HMRC loan charge

• Key contacts
• Case studies
• FWJ takeaway

The HMRC loan charge applies to certain outstanding loans linked to disguised remuneration schemes. It treats those loans as taxable income and can create a significant liability for individuals and company directors. If you have been contacted by HMRC about the loan charge or have an open enquiry relating to a historic loan scheme, early advice is essential to understand your position and explore your options.

---

At a glance

The loan charge targets historic loan based schemes used to reduce income tax and National Insurance. HMRC continues to review these arrangements and may raise assessments, contact scheme users or issue Accelerated Payment Notices. We help clients understand their liability, respond to HMRC and negotiate outcomes that protect their financial position.

---

What is the HMRC loan charge?

The loan charge is a statutory charge introduced to address certain loan based remuneration schemes. These schemes involved paying individuals through loans that were claimed to be non taxable. HMRC considers these arrangements to be ineffective and introduced the loan charge to bring outstanding loans into charge as income.

The loan charge applies to any outstanding disguised remuneration loans made since 1999 that had not been repaid by 5 April 2019. The legislation brings the value of those loans into income and applies tax on that basis.

Summary: The loan charge treats certain historic loans from avoidance schemes as taxable income.

Who does the loan charge apply to?

The loan charge applies to individuals who used loan based remuneration schemes. These schemes were commonly used by contractors, consultants, employees of managed service companies and company directors. They were also used within wider tax planning structures involving offshore trusts or employee benefit trusts.

The charge applies regardless of whether the scheme promoter still exists. It also applies even if the taxpayer believed the scheme was compliant at the time.

Summary: The charge affects anyone who received payments as loans under a disguised remuneration scheme.

Why were loan schemes used and why are they being challenged now?

Loan schemes were marketed as a tax efficient way to receive income. The arrangements varied, but the common feature was that payments were made as loans that were claimed not to be taxable.

HMRC’s position is that these loans were never genuine and that the payments were taxable as income at the time they were made. The loan charge was introduced to address large numbers of historic cases that remained unresolved.

Summary: Loan schemes were used for tax planning, but HMRC considers them ineffective and continues to challenge them.

How is the loan charge calculated?

The loan charge is calculated by treating the total value of all outstanding loans on 5 April 2019 as taxable income in a single year. This can create a significant liability. The tax due depends on the individual’s income in that year, the value of the loans and the relevant tax bands.

HMRC may also charge interest on unpaid tax and, in some cases, penalties depending on behaviour and cooperation.

Summary: The charge combines outstanding loans into a single income figure and taxes them accordingly.

Does the loan charge apply if the original scheme promoter has closed?

Yes. The loan charge is based on the nature of the payments received, not on the existence of the scheme provider. Many scheme promoters have closed, been liquidated or stopped operating. This does not affect HMRC’s ability to enforce the loan charge.

HMRC focuses on the taxpayer’s position rather than the promoter’s conduct when applying the legislation.

Summary: The loan charge applies even if the scheme promoter has ceased trading.

Can you challenge or appeal a loan charge liability?

In some circumstances you may be able to challenge the underlying tax position. This depends on whether there is an open enquiry, an open assessment or an appealable decision. The loan charge itself is a statutory charge and cannot be appealed separately. However, taxpayers may challenge HMRC’s interpretation of the underlying arrangements.

The options depend on the history of the scheme, whether previous enquiries have been opened and whether assessments were issued before the loan charge took effect.

Summary: Options to challenge depend on the underlying tax position rather than the loan charge legislation itself.

Fantastic firm, nothing was to much trouble. Direct to the point, so helpful would recommend to anyone, I would definitely use them again.

A client that we defended from an HMRC claim

How does the loan charge interact with APNs or follower notices?

HMRC may issue Accelerated Payment Notices or follower notices where it considers these powers apply to historic schemes. APNs require upfront payment of the disputed tax. Follower notices require taxpayers to amend their returns in line with a relevant court decision.

These notices are separate from the loan charge but often arise in the same cases. Receiving a notice does not prevent the loan charge from applying.

Summary: APNs and follower notices may apply alongside the loan charge and carry their own obligations.

What are your options if you cannot pay the loan charge?

If you cannot pay the loan charge in full, you can request a time to pay arrangement. HMRC will consider your financial circumstances and may allow repayment over an extended period if you demonstrate that full payment would cause financial difficulty.

It is important to engage with HMRC early. Ignoring demands can lead to enforcement action, including the use of third party debt collectors or court proceedings.

Summary: Time to pay arrangements may be available, but only if you engage with HMRC promptly.

How can you resolve an HMRC loan charge dispute?

Resolution options depend on your circumstances. These may include paying the charge, negotiating a repayment arrangement, appealing an underlying assessment or reviewing whether the original scheme was implemented in a way that affects the tax outcome.

Clear evidence, detailed records and early communication with HMRC are essential to reach a fair and workable resolution.

Summary: Loan charge disputes can be resolved through payment, negotiation or review of the underlying tax position.

How does FWJ help clients facing the loan charge?

We advise individuals, directors and business owners on the implications of the loan charge, the underlying tax position and the options available. We can assist with enquiries, settlement discussions, repayment arrangements and appeals where appropriate. Our focus is on protecting your position and achieving a clear and manageable outcome.

Summary: FWJ provides clear and practical advice to help clients understand and manage loan charge liabilities.

Our specialist Loan Charge tax team

No other firm in England has the strength in depth and range of skills our tax team.

• Andy Lynch. Andy is an expert on a wide range of HMRC claims and before joining FWJ, he spent 18 years at HM Customs & Excise in their National Investigation Service. His experience is unrivalled in all types of HMRC claims including HMRC investigation defence, VAT claims, R&D tax credit defence, Account Freezing Orders, Tax Disclosure, Code of Practice 8 & 9 claims, winding up petition defence and much more.
• Stephen Downie. Stephen is a Partner and a former ACCA accountant who combines financial expertise with deep legal knowledge to deliver clear, commercial advice. He acts for directors, shareholders, insolvency practitioners and private clients in corporate governance disputes, director disqualification defence, and HMRC-related claims including tax avoidance schemes, PLNs, VAT and PAYE security demands. His focus is always on achieving the best outcome for clients as efficiently and cost-effectively as possible.
• Anita Sharma. Anita is a Senior Associate specialising in tax litigation and financial disputes with HMRC. She advises high-net-worth individuals and major commercial clients on appeals against HMRC decisions, complex tax assessments, and enforcement proceedings. Anita has secured interim relief following HMRC revocations to keep clients trading during appeals and is known for achieving practical, results-focused outcomes in high-value disputes.
• Connor Coombs. Connor is a Paralegal in the tax team assisting on a broad range of HMRC investigation and defence matters. He supports clients with Code of Practice 8 and 9 investigations, time-to-pay arrangements, HMRC statutory demands and R&D tax credit disputes. Connor also helps prepare detailed evidence and submissions for use in appeals and settlement negotiations, ensuring cases are presented clearly and effectively.

“FWJ did precisely what it set out to do. I am extremely grateful for its assistance.”

A client who had received a Request for Security from HMRC for a sum that would have caused their company severe financial difficulties. We helped them to have the entire bill withdrawn

I have been doing business with Andy Lynch for over two years now. In that time I have found him to be very knowledgeable in relation to HMRC matters and excellent in explaining them in layman terms.

A bonded warehouse owner

---

At Francis Wilks & Jones our brilliant tax disputes team are able to assist with any legal matters arising in respect of your tax liability and particularly with regard to claims out of insolvency or claims for breaches of a director’s fiduciary duties.

Alternatively, contact Stephen Downie or Andy Lynch today for immediate help.