What you need to know: loan charges and disguised remuneration

A retrospective overhaul of the tax rules on loan charges from disguised remuneration schemes come into force from the new tax year on 5 April 2019, resulting in potentially huge tax bills for anyone who has not settled early. Julie Clift CTA, tax writer at Croner-i Tax and Accounting, examines the implications for taxpayers with outstanding loans

In April 2019, all outstanding loans from disguised remuneration schemes will become subject to an income tax and national insurance contributions (NICs) charge under Income Tax (Earnings and Pensions) Act 2003 ITEPA 2003, Pt 7A. The loan charge is an anti-avoidance measure which targets the payment of remuneration in a form (in this case, as a loan) that avoids tax and NIC.

The new loan charge was introduced by Finance (No. 2) Act 2017 on all disguised remuneration loans, eg, loans made via company employee benefit trusts (EBTs) or EBT sub-trusts, or similar via employer-financed retirement benefits scheme (EFRBS) made on or after 6 April 1999 and still outstanding at 5 April 2019.

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