HMRC says users of re-describing loan schemes are being told they can sign documents saying that the sums they have received from their disguised remuneration scheme under loan agreements are not loans at all.

Instead, these sums of money are merely held by them in a ‘fiduciary capacity’ – for example, an individual acts in a fiduciary capacity if they hold money, or assets, for the benefit of someone else, not themselves.

HMRC’s guidance states that it is wrong to claim that the loan charge will not apply because the sums received are not loans.

The department argues that renaming something now does not change what happened in the past. Attempting to describe a loan as something else does not mean it is not a loan.

The loan charge will apply to more than just loans, including any form of credit or other right to a payment regardless of what it is called.

HMRC warns that taxpayers who adopt this approach and choose not to reflect the loan charge on their tax return may face a significant penalty in addition to the tax charge.

The guidance advises the only way to avoid the new loan charge in 2019 is by making a repayment of the loan balance or by settling any tax liability with HMRC in advance.

Taxpayers who are already speaking to someone at HMRC about the use of a disguised remuneration scheme, should contact them. Other users should mail: [email protected].

Guidance Disguised remuneration: re-describing loans (Spotlight 39) is here.