The disguised remuneration loan charge – letters from former employees?

The disguised remuneration loan charge

What should you do if someone claiming to be a former employee asks you to confirm that you’ve accounted for the loan charge?

Image of Mike Lavan

Director - Global Mobility and Employment Taxes

KPMG in the UK


The disguised remuneration loan charge

Broadly, a ‘disguised remuneration loan’ is a loan which is unlikely to be repaid, made by an employee benefit trust (or similar third party) to an individual in connection with their employment.

The loan charge applies to such loans made after 5 April 1999 unless at the end of the day on 5 April 2019:

  • The loan had been repaid in full and in cash;
  • Income tax had already been paid on the amount of the outstanding loan; or
  • The employer, contractor or individual recipient of the loan was already in the process of settling the income tax and NIC due in line with HMRC’ settlement terms.

Individuals who held outstanding disguised remuneration loans on 5 April were required to notify the relevant employer (or employers) of the chargeable amounts by 15 April 2019. They are also required to notify HMRC of the chargeable amounts before 1 October 2019.

Where the disguised remuneration loan charge arose, the relevant employer should have accounted for the PAYE and NIC due by 22 April.

However, where the relevant employer was not based in the UK, the obligation to account for the relevant income tax transfers to the individual.

Letters from former employees?

Some organisations have received letters from individuals who held outstanding disguised remuneration loans on 5 April and claim to be former employees.

These letters often appear to use standard wording which makes general references to end users, agencies and intermediaries in a labour supply chain, and claim that the recipient is ‘likely’ to be regarded by HMRC as being the individual’s ‘employer’ in relation to a disguised remuneration loan charge.

They then request the recipient to confirm that it will account for PAYE and NIC on the affected loans, and state that the individual will report the chargeable loans to HMRC before 1 October.

What should you do?

As noted above, individuals who held outstanding disguised remuneration loans on 5 April are personally liable to account for the income tax due if the relevant employer is based offshore.

These letters might therefore be attempts by individuals who were employed by offshore intermediaries or agencies which operated disguised remuneration arrangements, to procure that the UK based end user of their services accounts for any loan charge.

HMRC are aware of these letters and have confirmed that, where the terms on which an individual was engaged do not give rise to an employment relationship, no disguised remuneration loan charge PAYE, NIC or reporting obligations should arise.

Organisations that receive such letters should therefore review the terms under which the sender’s services were received in order to confirm their obligations.

If you have any queries, please get in touch with your normal contact or e-mail Mike Lavan, Jay Lad, or

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