The short version: Disguised remuneration is a tax avoidance scheme where someone receives a “loan” instead of a salary. The loan never gets repaid, and because loans aren’t taxable income, the person avoids paying Income Tax and National Insurance.
Why is HMRC cracking down on it?
These schemes were widely used by contractors and some employers to dodge tax. HMRC considers them aggressive tax avoidance. They introduced the Loan Charge to recover unpaid tax from people who used these schemes, going back years.
What are the rules now?
If a company gives you a loan (especially if you’re a director), there are strict conditions. The loan needs to be below a certain threshold, charged at a fair interest rate, and repaid by the company’s year end. Break these rules and HMRC will treat it as income and tax it accordingly.
Should I be worried?
If you’ve used one of these schemes in the past, HMRC may already be in touch. If you’re being offered something that sounds too good to be true now, it probably is. Steer clear of any arrangement that promises to reduce your tax by disguising your income as something else.
Concerned about a scheme you’ve been involved with? Talk to us confidentially and we’ll help you understand your options.
