UK: More time for contractors to avoid crippling disguised remuneration charges
A retrospective 'loan charge' was announced in the 2016 Budget for contractors who had avoided income tax by receiving their payments as non-repayable loans, often from offshore employee benefit trusts. The punitive charge was legislated in Finance (No 2) Act 2017, and will be imposed on all disguised remuneration loans still outstanding on 5 April 2019. It will fall due for immediate payment on that date, bankrupting many of those liable to the charge.
'The social implications of this are immense', says Rachel de Souza, of tax accountancy firm RSM UK. 'The affected workers acted on advice, have used their loans to pay for their living expenses, and do not have the funds available to pay several years' tax bills in one go.' Most of them see the new tax charge as retrospective and deeply unfair.
Last November, those affected by the charge were offered a chance to settle their deemed liabilities on less onerous terms, under which they could elect to pay tax based on the rates that were in force during the years that the loans were taken out. Perhaps even more importantly, a repayment schedule can be agreed with HMRC so the tax can be paid over time. They were given until 31 May 2018 to accept.
Now that that date has passed, HMRC has decided to leave the opportunity open. Taxpayers, whether employees, employers or self-employed contractors, now have until 30 September 2018 to indicate their acceptance and provide all relevant information to HMRC. They are required to register 'as soon as possible', says HMRC's latest guidance.
The content displayed here is subject to our disclaimer. Read more