Individuals will be required to pay the loan charge for any loan from 6 April 1999 that was received through a disguised remuneration tax avoidance scheme, and is still outstanding on that date.

HMRC says it is possible to postpone the date on which the charge needs to be paid, provided an application is made by 31 December 2018.

Postponement is only possible if the taxpayer gets approval from HMRC that the loan in question is classed as a qualifying fixed term loan or, alternatively, if the individual has paid an accelerated payment in respect of the income on which the loan charge is based that is equal to or more than the outstanding loan balance.

Only the person liable for the loan charge can apply for postponement. If their employer will be liable for the loan charge, then they must make an application to postpone.

Individuals are advised to make an application for postponement at the same time as applying for approval that they have a qualifying loan.

A loan can only be classed as qualifying if it was made before 9 December 2010; has a term of 10 years or less, and is not an ‘excluded loan’. An excluded loan means that after it was granted it has been replaced (directly or indirectly) by another loan, or its terms have been altered to meet the 10 year term or change the date on which it must be fully repaid.

Applications to postpone the loan charge for this reason must meet two conditions. First, HMRC must agree that the loan repayments are ‘qualifying payments’, meaning there have been regular repayments at intervals of no more than 53 weeks, for which the individual can supply evidence.

Secondly, the loan must be classified as a ‘commercial loan’, meaning it was made by a lending business or it was on terms that are comparable to loans that were available to members of the public.

Taxpayers can also apply to postpone a loan charge if they have already made an accelerated for the same loan, provided the amount of the loan outstanding at 5 April 2019 is equal to or less than the value of the accelerated payment.

Such applications should include a copy of a loan statement from the lender from which the taxpayer, or in the case of an employer, the employees received the loans. The statement must include the balance outstanding on the loans at the date of the application.

HMRC guidance outlines alternative evidence which it will accept if loan statements from the lender are not available.

Following an application, HMRC will inform the taxpayer of how long the postponement will last; what to do if they repay the loan; and how to pay when the postponement ends.

Guidance Disguised remuneration: postponing the loan charge is here.

The 2019 loan charge postponement form is here.

Report by Pat Sweet