Disguised Remuneration Clarification By HMRC

An attack by HM Revenue and Customs (HMRC) on 'disguised remuneration' schemes, wherein a director of a company takes money out of the company in the form of a loan which is never intended to be repaid, has been widely reported.

Such schemes were widely used by 'one-man band' computer consultancy companies to avoid the payment of Income Tax and National Insurance Contributions. A charge on disguised remuneration was introduced on 5 April 2019 but is retrospective, catching such arrangements from 1999. Where the contractor's company is no longer trading, HMRC can pursue payment from the director. If the loan is repaid, the tax charge will not bite.

It has been less well reported that HMRC have been pursuing more than 1,700 contractors who have moved abroad in an attempt to recover the claimed tax shortfalls, using 'mutual assistance' treaties which allow tax authorities in one country to collaborate with those in foreign jurisdictions to collect taxes due.

On a more positive note, HMRC have confirmed that they will try to ensure that they avoid making anyone caught by the retrospective charge bankrupt and will provide a seven-year repayment programme for those earning under £30,000 a year.