HMRC had initially challenged such arrangements by arguing that the loans were ‘disguised remuneration’ and should be taxed as such when the EBTs made the loans. Such arrangements were widely marketed as tax-efficient because, instead of attracting tax and National Insurance at the usual rates, the amounts advanced to the employee would escape tax altogether (although there might then be a subsequent and continuing liability on the benefit of not then paying a market rate of interest under the beneficial loan rules). ![]() The current controversy surrounding the 2019 loan charge concerns arrangements where earnings were received in the form of loans from employee benefit trusts (EBTs). However, the decision does not resolve many of the uncertainties that surround these cases. This general discretion effectively circumvented the protections within the PAYE regulations themselves, which generally required HMRC to pursue employers and not employees for unpaid PAYE. ![]() The tribunal concluded that ITEPA 2003 s 684(7A) gave a general discretion to HMRC to disapply the PAYE regulations – and that it was not open to the tribunal to consider whether HMRC exercised their discretion properly. The decision in Hoey v HMRC, the first of these cases, has now been released. ![]() What can I take away?Ī large number of taxpayers have sought and obtained closure notices in respect of earlier years and appeals against these closure notices have been notified to the FTT. Despite the loan charge, HMRC are seeking alternative ways to charge income tax in some cases. The loan charge remains controversial and the chancellor has announced an independent review, led by Sir Amyas Morse.
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