Beware disguised remuneration loans
Following on from our news article on 18th August regarding the decision made by the Supreme Court that Rangers Football Club should have deducted income tax and NI from the sums they paid into an Employee Benefit Trust (EBT), new guidance has been issued for those businesses wishing to reach settlement with HMRC.
DTE business advisers have released the following newsletter:
The "Rangers case" was specific to Employee Benefit Trusts (EBTs), however the HMRC guidance covers all forms of loan arrangements including EBTs, EFRBS' and Contractor Loans.
HMRC are now expected to issue what are known as Follower Notices to arrangements that they consider are similar, these will in due course require participants in any such planning to pay over PAYE/NIC due on the amount. It is still unclear which arrangements will be considered as being ’similar’, however, the April 2019 loan charge will be imposed on any loans not repaid at that date.
If you have a business which previously entered into an arrangement involving a trust and a loan you should assess the choices ahead of you, which presently are:
- Pay over PAYE/NIC due on the loans further to a follower notice (if issued)
- Repay the loans before April 2019
- Pay the 2019 loan charge (PAYE/NIC)
- Reach settlement with HMRC (the current settlement arrangements require clients to be registered by May 2018)
Contractors and owner-managers should take stock of their position and the combined impact of the Rangers decision and 2019 loan charge, given the potential significant financial burden on the business. Whilst HMRC’s first port of call for PAYE/NIC arrears will be the employer, HMRC have indicated that if necessary, new secondary legislation (which means without any parliamentary scrutiny) will be introduced to ensure the transfer of liabilities is made easier for them.
For further information about the Ranger's case, please click here:
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