HMRC issues draft rules for loan charge repayments

HMRC has published details of proposed legislation for setting up a scheme to administer refunds to taxpayers who made voluntary payments prior to a change in the rules regarding the loan charge

The original plans for the loan charge on disguised remuneration (DR) avoidance schemes introduced a new charge on DR loan balances outstanding at 5 April 2019.

Following a review last year led by Sir Amyas Morse into its design and implementation, the government agreed that HMRC should repay certain voluntary payments (‘voluntary restitution’) that has been paid by individuals and employers since the loan charge was announced in March 2016.

The draft legislation requires HMRC to establish a scheme to repay or waive all, or part, of an amount of voluntary paid or due to be paid under an agreement made between 16 March 2016 and 11 March 2020. The voluntary restitution must have been paid, or be due to be paid, in respect of a loan or quasi-loan for unprotected years that would no longer be subject to the loan charge.

The repayments are  for any unprotected tax years where the loan charge no longer applies (loans made before 9 December 2010), or where the loans were made in any tax years before 6 April 2016 where a reasonable disclosure of the avoidance scheme use was made to HMRC and HMRC did not take action (for example, by opening an enquiry).

HMRC has published the draft scheme documents setting out the eligibility criteria for claiming a refund, the process for repaying or waiving payments and how variations to settlement agreements, and any consequent refunds, will be calculated.

The tax authority has made clear this is a technical document and is not intended to be guidance.

Detailed guidance for customers on the claims process and how refunds will be calculated will be published before Royal Assent. Those who want to claim a refund should await this further guidance before taking any action.

Refunds can only be issued after Finance Bill 2019-20 has received Royal Assent.


An estimated 11,000 individuals will be removed from the loan charge due to the date the loan charge applies from being changed to 2010 and the provisions for those who have made reasonable disclosures.

An estimated 21,000 individuals will see the amount of tax they owe under the loan charge reduce as a result of the proposals to allow customers to split their loan balance over three years.

According to HMRC’s impact assessment, this measure is expected to decrease receipts. The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at Budget 2020.

Technical consultation closing date

The draft legislation and scheme document have been published for technical consultation before the Finance Bill is laid before parliament.

The consultation is intended to ensure that the legislation and scheme work as intended. Any comments on the draft legislation, including that published on 20 January, or the draft scheme, should be sent by email to:

Legislation reflecting any changes following consultation will be published after the Budget as part of Finance Bill 2020.

Draft legislation for refunding voluntary restitution

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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