Loans tax loophole closes

Beware misleading financial advisers

Have you been avoiding tax with the loans tax loophole – being paid in loans, instead of via a normal salary system? Well, the good times are over. And don’t listen to the siren voices of untrustworthy financial advisers who would persuade you otherwise. But do listen to the experts – the Most Money experts! Read more …

The party’s over

It was fun while it lasted. For years, a legitimate form of tax avoidance was for your employer to pay you by making a series of loans. This way of earning is called ‘disguised remuneration schemes’. Well, the party’s over. HMRC has announced that, from April 2019, they’ll be taxing these schemes. They advise that to avoid unnecessary expense, people should immediately close the schemes.

To avoid charges, you must repay your loans in full before the changes take effect. However, HMRC will allow installment plans of up to 5 years to settle loans before any charges arise.

You won’t need any supporting information regarding your means and ability to pay if … you are no longer engaged in tax avoidance. If you earn £50,000 or more or you need longer to repay, HMRC will still consider an arrangement, but they’ll need more information.

‘Will I be liable for tax on these loan schemes?’ – Yes, you will!

Some financial advisors are claiming that you might get away without bringing taxed on these schemes. They’re wrong. HMRC has been clear in warning that all such schemes will be taxed.

Don’t believe us? Here‘s the statement in HMRC’s own words –

Most disguised remuneration schemes will be affected by the loan charge in 2019. HMRC is aware that some promoters or agents may have told you that settling will not be beneficial – that the disguised remuneration loan charge will not apply to you and other disguised remuneration anti-avoidance legislation does not apply to your arrangements’. They concluded by adding that such advice is wrong.

The new rules aren’t limited to just loans. They also include other forms of credit. For example, if you use a Corporate Remuneration Trust scheme, your adviser may have told you that the loan charge won’t apply to you. HMRC does not agree and urges you to seek independent advice.

Do you want to settle before the loan charge comes into force? Then make sure you give HMRC all the information they need before 30 September 2018.

Settling your loan now will save you money. If you wait until the charge come in next April, then all previous loans will be added together and taxed in a single year.

Furthermore, if you don’t settle the loan, this could affect income-dependent charges or benefits, including tax-free childcare payments and the high-income Child Benefit charge.

Legitimate long-term solutions

Our experts at Most Money never advise tax evasion schemes. We’re here to advise you on tax-saving ideas which are practical, legal and which will, in the long term, save you money.

So – if you’re involved in a disguised remuneration scheme and you want to understand your options – seek out your expert tax specialist.
Save money on taxes but don’t make any of those changes without checking with your accountant first. Getting it wrong could prove dangerously expensive. Remember – we’re here to help.

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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