Loan charge “stacks” loans that the taxpayer has received

In 2017, HMRC offered settlement terms to taxpayers who used disguised remuneration (DR) tax avoidance schemes and who may have been liable to pay the Loan Charge unless they settled with HMRC. Taxpayers who provided the necessary information by 5 April 2019 and worked with HMRC to conclude settlement by 30 September 2020 were able to settle under these 2017 terms, enabling them to avoid the Loan Charge. HMRC continued settlement discussions beyond 30 September 2020 with a minority of taxpayers who could not meet this deadline for reasons beyond their control, for example, recent hospitalisation.

HMRC published further settlement terms in August 2020 for those taxpayers who did not settle under the 2017 terms. These terms were updated in November 2020 to include all outstanding DR liabilities, including the Loan Charge. Both sets of terms allow taxpayers to make voluntary payments of tax for unprotected years (sometimes called ‘closed years’), which enable them to benefit from double taxation relief against any future income tax charges on the same underlying income.

HMRC settle cases in accordance with their Litigation and Settlement Strategy (LSS), which requires that HMRC only settle for an amount that is consistent with the law. The LSS is available on GOV.UK. HMRC’s settlement terms help to maintain a consistent approach to settling tax disputes with taxpayers.

Monty Jivraj