On 20 December 2019, the independent review of the loan charge was published, together with the Government's response.  In summary, significant changes will be made, addressing some of the elements that have attracted the most controversy.


The loan charge was announced in 2016 as a measure to impose tax on historic "disguised remuneration" arrangements.  Broadly, these arrangements involved the remuneration of workers by way of loans, not from their employers, but from a third party such as an employee benefit trust (EBT) or employer-financed retirement benefit scheme (EFRBS).  The expectation was generally that the loans would never be repaid; and the intended analysis was that the loans were not subject to tax at all. 

The loan charge as originally enacted charged income tax for the 2018-19 tax year on the full outstanding amount of any disguised remuneration loans made since 1999 (i.e. a 20-year look-back).  The policy attracted significant criticism, in the press, from pressure groups and also from MPs, in particular on the grounds that it was retrospective.  An independent review into the policy, led by Sir Amyas Morse, was announced in September 2019. 

Outcome of the review

The review has recommended significant changes to the scope of the loan charge and the Government has accepted the majority of these.  Detailed legislation and guidance is to follow, but the headline points are:

  • The loan charge now only applies to loans made after 9 December 2010 (the date the disguised remuneration rules were announced). This represents significant movement - it is more than 11 years later than was originally envisaged.
  • Loans made between 9 December 2010 and 5 April 2016 will not be caught by the loan charge where the scheme was fully disclosed by the individual user on their tax return and HMRC did not "protect its position" (e.g. open an enquiry or raise an assessment).
  • Taxpayers have the option of spreading the loan charge over three years, to mitigate the impact of the full amount being brought into charge at higher rates.
  • Favourable payment terms for individuals in lower income brackets remain.
  • HMRC will refund amounts already paid to them in settlements by way of "voluntary restitution" in relation to the periods where the loan charge no longer applies.
  • Affected taxpayers can opt to defer filing their tax return for the 2018-19 tax year to 30 September 2020.  If they do this, HMRC will waive penalties for late filing or late payment.

As ever, the devil will be in the detail and the new legislation should be closely scrutinised when it is published.  Of particular interest will be the approach taken to what constitutes "full disclosure" for the 2010-2016 period and also the mechanics of the refund of "voluntary restitution".

It is clear though that none of this will impact existing enquiries or assessments for historic periods.  HMRC state that these will still need to be resolved, either through settlement with HMRC or litigation. In fact, the Government is investing in a new HMRC team to conclude enquiries and "bring in the tax due from people who in the past have used [disguised remuneration] schemes, and other forms of tax avoidance". It remains to be seen exactly what this will involve.

Further, the review notes that disguised remuneration schemes are still being used. The Government has stated that it will reflect on the most effective method to tackle these and will announce further action at the budget.

Finally, a striking point is the level of criticism in the review reserved for those who promoted, advised and sold these schemes.  Indeed, the review mentions that it heard evidence from individuals who had received advice that they had a reasonable chance of success in claims against such advisors and promoters, but such claims are now time-barred. This will not necessarily be the same in all cases, but time is ticking, so affected individuals who may be considering their options in this regard should investigate the position further without delay.


The review and the Government's response represent fundamental changes to the loan charge, which will provide welcome relief for many affected taxpayers.  However, there is likely to be significant complexity in the detail, and the upcoming legislation and guidance will need to be closely scrutinised.  Affected individuals should take specialist advice not only on the impact of the changes to their individual cases, but also possibly as to whether they might have recourse against any third parties.