The Basics

Contractors who’ve used tax scheme’s involving loans (after 6 April 1999) and choose not to settle with HMRC using the current disguised remuneration settlement opportunity, will be subject to PAYE and NIC under legislation enacted in the Finance (No 2) Act 2017 being applied to any outstanding loans as of 5 April 2019. The charge falls in the 2018/19 tax year and is therefore payable by 31 January 2020.

Under the legislation there’s a requirement for employees to report details of loans to their employer or HMRC. The required information must be provided before 19 April 2019. Where people have already paid assessments or APNS these amounts will be treated as a credit to prevent a double tax charge.

The schemes caught by the loan charge are far reaching and include Employee Benefit Trusts, Employer Financed Retirement Benefit Schemes, Contractor Loan Schemes and other disguised remuneration arrangements.

April 2019 Loan Charge: What are the options?


The disguised remuneration settlement opportunity will close for registrations on 31st May 2019, and if schemes are not settled using the opportunity, taxpayers could still be hit with a PAYE and NIC charge in 2019 in relation to the planning they have undertaken.

Generally individuals have four options here:

  1. Explore a settlement with HMRC
  2. Successfully prove the scheme used was effective before 5th April 2019
  3. Repay the loan/advances/funds back to the trust
  4. Suffer the April 2019 charge

Explore a settlement with HMRC

Taking this option means that the individual agree’s the sums received were taxable and therefore agree to pay any tax HMRC believe is due on these sums. It removes any chance of HMRC’s opinion on the setup becoming invalid and will therefore result in the loss of your money indefinitely. It is the simplest option above and is therefore HMRC’s preferred option.

Many people have taken this route simply to close the issue off and move on from the use of such setups. Other people are continuing to challenge and fight HMRC but generally this is not proving successful.

A settlement on any tax year will close this off indefinitely and prevent the April 2019 charge from applying on that tax year.


Successfully prove the scheme used was effective before 5th April 2019

This option requires a scheme promotor/provider and or tax specialist to legally challenge HMRC’s decision and win their case. Should the challenge be successful then HMRC’s argument would be invalidated and no further tax would be due.

This will be extremely rare and in many cases promoters have simply liquidated and passed customer support onto a 3rd party provider.

There are a number of companies “specialising” in this area are simply cashing in on people’s desperation and are charging vast amounts for work that will never come to anything.


Repay the loan/advances/funds back to the trust

In majority of situations this option isn’t available or possible but contractors will need to talk to the original scheme provider to see if this is an option.

If the provider does allow this, it requires the repayment of all sums received to the trust before 5th April 2019. It therefore requires the individual to have a large amount of cash available but has the benefit of completely elimination any tax charges.

The money in the trust then may be accessible again after 5th April 2019 but this would need to be confirmed by the trustees.


Suffer the April 2019 charge

If an individual is unable to do any of the three options above then they will incur a tax and NI charge on 5th April 2019 based on the total sums received during the last 20 years.

In some cases this may actually be the best option, i.e where someone used a setup for just on year, as you can plan for the added income on your next tax return and avoid any interest charges.

In many cases though individuals will have more than one year of untaxed income to consider and the cumulative hit on this income in one tax year may outweigh the benefit of no interest charges. HMRC are also less likely to consider concessions and extend payment terms for people they impose this charge on.


Many people are considering this route on the basis that HMRC have not assessed/ enquired into all tax years yet and therefore believe that they will “get away” with avoiding the charge on certain years. Although this may occur it is likely that HMRC will simply impose estimated charges on any years they believe someone may have been involved thereby putting the onus back on the individual to provide bank statements as evidence. There is also discussions at HMRC to impose penalties, both financial and criminal, on anyone who takes this approach on the basis it could be considered tax evasion.


For more information on the settlement opportunity we suggest viewing HMRC’s detailed guidance at and then seeking independent tax advice from a specialist if required.