This is a tax charge on any outstanding loans that exist as a result of a disguised remuneration tax avoidance scheme. It applies to any loans that were taken out under a disguised remuneration scheme since 6 April1999.
The most common schemes were Employee Funded Retirement Benefit Schemes (EFRBS) and Employee Benefit Trusts (EBT). When used for tax avoidance, both involved the diversion of employment income to a trust; the trust would then ‘loan’ the employment income to the individual (meaning no PAYE/National Insurance tax was paid) who sought to benefit from the Scheme.
It is the responsibility of the employer/company to pay the 2019 Loan Charge under PAYE legislation. The employer is then expected to pass this cost on to the individual. Whilst the initial liability falls to the employer, it can be passed to the individual beneficiary of the scheme by HMRC if unpaid.
By contacting HMRC to settle your tax affairs now, you can obtain certainty of what you owe and if required, arrange a payment plan.