Report and account for your disguised remuneration loan charge

Loan charge review

The loan charge review is now complete, and the government published its response on 20 December 2019.

This guide reflects the changes to the loan charge as a result of the review. There’s also more detailed guidance on the key changes and what they mean for you.

Overview

Disguised remuneration loan schemes are used to avoid paying Income Tax and National Insurance contributions.

You’re classed as having a disguised remuneration loan, when you receive payment for work or services in the form of a loan or other form of credit in a way that means it is unlikely to be repaid.

If you received a disguised remuneration loan or credit on or after 9 December 2010, it may be liable to a tax charge, unless you or your employer have previously accounted for all tax and National Insurance contributions due on the income received as a loan.

This tax charge is known as the ‘loan charge’.

The loan charge will apply to disguised remuneration loans made on or after 9 December 2010, that were still outstanding on 5 April 2019. It will not apply to loans made between and including 9 December 2010 to 5 April 2016 if the loan arrangements were reasonably disclosed to HMRC for that tax year and HMRC had not taken action (for example, by opening an enquiry).

You need to report all outstanding loans subject to the loan charge to HMRC and, where appropriate, to your employer.

If you or your employer have reported and correctly paid the income tax and National Insurance contributions due for outstanding loans on or before 5 April 2019 you’ll not have to report the loan charge.

If you used an employment based scheme, the loan charge may apply to outstanding loans made between and including 9 December 2010 and 5 April 2019.

If you used a trade based or self-employed scheme, the loan charge may apply to outstanding loans made between and including 9 December 2010 and 5 April 2017. Any disguised remuneration loans received after these dates are still chargeable to Income Tax and National Insurance contributions for the relevant year.

The loan charge

The loan charge affects individuals if they used disguised remuneration tax avoidance schemes and they did not either repay their loans or provide HMRC with all the necessary settlement information on or before 5 April 2019.

The loan charge also affects employers who provided loan funds through disguised remuneration tax avoidance schemes if, on or before 5 April 2019, their employee or former employee did not repay their loans, or they did not provide HMRC with all necessary settlement information.

Paying the loan charge does not resolve the underlying tax dispute with HMRC for the years in which loans were made. Tax years that are subject to an open enquiry or assessment will still need to be resolved.

If you want to resolve all of your tax affairs relating to disguised remuneration schemes and you’re not already in the process of settling, you should contact HMRC.

Calculate your loan charge

A loan is classed as outstanding if the total sums loaned are more than the total repayments made. All disguised remuneration loans within the scope of the loan charge, outstanding on or before 5 April 2019, are treated as employment income received on that date, or trade profits in the tax year 2018 to 2019, depending on the type of scheme used.

This means that loans outstanding on 5 April 2019 will incur an Income Tax and National Insurance contributions charge as if they were earnings or profits received in the tax year 2018 to 2019.

As part of the loan charge review, an individual was able to make an election to spread their loan balance evenly over 3 tax years (2018 to 2019, 2019 to 2020 and 2020 to 2021). They had to do this on or before 30 September 2020 for an election to be made in time.

If you did not make an election on or before 30 September 2020, you may be able to make a late election. There are limited circumstances where we can accept a late election. The Statement of Practice sets out the criteria that we’ll consider for late elections and the process for making a late election.

To apply for a late election to spread your balance over 3 tax years, you need to ask for a paper version of the loan charge reporting form by either:

• email ca.loancharge@hmrc.gov.uk using ‘late loan charge election’ in the subject line
• telephone: 0300 322 9494

When you send the form back, you should tell us why you are making a late election.

If you attempt to make a late election, you should include your full outstanding loan balance in your 2018 to 2019 Self Assessment tax return, until an officer of HMRC has provided confirmation that the late election has been accepted. We’ll consider late elections on a case by case basis and write to you to let you know our decision.

To calculate the value of your outstanding disguised remuneration loans, you may need to check:

• payslips or invoices you received for work performed whilst using these arrangements
• any contracts of employment or service contracts you entered into
• loan agreements you signed, or any other documents that were part of the disguised remuneration arrangement, such as letters from your employer
• your bank statements, or check with your bank if your loan was paid directly into your bank account (some banks may charge a fee for searching old records)
• your P60
• with the people you received the loan from (usually the trustees of a trust), for information about the loans

Benefit payments

Your outstanding disguised remuneration loan balance will not be treated as earnings when calculating your entitlement to some income-related benefit payments, such as:

• Universal Credit
• Housing Benefit
• Jobseeker’s Allowance
• Employment and Support Allowance
• Pension Credit
• Income Support
• Carer’s Allowance
• Tax Credits

Loan repayments to be disregarded

If you’ve repaid some or all of your loans, this may be taken into account for the purposes of calculating the amount of loans outstanding. Only genuine repayments made on or before 5 April 2019 can be accepted as valid loan repayments.

Genuine repayments include those where the repayment amount is not routed back in some way to the person who received the original loan, and those where the repayment is not related to a further scheme to avoid tax.

If you used an employment based scheme, disregarded repayments include any repayments that were:

• not in money and made on or after 17 March 2016
• linked to an avoidance scheme and made on or after 17 March 2016
• made on or after 17 March 2016 where the money or asset used in the repayment is the subject of a subsequent ‘relevant step’, which means that the amount repaid is then routed back to you in some form

If you used a trade based scheme (used by self-employed traders and partners in trading partnerships), disregarded repayments include those made on or after 5 December 2016:

• not in money
• linked to a tax avoidance scheme

You may also still need to report your loan information and pay the loan charge if:

• the loan has been written off or released by the lender without settlement of the tax due
• you entered into subsequent arrangements which attempt to remove the tax liability on the amounts put through the scheme

Repayments made to any disguised remuneration loan on or before 5 April 2019 in a depreciating currency, will only count up to the sterling value of that repayment.

Accelerated payment notices

If you’ve paid an accelerated payment notice (APN) for a tax avoidance scheme covered by the loan charge, you may be able to offset your APN payments against some or all of the charge.

You can only do this if the APN is for the same tax avoidance scheme that the loan charge applies to, and to the extent it relates to your outstanding disguised remuneration loan.

The way you make a claim to offset your APN payments is different depending on if you used an employment based scheme or trade based scheme.

If you used an employment based scheme

Where an APN was issued to you in respect of a loan that you’re liable to pay the loan charge for, you can offset the APN payment formally or informally.

Where an APN was issued to another person (for example, your employer) in respect of a loan that you’re liable to pay the loan charge on, you can only offset the APN payment informally. This offset will only be valid until any appeal against the underlying tax in dispute that the APN was based on is resolved.

Requesting a formal offset

You can apply to HMRC for your APN payments to become a non-refundable payment of the tax due on either:

• the loan charge
• any earlier charge on the same income

To use your APN payment in this way you must not have used the APN payment to cover another tax charge and you’ll need to tell HMRC:

• the name and scheme reference number of the scheme the APN relates to
• the dates and amounts of the original loan subject to the APN
• the balance of the loan subject to the APN on 5 April 2019

If you use your APN payment in this way you can never have it repaid, even if the scheme to which the APN relates is challenged and HMRC does not win.

To make an application, email: bootle.acceleratedpayments@hmrc.gov.uk stating that it is an application for a formal offset (under section 554Z11E of the Income Taxes (Earnings and Pensions) Act 2003). You should confirm within the email that you accept the application, if accepted by HMRC, is irrevocable.

Requesting an informal offset

You should request an informal offset through your 2018 to 2019 Self Assessment tax return. You should enter the amount of the APN that you’ve paid (or one third if you’ve made an election to spread the balance) in box 15 of the supplementary tax calculation summary (SA110). You should include a note in box 17 giving details, including the name and reference number of the scheme the APN relates to (these numbers relate to the paper form).

If you used a trade based scheme

Where you’ve paid an APN, and the loan balance outstanding on 5 April 2019 is not more than the amount of the APN, you can make a claim for an adjustment to be made to the charge for which the APN was issued. You can ask for the APN amount paid to be offset against the loan charge amounts due.

To make a claim, email: bootle.acceleratedpayments@hmrc.gov.uk.

You’ll need to tell HMRC:

• the name and reference number of the scheme the APN relates to
• the dates and amounts of the original loan subject to the APN
• the balance of the loan subject to the APN on 5 April 2019
• confirmation that you want to use the APN amount paid against the loan charge amounts due

Double Taxation Relief

If your disguised remuneration loan is subject to an earlier tax charge, you can ask HMRC to credit any amount already paid or accounted for when you pay the loan charge.

How to report a disguised remuneration loan

If you’ve not already done so, you must accurately report any outstanding disguised remuneration loans that are subject to the loan charge to HMRC. You can do this on the loan charge reporting form.

You’re no longer able to submit the form online. You should ask for a paper version of the loan charge reporting form by contacting us by either:

• email us at ca.loancharge@hmrc.gov.uk using ‘loan charge reporting form request’ in the subject line
• telephoning 0300 322 9494

If you’re filling in the form for someone else, you’ll need their National Insurance number. If that person has a Self Assessment Unique Taxpayer Reference, you’ll also need that number.

You must give information about loans under each scheme separately. Monthly loans made as part of the same arrangement should be added together and returned as one for each tax year.

You’ll need to provide details of the loan arrangements you used in each tax year. These details will include:

• the scheme name
• the start and end dates of the schemes you used
• any HMRC case reference numbers you have
• your Disclosure of Tax Avoidance Scheme number, if you have one
• the total loan amount in each tax year, including any amounts repaid or written off
• any amounts of tax or National Insurance contributions you’ve already settled

HMRC will check the details you send and will contact you if you need to provide more information. If you need to add another scheme or change the details you sent, you’ll need to send your details again together with the changes or new information.

How and when you’ll need to provide the information to HMRC depends on the type of scheme you were using.

Typical characteristics of the main types of scheme are explained below. The reporting requirements depend on the nature of the scheme used, not your employment status now or in the past.

For example, this means that if you used an employment based scheme you’ll have to meet the reporting requirements for that scheme, even if you consider yourself as self-employed now.

Employment based schemes

Your employer provides funds to a third party (normally a trust) who lends those funds to you. You’ll normally have an employment contract with your employer who should give you payslips.

Employed contractor

You provide your services through a third party known as an ‘intermediary’, who is often based offshore and provides funds to another third party (frequently a trust). The trust then lends those funds to you.

Alternatively, you may have received loans from your employer, but your employer may have transferred the rights to the repayments of your loan to a third party.

You’ll normally have an employment contract with the intermediary who should give you payslips.

Trade based schemes

You may have a contract for services, meaning you were working in a self-employed capacity, alone or in a partnership, and payments may have been routed through an offshore trust that lends those funds to you. As you were self-employed you would not have a contract of employment or receive a payslip.

If you’re not sure which type of scheme you’ve used, you can Telephone: 03000 534226 or email: ca.loancharge@hmrc.gov.uk.

Penalties

If you did not report details of your outstanding disguised remuneration loans to HMRC on or before 30 September 2020, or the information is not complete and correct, you may be liable to:

• an initial penalty of £300
• further daily penalties of up to £60 a day for as long as the information remains outstanding, up to a maximum of 90 days
• a penalty not exceeding £3,000 for each inaccuracy deliberately or carelessly included within the information provided, or discovered after the information has been submitted and you do not tell HMRC

Employees and contractors using employment schemes

What you need to do depends on the current status of the employer who you had the disguised remuneration loan arrangement with.

If your employer or former employer:

• exists and is based in the UK, they must account for and pay the loan charge on your behalf using PAYE
• is no longer on the companies register or is not based in the UK, you’ll need to pay the loan charge through your Self Assessment return

Employer exists and is based in the UK

HMRC will first go to the employer who provided you with your disguised remuneration loan to collect the loan charge. If they cannot pay the loan charge, HMRC may transfer this charge to you in the future.

You should have told any employers you had disguised remuneration loan arrangements with about your outstanding disguised remuneration loans. You should have done this on or before 15 April 2019. If you did not, you must do so now, and let HMRC know. Telephone: 0300 322 9494.

You can find information about a company if you do not have any contact details for the employer.

If the company is insolvent you should have sent the information to the appointed insolvency practitioner. You can find insolvency information about the company if you do not know their contact details.

You should also have reported the loan charge to HMRC, and included it on a Self Assessment tax return for the 2018 to 2019 tax year. Any 2018 to 2019 returns submitted now are late and will be liable to late filing and payment penalties and interest on any amount owed, charged from 1 February 2020.

If you made an election to spread your outstanding loan balance evenly over 3 tax years, you’ll also be required to submit a Self Assessment tax return for the 2019 to 2020 tax year on or before 31 January 2021. The return for the 2020 to 2021 tax year will be due on or before 31 January 2022.

You’ll need to include the loan charge for each relevant tax year using the SA102 supplementary pages. You should include all taxable income which relates to the tax year in each return, not just your outstanding disguised remuneration loans.

If the relevant employer is based in the UK, they should have reported and paid any disguised remuneration loan charge on your behalf. If the loan charge was reported on your behalf, this tax may have been deducted from any payments your employer made to you through PAYE. Alternatively, you may have repaid the tax to your employer.

If your employer cannot deduct the loan charge liability from your pay in each tax year to which your outstanding loan has been spread, you should agree how you’re going to repay them. You should repay your employer, referred to as ‘making good’, on or before 5 July 2021 for the 2020 to 2021 tax year. If you do not do this, you may incur a further tax charge on the benefit of your employer paying your tax. If you did not make good on or before 5 July 2020, any tax paid by your employer for the 2019 to 2020 year, you may also incur a further tax charge.

Your employment income in each relevant tax year should include the appropriate amount of outstanding disguised remuneration loans, as well any other employment income. Your employment income can be found on your P60, or other information provided by your employer if you’ve left employment.

You’ll need to give details of your employment income relating to the loan charge on your tax return, along with any other employment income you received in each relevant tax year. Loans you received through trade based schemes should be shown separately to the sums for employment based schemes. Further information can be found in the guidance accompanying your tax return.

Employer no longer exists or is not based in the UK

If your employer is not based in the UK, the responsibility for payment of the tax on the loan charge transfers to you.

You had to tell HMRC about any outstanding disguised remuneration loans on or before 30 September 2020, both on the loan charge reporting form and a 2018 to 2019 Self Assessment tax return. If you’ve not yet done so, tell us now. Any 2018 to 2019 returns submitted now are late and you’ll be liable for late filing and payment penalties and interest on any amount owed, charged from 1 February 2020.

If you made an election to spread your loan charge balance evenly over 3 tax years, the income will be deemed as employment income in the tax years 2018 to 2019, 2019 to 2020 and 2020 to 2021. You should report this in the additional information page of your tax returns, boxes 21 to 24.

You should include all taxable income which relates to the tax year in each return, not just your outstanding disguised remuneration loans.

If you decided to pay your loan charge in full, the total of your outstanding loans is deemed as employment income in the tax year 2018 to 2019.

You’ll also need to include any other employment income received in each relevant tax year. If you received loans through trade based schemes you should include those sums in your Self Assessment tax return separately to the sums for employment based schemes.

If we have not asked you to submit a 2018 to 2019 Self Assessment tax return, you should have notified us of your liability to the loan charge. If you’ve not done so you should as soon as possible. We’ll then send you notice to file a return. Find out how to register and file a return. This can take up to 20 working days.

Help is available to support you completing your Self Assessment tax return.

Employees and contractors using trade based schemes

If you’ve not done so already, you should include outstanding disguised remuneration loan amounts from trade based schemes in your 2018 to 2019 Self Assessment tax return. Any 2018 to 2019 returns submitted now are late and you’ll be liable for late filing and payment penalties and interest on any amount owed, charged from 1 February 2020.

If you made an election to spread your outstanding loan balance liability over 3 tax years, the outstanding loan amount will need to be split evenly between your Self Assessment tax returns in the tax years 2018 to 2019, 2019 to 2020 and 2020 to 2021. The loan charge income will then be reported in the tax return for each of these years, instead of reported wholly in the return for the tax year 2018 to 2019.

Trade exists when loan charge income is reported

If the trade for which you received the disguised remuneration loans continued in the tax years in which the loan charge income is reported, you should include the loans as ‘disguised remuneration additions to profits’ in the appropriate box of your SA103 self-employed supplementary pages

Your tax return will also need to include any other profits from trading activities, and any other taxable income, for each tax year where a loan charge liability is reported.

Trade has ceased

If the trade has ceased, then this income will normally still be chargeable in the year it is reported and you should include the loan amount in Box 22 of your SA101 additional information supplementary pages as ‘self-employed or partnership income where the trade has ceased’ in the relevant tax years. Income received from a trade that has ended is known as ‘post cessation receipts’.

Depending on when the trade ceased, you may be able to treat the loan charge income as taxable income in the tax year in which the trade ended.

In this case, do not complete Box 22 of your SA101 additional information supplementary pages, but instead complete boxes 23 and 24.

In addition, you’ll need to calculate the difference between the actual liability paid for the earlier year (the year in which the trade ceased), and the liability that would have arisen for that earlier year if the loan charge income had been included in the return for that year.

This calculation should take into account any other post-cessation receipts (including other loan charge income), which you’ve elected to treat as taxable income in the tax year in which the trade ended.

You’ll need to input the amount of the difference in box 14 of the supplementary tax calculation summary (SA110). The adjustment relates to the year in which the post cessation receipt is actually received, even though it is calculated by reference to the circumstances of the earlier year.

Relief from double taxation

If more than one tax charge had arisen for the same loan, you can ask HMRC to credit what you pay under the loan charge against the other tax liability. This will prevent you having to pay tax twice on the same income.

If you also had loans from employment based schemes, you’ll need to report them separately using the employment income pages in your Self Assessment return. Further information can be found in the guidance accompanying your tax returns.

If you have difficulty paying

If you think you’ll have difficulty paying the liabilities due, there are options available to make paying the loan charge more manageable. If you’re unable to pay in full and need a payment plan, contact the loan charge helpline. Telephone: 0300 322 9494.

What happens if you’re an employer

Any employees you’ve had disguised remuneration loan arrangements with, should have sent you details of outstanding loans on or before 15 April 2019 so you could account for the loan charge.

Third party lenders (usually trustees of an Employee Benefit Trust or similar body) also have a duty to provide you with this information.

Even if they did not provide you with any information, you should still have sent a loan charge return to HMRC.

You may want to contact your employees or former employees to find out the amount of their outstanding disguised remuneration loans, and if they have made an election to spread their loan balance.

Employers who have paid the loan charge

If you’re an employer who has already reported and accounted for the loan charge where an employee has made an election to spread their loan balance evenly over 3 years, you’ll need to amend the information submitted.

You’ll also need to amend the information submitted where the employee’s loan charge liability has reduced as a result of the changes to the loan charge. You may also be due a refund in this situation.

How to report any changes

You should amend the amount of outstanding disguised remuneration loan balance you reported on your Real Time Information submissions for the 2018 to 2019 tax year. If you’re able to, you should use the same payroll software you originally used to report the amounts of outstanding disguised remuneration loans.

If you’re correcting a mistake in the 2018 to 2019 or 2019 to 2020 tax years, you may be able to send an FPS instead – use your payroll software to check.

Alternatively, you’ll need to use Earlier Year Update (EYU) submissions through HMRC’s Basic PAYE Tools (BPT).

When submitting the EYU for each employee or former employee, you should calculate the difference between the figure you originally reported and the revised amount and report the difference to us.

If you’re using Basic PAYE Tools to complete an Earlier Year Update submission, you’ll need to enter the previously submitted year to date figures. You’ll also need to work out the tax, National Insurance contributions and student loan deductions due.

BPT will not do this for you, so you should use your current payroll software product to do your calculations. If this is not possible, you’ll need to calculate the tax, National Insurance contributions and student loan deductions manually.

If you’re reporting an outstanding disguised remuneration loan balance for a former employee, you should use the guidance for paying an employee after giving them a P45.

2018 to 2019 tax year

For this tax year you’ll need to:

• calculate the revised amount of outstanding disguised remuneration loan balance, taking account of any election your employee has made to spread their loan balance evenly across 3 years
• submit an EYU with the difference of the employee’s outstanding loan balance in the ‘Amount of Part 7A disguised remuneration income’ field (this will be the difference between the amount you previously submitted to HMRC and the revised amount, and will be a minus figure)
• enter this minus amount in the taxable pay, the gross earnings for National Insurance contributions and, if relevant, the student loan deduction fields
• calculate the revised amount of tax, National Insurance contributions and, if relevant, student loan deductions now due
• complete all relevant fields with the minus amounts (this will be the difference between the amounts you previously submitted to HMRC and the revised amounts)

If your employee has made an election, follow the guidance below in respect of the 2019 to 2020 and 2020 to 2021 tax years.

You’ll need to provide your relevant employees with a revised P60 for the 2018 to 2019 tax year which reflects the amended disguised remuneration loan balance. Alternatively, you should notify any employees or former employees of the changes in writing as soon as possible.

2019 to 2020 tax year

Where you’ve received a copy of an employee’s election, you should submit an EYU or Full Payment Submission (FPS) with ‘year to date’ information (dependent on which submission type your payroll software supports) to make amendments to this tax year.

The appropriate amount of the outstanding loan balance should be reported as soon as possible for the 2019 to 2020 tax year.

2020 to 2021 tax year

From 20 April 2021, an EYU will no longer be a valid submission type to make amendments to the tax year ending on 5 April 2021. Any amendments to this and future tax years will need to be made using an FPS submission.

The appropriate amount of the outstanding loan balance should be reported as soon as possible after 5 April 2021 for the 2020 to 2021 tax year.

EYU submissions for the 2019 to 2020 tax year where the outstanding loan amount will be spread

For this tax year you need to:

• submit an EYU with one third of the outstanding loan balance on 5 April 2019 in the ‘Amount of Part 7A disguised remuneration income’ field
• enter this same amount in the taxable pay, the gross earnings for National Insurance contributions and, if relevant, the student loan deduction fields
• calculate the revised amount of tax, National Insurance contributions and, if relevant, student loan deductions now due

You should include any disguised remuneration loan balance on relevant P60s for the 2019 to 2020 tax year. Alternatively, you should notify any employees or former employees of the changes in writing as soon as possible.

FPS ‘year to date’ submissions for the 2019 to 2020 and 2020 to 2021 tax years where the outstanding loan amount will be spread

You need to:

• submit an FPS with one third of the outstanding loan balance on 5 April 2019 in the ‘Amount of Part 7A disguised remuneration income’ field
• enter all ‘year to date’ figures, including the amount of outstanding loan balance, in the taxable pay, the gross earnings for National Insurance contributions and, if relevant, the student loan deduction fields

We recommend that you submit the FPS for the 2020 to 2021 tax year after 5 April 2021, and that employers do not operate PAYE on the loan balance at the same time as a payment of regular salary.

This is to make sure payroll software does not deduct income tax and National Insurance contributions due on the loan balance from any take home pay, which could reduce take home pay significantly or to nil.

Overpayments

Once HMRC has processed the amendments, any overpaid liability will be available as a credit on your employer record. A repayment may be due from you to your employee where you’ve paid the tax and National Insurance contributions due to HMRC on your employee’s outstanding loan balance which has either:

• been deducted from actual payments made to your employee, or
• the employee has repaid to you the tax and National Insurance contributions due on the outstanding loan balance

Before making any repayment you should check if your employee has made an election to spread their outstanding loan balance. If they have made an election, you need to report one third of the outstanding disguised remuneration loan balance in the 2019 to 2020 tax year as detailed above.

You should deduct any liability due in respect of the 2019 to 2020 tax year before repaying any balance. You must calculate the repayment based on the revised 2018 to 2019 liability and make arrangements to repay your employee.

Where you paid the tax and National Insurance contributions due to HMRC on your employee’s loan charge for 2018 to 2019, and your employee has not repaid the tax and National Insurance contributions to you, no repayment is due to your employee.

In these circumstances you should previously have reported the tax and National Insurance contributions you paid which were not repaid to you, as a taxable benefit (Box B) on a P11D for the 2018 to 2019 tax year.

If the amount of loan charge for 2018 to 2019 has now changed, complete an amended P11D for the 2018 to 2019 tax year with the revised figure of PAYE deductions (tax and employee National Insurance contributions) you paid which were not repaid to you and provide your employee with a copy.

Where you’ve received an election to spread the outstanding loan balance, your employee had up until and including 5 July 2020 to repay the 2019 to 2020 loan charge liability to you and 5 July 2021 to repay the 2020 to 2021 loan charge liability to you.

Where the liability is not repaid to you by these dates, you should have completed a P11D form for 2019 to 2020 on or before 6 July 2020 and on or before 6 July 2021 for 2020 to 2021. You should provide your employee with a copy. The forms should include the figure of PAYE deductions (tax and employee National Insurance contributions) you paid, which are not repaid to you by these dates.

Apprenticeship Levy

If you’re liable to the apprenticeship levy as your pay bill is over £3 million in the 2018 to 2019 or 2019 to 2020 tax years, you’ll also need to recalculate this levy and send a revised Employer Payment Summary for these years.

Employers who have not paid the loan charge or agreed a settlement

If you’re an employer who has not reported and accounted for the loan charge, you should do so now. Late payment interest will accrue until you pay, because you missed the statutory deadline for payment, which was 22 April 2019. There may be additional reporting requirements where an employee has made an election to spread their loan charge balance.

How to report the loan charge

You must report and pay the loan charge for appropriate loans made on or after 9 December 2010.

Do not include any loans made before 6 April 2016 where the avoidance scheme use was reasonably disclosed to HMRC and the department did not take action (for example, opening an enquiry).

In addition, your employees or former employees may have made an election to spread the amount of their outstanding loan balance over 3 tax years. They should have provided you with a copy of their election on or before 30 September 2020 to show they have done this.

If you’re given a copy of an election, the outstanding loan balance should be split evenly across the 3 tax years 2018 to 2019, 2019 to 2020 and 2020 to 2021.

2018 to 2019 tax year

You must report any outstanding disguised remuneration loans for each employee and former employee on an EYU for the 2018 to 2019 tax year.

You should check with your payroll software provider if they have made the changes necessary for you to correctly report the outstanding disguised remuneration loans. If they have not, you’ll need to use an EYU submission through HMRC’s BPT to report the outstanding disguised remuneration loans.

If you’re reporting an outstanding disguised remuneration loan balance for a former employee, you should use the guidance for paying an employee after giving them a P45.

When submitting the EYU for each employee or former employee, you should:

• calculate the revised amount of outstanding loan balance, taking account of any election your employee has made to spread their balance evenly across 3 years
• submit an EYU with the amount of the employee’s outstanding disguised remuneration loan balance in the ‘Amount of Part 7A disguised remuneration income’ field — this will be a positive amount
• enter this same amount in the taxable pay, the gross earnings for National Insurance contributions and, if relevant, the student loan deduction fields
• calculate the revised amount of tax, National Insurance contributions and if relevant student loan deductions now due
• complete all relevant fields with the difference between the amounts you previously submitted to HMRC and the revised amounts

If your employee has made an election, follow the guidance below in respect of the 2019 to 2020 and 2020 to 2021 tax years.

You should provide your employees with a revised P60 for the 2018 to 2019 tax year which reflects the amended disguised remuneration loan balance. Alternatively, you should notify any employees or former employees of the changes in writing as soon as possible.

Where you pay the tax and National Insurance contributions due to HMRC on your employee’s outstanding loan charge liability for 2018 to 2019, you should complete a P11D for the 2018 to 2019 tax year with the figure of PAYE deductions (tax and employee National Insurance contributions) not repaid to you as a taxable benefit (Box B) and provide your employee with a copy.

If you’re using BPT to complete an EYU submission, you’ll need to enter the previously submitted year to date figures. You’ll also need to calculate the tax, National Insurance contributions and student loan deductions due.

BPT will not do this for you, so you should use your current payroll software product to do your calculations. If this is not possible you’ll need to calculate the tax, National Insurance and student loan deductions manually.

2019 to 2020 tax year

Where you’ve received a copy of an employee’s election, you should submit an EYU or Full Payment Submission with ‘Year to Date’ information (dependent on which submission type your payroll software supports) to make amendments for this year.

The appropriate amount of the outstanding loan charge balance should be reported as soon as possible for the 2019 to 2020 tax year.

2020 to 2021 tax year

From 20 April 2021, an EYU will no longer be a valid submission type to make amendments to the tax year ending on 5 April 2021. Any amendments to this and future tax years will need to be made using an FPS submission.

The appropriate amount of the outstanding loan balance should be reported as soon as possible after 5 April 2021 for the 2020 to 2021 tax year.

EYU submissions for the 2019 to 2020 tax year where the outstanding loan amount will be spread

For these tax years you need to:

• submit an EYU with one third of the outstanding loan balance on 5 April 2019 in the ‘Amount of Part 7A disguised remuneration income’ field
• enter this same figure in the taxable pay field, the gross earnings for National Insurance contributions and, if relevant, the student loan deduction fields
• calculate the revised amount of tax, National Insurance contributions and, if relevant, student loan deductions now due

You should include any disguised remuneration loan balance on relevant P60s for the 2019 to 2020 and 2020 to 2021 tax years. Alternatively, you should notify any employees or former employees of the changes in writing as soon as possible.

FPS ‘Year to Date’ submissions for the 2019 to 2020 and 2020 to 2021 tax years where the outstanding loan amount will be spread

You need to:

• submit an FPS with one third of the outstanding loan balance on 5 April 2019 in the ‘Amount of Part 7A disguised remuneration income’ field
• enter all ‘year to date’ figures, including the amount of outstanding loan balance, in the taxable pay, the gross earnings for National Insurance contributions and, if relevant, the student loan deduction fields

We recommend you submit the FPS for the 2020 to 2021 tax year after 5 April 2021, and that employers do not operate PAYE on the loan balance at the same time as a payment of regular salary.

This is to make sure payroll software does not deduct income tax and National Insurance contributions due on the loan balance from any actual take home pay, which could reduce take home pay significantly or to nil.

Where an election had been received, your employee had until 5 July 2020 to repay the 2019 to 2020 loan charge liability to you and 5 July 2021 to repay the 2020 to 2021 loan charge liability to you.

Where the liability is not repaid to you by these dates, you should have completed a P11D for 2019 to 2020 before or on 6 July 2020 and before or on 6 July 2021 for 2020 to 2021. You should provide your employee with a copy of these forms. The forms should include the figure of PAYE deductions (tax and employee National Insurance contributions) you’ve paid which are not repaid to you to you by these dates.

You must make sure you pay the Income Tax and National Insurance contributions payments to HMRC by the due date. The payment dates for the 2019 to 2020 tax year were 19 April 2020 if paying by post, or 22 April 2020 if paying electronically. Late payment interest is due if you missed the statutory payment dates and will continue to accrue until you pay.

Apprenticeship Levy

If you’re liable to the apprenticeship levy as your pay bill is over £3 million in the 2018 to 2019 or 2019 to 2020 tax years, you’ll also need to recalculate this levy and send a revised Employer Payment Summary for these years.

If you do not have enough funds available to pay the PAYE you reported, contact us by telephone on 0300 322 9494 as soon as possible to discuss your options.