HMRC has issued new guidance for taxpayers who have received repayment claims for loans made as part of disguised remuneration agreements. The demand has been filed in most cases because the original loan source has sold the loan to a third party or because it has been recalled, according to the document.
The vast majority of taxpayers who are facing the prospect of having to pay large amounts of income tax for loans which may have to be repaid will find little solace in HMRC’s guidance.
Our London Tax Solicitors and Barristers have vast experience of tax laws and first hand commercial, litigation and advocacy experience. We have a proven track record of successfully contesting disputed tax assessments and penalties with HMRC. The tax authorities have lost many cases that are appealed through negotiation, internal review or through the Tax Tribunal.
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What are disguised remuneration charges?
Disguised remuneration schemes are arrangements in which loans are paid instead of regular income in order to avoid paying income taxes and National Insurance contributions. To combat the use of disguised remuneration schemes, the loan charge was implemented. People who expect to have trouble paying the loan charge will be able to work out a sensible payment plan with HMRC, depending on their unique circumstances. There will be no time restriction, and people will be granted as much time as they need to pay their debts.
The current approach on the Loan Charge
On April 5 2019 the Loan Charge was determined on any loan from a disguised remuneration scheme that was still due. The loan charge still applies if you repay your debt after that date. HMRC is unable to issue a refund or change a settlement agreement if you have previously paid a loan charge.
Third parties have approached taxpayers in the past, requesting repayment of debts, according to the guidelines. Despite the fact that taxpayers had already paid the Loan Charge for a loan(s) that were due on April 5 2019, the taxpayer is nevertheless charged.
A third party may have approached you about repaying a debt you took out under a disguised remuneration arrangement. The most common reason for the payback request is that the original loan source has sold the outstanding debts to a third party. An insolvency practitioner may also recall a loan in some conditions.
Many of these third parties are now contacting scheme participants to demand repayment of outstanding debts, even if the participants thought they would not be asked to return the loans. They may have offered you the option of making a one-time payment to get out of the loan agreement and have the remaining sum written off.
What is a repayment request?
A third party may contact you in the following ways:
- a letter asking for details of your loans
- a request for repayment of your loans and/or payment of interest on your loans
- a statutory demand for you to repay your loans
If you receive a statutory demand, you should be aware that you have a certain amount of time to respond. You can learn more about how to fight a statutory demand and the time limit for doing so, in addition to getting legal assistance.
If the third party asking for reimbursement is based abroad and you believe the request is invalid or they are not following professional standards, you may choose to contact the relevant regulatory authority from where your letter originated.
Need Expert Disguised Remuneration Lawyers Advice?
If you have entered into a disguised remuneration scheme (or any other tax avoidance scheme), it is important you seek legal advice as soon as possible.
Whether you are an employer, employee or contractor, our expert tax solicitors and barristers can assist you in managing HMRC’s investigation and entering into negotiations by providing comprehensive legal advice and robust responses to the investigators. Our tailored team which also comprises of specialist forensic accountants can calculate what you owe and make representations on your behalf to HMRC.
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Please note that if you have been warned about your file being passed to HMRC’s Solicitor’s Office or have been served a statutory demand or winding-up petition do not delay in taking legal advice. Your matter can be handled more effectively the sooner you contact us.