1. Services

Disguised Remuneration

In spite of the fact that HMRC's general position has changed since the Loan Charge Review was conducted in December 2019, the ongoing Settlement Opportunity remains in effect.

Using EBTs and similar "disguised remuneration" structures, employers and companies can settle any outstanding tax and NICs without having to resort to litigation with HMRC.

Under the Settlement Opportunity, HMRC will try to settle outstanding enquiries by claiming that payments and allocations made from EBTs are earnings from an employment and that the income should be taxed once and for all.

To achieve clarity and closure for customers regarding their use of EBT settlements, and depending on the style and implementation of any particular scheme, the following items can be covered:

• Tax on income (Pay As You Earn)
• National Insurance Contributions
• Corporation Tax
• Inheritance tax
• EBTs and beneficiaries are subject to other taxation charges

Upon agreement of any settlement, it will include:

• Allows you to pay the tax and NICs owed to HMRC
• Reduces the costs associated with complex inquiries and litigation
• Ensures that the various tax provisions are understood

Loan Charge Review

To review the Loan Charge (LC), the Government commissioned an independent review in September 2019. The review was published on 20 December 2019, along with the Government's response:

https://www.gov.uk/government/publications/disguised-remuneration-independent-loan-charge-review

Briefly, the overview is:

• It was announced in the 2016 Budget on 16 March 2016 that there would be a Loan Charge
• All Disguised Remuneration (DR) loans outstanding on 5 April 2019 made on or after 6 April 1999 are subject to the loan charge
• There was a statutory provision for the Loan Charge in the Finance (No.2) Act 2017 and supplementary provisions in the Finance Act 2018
• The next budget in 2020 will announce details of changes to the Finance (No.2) Act 2017 as a result of the loan charge review.
• All Disguised Remuneration loans outstanding on 5 April 2019 will be taxed, but only those made after 9 December 2010.
• In addition, the loan charge will not apply to DR loans made between 9 December 2010 and 5 April 2016 where the avoidance scheme use was fully disclosed to HMRC and no action was taken by HMRC.

Now that my case has been settled, what should I do?

• All DR loan/EBT cases settled after 16 March 2016 that includes Voluntary Restitution should be checked
• If the VR element is for a year no longer covered by the loan charge, a refund may be due, subject to disclosure to HMRC for the later years
• The Finance (No.2) Act 2017 must be amended before HMRC can refund
• Ideally, VR refunds should be flagged up to HMRC as early as possible, since we doubt HMRC will be rushing to process refunds (!)

How do I proceed with stalled settlements in the process with HMRC?

• As described above, the November 2017 settlement terms will be revised to reflect the changes to the loan charge
• We expect to issue revised settlement terms in early 2020
• As long as the settlement is completed within the timeframe set by HMRC, late payment interest was generally halted on 30 September 2018.

What should I do for new settlement cases?

• Despite the slimmed down loan charge, HMRC will still have a lot of cases to settle where enquiries are open for some years (or not).
• HMRC is unlikely to have the capacity/staff to litigate what is left - expect the doors to settlement to open again
• Keep an eye on this, but seek professional advice if necessary

Can Bolton Tax Accountants help?

Throughout this on-going saga, Bolton Tax Accountants remains committed to providing pro-active, no-nonsense support and advice to clients. Because we have been settling such cases with HMRC with a favourable outcome.

HMRC recommends that anyone considering the EBT (Employee Benefit Trust) Settlement Opportunity seek professional advice first.