and have no other source of wealth, HMRC will agree a payment plan spread over a minimum of 5 years. If your income was less than £30,000 then we’ll agree a payment plan of at least 7 years.
HMRC will arrange a spread of payments for longer than 5 to 7 years if this is needed, based on individual circumstances. We want payment plans to be sustainable, so tell us if you need more than these minimum lengths. There is no maximum time limit for these payment plan arrangements.
If you qualify for the minimum 5 or 7 years time to pay we’ll need some basic income and expenditure information from you. This is so we can check that you do not need more than the minimum period and that we’re not asking for more than 50% of your disposable income.
The 5 or 7 years time to pay period starts when we agree the payment agreement and ends 5 or 7 years after. If you elect to spread your loan charge liability over 3 years we’ll review the time to pay arrangement when your subsequent Self Assessment tax returns are submitted.
You can also choose to pay your liability more quickly than this, if you’re able to. Interest will be charged from 1 October 2020 so it will be best for you to pay as quickly as you can.
If your income was more than £50,000 in the tax year 2017 to 2018 or have other sources of wealth, but cannot afford to pay in full, then you’ll still be able to agree a payment plan but HMRC may need more information from you. The payment plan would be for the length of time needed based on your individual circumstances. There is still no maximum length to these payment arrangements.
HMRC will not ask you to pay more than 50% of your disposable income in your payment plan. The amount you pay into a plan will be based on your individual circumstances.
If you’re unable to pay in full and need a payment plan, phone the loan charge helpline on 0300 322 9494.
Find out about setting up a payment plan to pay in instalments.
On 20 December 2019, the government announced changes to the loan charge following the independent review led by Sir Amyas Morse.
HMRC has already published details of the key changes and what they mean for different customers, which has now been updated with more information.
This additional guidance provides more information on key areas.
Loans made on or after 9 December 2010
The loan charge will apply only to loans made on or after 9 December 2010 that were outstanding on 5 April 2019 subject to if the loan was made in an unprotected year.
If you were employed when you received a loan, the loan charge applies to outstanding loans made between and including 9 December 2010 and 5 April 2019.
If you were self-employed when you received a loan, the loan charge applies to outstanding loans made between and including 9 December 2010 and 5 April 2017. Any loans received after this date are still chargeable as income from self-employment and should have been included in your Self Assessment tax return for the relevant year.
You should check bank statements, loan agreements and copies of contracts to find out if you were employed or self-employed and to check when your loans were made.
If you’re still not sure what type of loan you received, or if you’re unsure if the loan charge applies to your loans, email: cl.resolution@hmrc.gov.uk for contractor loan schemes.
For all other disguised remuneration scheme users, email: CAGetHelpOutOfTaxAvoidance@hmrc.gov.uk.
Loans received in the tax year 2010 to 2011
You’ll need to check any loans received between and including 6 April 2010 and 5 April 2011 as loans taken out before 9 December 2010 are no longer in scope of the loan charge.
You should check bank statements, loan agreements and copies of contracts to find out when your loans were made. If you still do not know, you can apportion your total outstanding loan balance on a just and reasonable basis. For example, it may be just and reasonable to apportion two-thirds of your total 2010 to 2011 loan balance to pre 9 December 2010 (April to December) and one-third to post 9 December 2010, if you received equal payments throughout the tax year.
Unprotected years and reasonable disclosure
An unprotected year, for the purposes of the loan charge, refers to a tax year where, at 5 April 2019 HMRC had not taken action to protect its assessing position, for example by opening an enquiry or issuing an assessment or determination.
The change takes unprotected years prior to 5 April 2016, where the customer made a reasonable disclosure of their disguised remuneration tax avoidance scheme in their relevant returns, out of scope of the loan charge.
This means that loans you received between and including 9 December 2010 and 5 April 2016 (inclusive) should be included in your outstanding loan balance on 5 April 2019, unless you made a reasonable disclosure of the disguised remuneration tax avoidance scheme on your return and HMRC did not take action.
For the purposes of the loan charge, HMRC will consider that a reasonable disclosure of a disguised remuneration tax avoidance scheme was made if you provided sufficient information in your return or accompanying documents so that HMRC can identify the loan scheme and specifically the person to whom the loan was made and the loan arrangement. For example, if the avoidance scheme promoter had provided the scheme user with a disclosure of tax avoidance scheme (DOTAS) number, it is reasonable for you to have enclosed this number on your return. Alternatively, where the loan scheme was not disclosed to HMRC (and there was no DOTAS number) it would be reasonable for you to refer to your loan arrangement elsewhere on your return.
The disclosure must have contained sufficient information so that it was apparent that a tax liability may have arisen as a result of the loan arrangement. Where the nature of the loan arrangement meant that only by considering its implications over more than one year could it become apparent that a tax liability arose, the disclosure will be considered reasonable if sufficient information was provided when considering all relevant returns together.
If you’re not sure if you disclosed the scheme you should check your copy of your return.
If you sent a return for any of the last 4 years, you’ll be able to access it through your Self Assessment account.
If you do not have a copy of the relevant return phone the loan charge helpline on 0300 322 9494.
Any loans made after 5 April 2016, and before 6 April 2017 if you were self-employed, or before 6 April 2019 if you were employed, will be subject to the loan charge, whether or not HMRC has opened an enquiry or raised an assessment.
How to report a disguised remuneration loan
You need to complete the loan charge reporting form to report your disguised remuneration loan, if you’re liable to the loan charge after the changes following the review.
The deadline to provide this information to HMRC was 30 September 2020. You should still report an outstanding disguised remuneration loan balance if you’ve not already done so, but you may be liable to interest and penalties.
You can request a paper version of the form to report your disguised remuneration loan by either:
- emailing us at ca.loancharge@hmrc.gov.uk using ‘loan charge reporting form request’ in the subject line
- telephoning 0300 322 9494
If you’ve already provided HMRC with full and accurate information regarding your outstanding loan balance you do not need to resend this information, even if your loan charge liability has changed.
If you’ve already completed the loan charge reporting form to report your disguised remuneration loan, but are no longer within scope of the loan charge as a result of these changes, you’re not required to complete another form.
Spreading your outstanding loan balance
On or before, 30 September 2020, you could have chosen to either:
- include all of your outstanding loan balance in your 2018 to 2019 return
- spread it evenly over 3 tax years (2018 to 2019, 2019 to 2020 and 2020 to 2021) which will give greater flexibility on when the outstanding loan balance is subject to tax and may mean that the loan balance is not subject to higher rates of tax
To do this and file and pay your 2018 to 2019 Self Assessment tax return on time, you had to make an election on the loan charge reporting form on or before 30 September 2020.
If you did not make an election on or before 30 September 2020, you may be able to make a late election. There are limited circumstances where we can accept a late election. The Statement of Practice sets out the criteria that we’ll consider for late elections and the process for making an application.
You will need to apply for a late election on a paper copy of the loan charge reporting form. You should email ca.loancharge@hmrc.gov.uk to ask for a copy of the form. You should include ‘late loan charge election’ in the subject line of the email.
Alternatively, you can call the loan charge helpline on 0300 322 9494 to ask for a form.
When you send the form back, you should tell us why you are making a late election.
If you apply for a late election, you should include your full outstanding loan balance in your 2018 to 2019 Self Assessment tax return, until an officer of HMRC has provided confirmation that the late election has been accepted.
We’ll consider late elections on a case by case basis and we’ll write to you to let you know our decision.
If you’ve only registered for Self Assessment to report the loan charge you may be automatically removed from the list of people required to send in a return for the tax year 2019 to 2020. If that happens, you’ll receive an automated letter from HMRC to say you no longer need to complete a return. You’ll then need to re-register for Self Assessment for tax year 2019 to 2020 to report the remaining years.
If you cannot pay your tax bill on time
If your income was less than £50,000 in the tax year 2017 to 2018 and have no other source of wealth, HMRC will agree a payment plan spread over a minimum of 5 years. If your income was less than £30,000 then we’ll agree a payment plan of at least 7 years.
HMRC will arrange a spread of payments for longer than 5 to 7 years if this is needed, based on individual circumstances. We want payment plans to be sustainable, so tell us if you need more than these minimum lengths. There is no maximum time limit for these payment plan arrangements.
If you qualify for the minimum 5 or 7 years time to pay we’ll need some basic income and expenditure information from you. This is so we can check that you do not need more than the minimum period and that we’re not asking for more than 50% of your disposable income.
The 5 or 7 years time to pay period starts when we agree the payment agreement and ends 5 or 7 years after. If you elect to spread your loan charge liability over 3 years we’ll review the time to pay arrangement when your subsequent Self Assessment tax returns are submitted.
You can also choose to pay your liability more quickly than this, if you’re able to. Interest will be charged from 1 October 2020 so it will be best for you to pay as quickly as you can.
If your income was more than £50,000 in the tax year 2017 to 2018 or have other sources of wealth, but cannot afford to pay in full, then you’ll still be able to agree a payment plan but HMRC may need more information from you. The payment plan would be for the length of time needed based on your individual circumstances. There is still no maximum length to these payment arrangements.
HMRC will not ask you to pay more than 50% of your disposable income in your payment plan. The amount you pay into a plan will be based on your individual circumstances.
If you’re unable to pay in full and need a payment plan, phone the loan charge helpline on 0300 322 9494.
Find out about setting up a payment plan to pay in instalments.
