The 2019 Loan Charge.

HMRC are on the rampage to clamp down on tax evasion, no matter how legal it may have once been or seemed; they are taking steps to reclaim all tax owed. This is known as the 2019 Loan Charge and is contained under the Finance (no 2) Act 2017, which could be the biggest most significant change in tax legislation in recent years.

It could affect 100s of independent nurses/doctors/teachers/contractors & freelancers that were employed through agencies, because of retrospective tax measures.

If you already know what this is and know that you are included in this, you need to seek tax advice now.

The Government has extended the date for ‘registering an intention to settle’ to the 30th September 2018.  It will only accept money not assets. Be aware – this date will creep up fast.

What is it?  Besides being a complex subject with far-reaching consequences?

As far back as 1999, HMRC told companies that they could no longer treat freelancers as contractors thereby avoiding paying tax & NI contributions (IR35).  But this, in itself, had loopholes leading to accountants & other financial companies offering Trusts such as an Employment Benefit Trust or an Employee Funded Retirement Benefit scheme as a more tax efficient way of getting ‘their’ cash out of the business and avoid paying tax.  These are known as Disguised Remuneration Schemes (DR).

Company A, or an individual, could pay their profit/divert income into this scheme and then get possibly up to 90% paid back by means of a tax-free loan, which was never expected to be repaid or called in.

If you’ve benefitted from such a scheme and still have one on the 5th April 2019 then, please, seek advice.  I can’t stress this strongly enough.

Unless you repay the loan (with money, not assets), or have settled with HMRC then you will get a tax charge, as HMRC regard it as a taxable income and it is triggered on any outstanding loan balance built up. Each case is individually reviewed and the charge can include income tax at a percentage of the balance and NI contributions.  HMRC are also chasing contractors & freelancers with APNs (Accelerated Payment Notices) which have no right of independent appeal.  If the company has gone, then the directors; partners; individuals will be billed.

There are 4 options for settling – see the HMRC website – but they all mean you have to pay or incur further liabilities. There are forms on their site which you would have to discuss with a tax advisor – ‘Disguised Renumeration- apply to postpone your 2019 loan charge (DR100); – schemes affected by the loan charge (Spotlight 44 & 36).

Stephen Lloyd MP says that it is unfair and immoral possibly causing bankruptcy, hitting hard earning contractors rather than the firms who ran the schemes & recommended them. They were also approved by top accountants. Mr Lloyd adds that people who acted in good faith are being punished for imprecise legislation which enabled agencies & tax advisers to take advantage of loopholes.

He argues that in March 2011, the Treasury claimed that HMRC could act retrospectively only in ‘exceptional circumstances’ but how can these be exceptional when 1000s used this arrangement over 20 years?

Stephen Lloyd is raising a motion in Parliament to try & minimise the effect on independent contractors & freelancers.  He calls for the loan charge not to be retrospective & to only be applied to those entering disguised remuneration schemes after the 2017 Finance Act got Royal Assent.

See below for his Parliamentary information.


What do I think – somebody had to think up these Trusts and schemes in the first place to offer them to companies and individuals.  Where are they now?

It is harsh to penalise all people with the same treatment.  Yes, some knew that they were avoiding tax and NI payments, but others didn’t realise that the schemes were a bit ‘grey’ especially the Retirement Schemes.   Why have HMRC avoided the issue until now and why are they backdating it so far when normal financial records are not kept that long?

So, was there a level of pressure or encouragement at the time?  The schemes were used openly, may not have been operating outside the rules at the time and the loopholes were not starting to be closed until 2010, but the charge can date back to 1999.  Why now, when HMRC did not show an interest in them even though they knew about them?

Will they retrieve as much money as they say compared to the expense of all this? That, I don’t know.


If you think you may be affected by the possible ruling, any financial advice is beneficial. Until the ruling is settled nothing is set in stone, so watch this space and I’ll update you when I hear more.

Sites which I have found helpful:

Stephen Lloyd Lib Dem Work & Pensions spokesperson:

Stephen Lloyd – – Early Day Motion (EDM1239) is also collecting signatures. has collected 3363 signatures to date (26.08.18) – Stop the Loan Charge 2019 from being applied retrospectively – deadline is 3rd Nov 2018.

The Loan Charge Action Group – is a volunteer organisation.

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