HMRC sets up scheme for loan charge refunds

HMRC has published guidance on how it will administer the disguised remuneration repayment scheme, offering refunds to taxpayers who made voluntary payments of income tax or National Insurance prior to a change in the rules regarding the loan charge

This guidance is for those who used disguised remuneration avoidance schemes between 6 April 1999 and 5 April 2016, from which disguised remuneration loans were made, and settled the tax due with HMRC on or after 16 March 2016 and before 11 March 2020.

Individuals who paid some or all of the tax or National Insurance contributions voluntarily to avoid the loan charge, may be eligible for a refund or waiver, and will be contacted by HMRC with details of how to apply.

For certain payments of income tax and National Insurance contributions, HMRC may refund amounts that were paid in disguised remuneration scheme settlements, and waive amounts that may be due if an individual is paying their settlement by instalments.

These amounts are referred to in the scheme as ‘voluntary restitution’. They relate to certain loans made before 9 December 2010 where HMRC did not have the power to recover the income tax or National Insurance contributions at the date the settlement agreement was made.

They also relate to loans on or after 9 December 2010 and before 6 April 2016 where the taxpayer made a reasonable disclosure of their scheme use at a time when HMRC had the power to recover the Income tax and National Insurance contributions, or at the date the settlement agreement was made, HMRC did not have the power to recover the income tax or National Insurance contributions.

A ‘reasonable disclosure’ must have been made in either income tax self-assessment returns, or corporation tax self-assessment returns, for each disguised remuneration loan received.

The guidance states the information could have been provided through more than one return, but these must be the same type of return, that is, two or more income tax self-assessment returns, or two or more corporation tax self-assessment returns. A reasonable disclosure could not have been made where the information for a loan was provided in a combination of two different types of tax return.

The information could also be included in any accompanying accounts, statements or documents which were provided with the return.

HMRC says it will not refund any voluntary payments of income tax or National Insurance contributions made in respect of amounts paid or contributed through a disguised remuneration scheme if either no loans were made from the scheme, or these amounts relate to a loan which was not outstanding at the date the settlement was made.

A refund or waiver may be adjusted to account for any corporation tax relief or income tax relief claimed, or for any transitional relief, for settlements reached by 5 April 2017, against investments made through a disguised remuneration scheme.

Adjustments will also be made to account for a secondary tax planning arrangement which created an alternative or additional tax charge on the same income.

Applicants invited to apply for a refund or waiver should send back their form by 30 September. HMRC will then send them a repayment decision, which the taxpayer must accept within two months.

If the taxpayer disagrees, they have two months in which to request a review. HMRC will issue an updated repayment decision which must be agreed and accepted within two months, or if the taxpayer disagrees, then the application is terminated.

Only the person (signatory), or people (signatories), who signed the settlement agreement can make an application, regardless of who paid the settlement amount or amounts. If more than one person signed the agreement, then they must all jointly apply.

If the taxpayer’s company was a signatory to an agreement and it has been struck off the Company Register and dissolved, it must be restored to the Company Register to be able to make an application for a refund or waiver.

Provided the requirements are met, individuals or contractors who settled personally, employees who settled on behalf of their employer, and employers, are all eligible to make an application.

Anyone who has not heard from HMRC by 1 October and thinks they are eligible should contact HMRC by phone on: 03000 534 226 or email at: ca.loancharge@hmrc.gov.uk

Guidance Apply for a refund or waiver from the Disguised Remuneration Repayment Scheme 2020

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