Disguised Remuneration schemes

Thousands of ‘victims’ hit by huge tax avoidance bills.

In recent blogs, we’ve been looking closely at HMRC closing the Loan Scheme loophole, sometimes known as Disguised Remuneration schemes. First, I examined the idea of Loan Charge Tax Avoidance. This took place when companies remunerated highly-paid staff by issuing loans rather than conventional salaries.

In my last blog, I highlighted the case of Hyrax, who were running one of these disguised remuneration schemes for 1,180 high earners and are being forced to pay back around £40m in unpaid taxes.

From April 1st, HMRC has been issuing Loan Charge demands for repayment of unpaid Tax and National Insurance – sometimes going back as far as 1999, when the schemes were first introduced.

Families ‘destroyed’

This whole issue is turning into an emotional and ugly battle. Thousands of people who innocently went into these schemes, understanding they were lawful, now feel they are being unfairly punished. Some say their families are being destroyed by the unfair demands of HMRC.

Andrew (not his real name) is a 57-year old IT worker. His bill for unpaid taxes and National Insurance is over £300,000. He says his only option is bankruptcy. He has already lost his marriage and has contemplated suicide. Andrew claims he was advised when he started some 15 years ago that the loan scheme was entirely legitimate – that it was fully compliant with HMRC and that the paperwork would all be handled by the company. In fact, he claims he was given little choice by the company making the payments – the word ‘loans’ was never mentioned.

HMRC has already been in touch with 40,000 individuals like Andrew and expects to bring in as much as £3.2bn in tax. Giving its side of the story in its official guide to the loan charge, HMRC says –

These loans are paid to people in such a way that means it’s unlikely that they’ll ever have to be repaid. In other words, the person receiving money from a loan scheme gets to keep it all. And they don’t pay any tax on this money, even though it’s clearly income.

Is the Loan Charge fair?

There’s a strong argument that to apply a new law retrospectively in this way is deeply unfair and arguably unconstitutional.

Richard Horsley has co-founded the Loan Charge Action Group.

At the time, tax professionals and QCs came up with solutions where we went on to PAYE for a portion of our earnings, while another portion was a loan, which was not taxable. We asked if it was legal and were told yes. If we knew it was illegal we would never have allowed ourselves into it.

In response, HMRC are largely unsympathetic, insisting –

We’ve always been clear that these schemes do not work, warning against the use of tax avoidance schemes in the media and in publications such as our Spotlight series on gov.uk as early as 2009.

It claims that the loan charge isn’t retrospective – it’s a new charge, “arising at a future date, on loan balances outstanding at that date.” Back in 2016, it gave scheme users three years to repay their Disguised Remuneration loans, or to agree a settlement with HMRC before the charge takes effect.

Find out more about how to identify tax avoidance schemes.

Take a look at our range of services. You’ll see we’re specialists in all areas of personal and corporation tax. If you’re concerned in any way at all about your own situation, call us today. With our fast efficient and affordable service, we’ll help get you back on track.

We’re here to help.


This legal information is not the same as legal advice and you may not rely on our post as a recommendation of any particular legal understanding. Please, consult an attorney if you’d like to get advice on your interpretation of this article.

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