A charge on disguised remuneration loans, known as the loan charge, came into effect on 5 April 2019 to tackle the use of disguised remuneration schemes. Broadly speaking, the charge applies to loans made since 9 December 2010 that were still outstanding on 5 April 2019. For more details on the scheme see HMRC’s guidance.

Outstanding disguised remuneration loans that were subject to the loan charge needed to be reported to HMRC by 30 September 2020, using an online form as well as on the taxpayer’s 2018/19 self assessment tax return.

HMRC is issuing discovery assessments to taxpayers that it believes should have submitted a 2018/19 return containing the loan charge. This is on the basis that the taxpayer either did not include the loan charge or did not include it fully.

The standard time limit for HMRC to make a discovery assessment (unless there is careless or deliberate behaviour by the taxpayer) is four years from the end of the tax year to which the return relates. HMRC would therefore need to issue assessments by 5 April 2023 in such cases. HMRC may be trying to protect its position by issuing assessments now. Otherwise it will need to prove there was careless or deliberate behaviour.

The discovery assessment rules at s29, Taxes Management Act 1970 are complex. ICAEW recommends that any taxpayer receiving any of these assessments takes specialist advice to determine what action to take. Time is of the essence, however, as appeals against the assessments should ideally be made within 30 days of the letter. Although late appeals are possible in some circumstances, they are not guaranteed.