By Pat Sweet, Reporter, CCH Daily and Accountancy, published by Croner-i Ltd
HMRC has updated its warnings on disguised remuneration avoidance schemes with guidance on the use of schemes designed to avoid the new ‘loan charge’
At Budget 2016 the government announced a number of changes to tackle existing avoidance schemes and prevent their future use. These included a new ‘loan charge’ on disguised remuneration loans which are outstanding on 5 April 2019.
In the latest spotlight publication, HMRC highlights scheme promotors who suggest individuals should enter into a bet with the trust that granted them the loan. The terms of the ‘bet’ mean the individual is almost certain to win, and then able to use the winnings to repay the loan.
HMRC states: ‘This scheme will not prevent the loan charge arising as the loan repayment is connected to a new tax avoidance arrangement.’
The guidance states that the only way to avoid the new loan charge is by making a genuine repayment of the loan balance or settling the tax liability with HMRC in advance. Any repayments connected to a new tax avoidance arrangement will be ignored and the loan charge will still apply.
Guidance: Disguised remuneration: schemes claiming to avoid the new loan charge (Spotlight 36) is here.
Report by Pat Sweet