If your company or directors are threatened with an HMRC loan charge, we have the expert team to help. We regularly deal with these types of claim. Our team is led by accountant and lawyer Stephen Downie and assisted by Andy Lynch formerly 18 years working for the investigations team at HMRC. Don't settle for second best. Call us today.

HMRC loan charge – an overview

Loan charges are a description of charges, or rather tax obligations, made against loans considered to represent disguised remuneration schemes. 

Together with surcharges, penalties and interest which may be sought under the various tax legislation, this supports the prohibitive measures taken by HMRC to counter tax avoidance and the late or non-payment of tax liabilities.

The loan charge is a method by which HMRC enforces the obligation to pay tax via a charge against sums loaned (which, as a loan, would otherwise not be liable for tax). The loan charge is applied to all loans received via a disguised remuneration scheme since 9 December 2010. Our Partner, Stephen Downie, has written the comprehensive guide to the application of loan charge legislation for Lexis Nexis.

Charges against director’s loans

It used to be the case (and continues to be) that disguised remuneration was relatively unsophisticated and was disguised as director’s loans which, whilst not chargeable to tax (as with any loan), were also never repaid (making them income, rather than a loan).

The director would have control over the company’s finances and create artificial ways to cancel the loan at the year-end or to write the loan off, thereby obtaining income free of any tax liability.

  • the charge imposed on all company director’s loans under Section 445 of the Corporation Tax Act 2010 provided that such loans, if due at the year-end, would be subject to a tax charge. 
  • whilst this is not a tax, as it could be reclaimed (if the loan was paid back), it acts as a tax on those who chose to draw their income as director’s loans without repaying them.

Loan charges

The use of loans as a form of avoiding tax liabilities has been heavily utilised by disguised remuneration schemes using a loan to conceal or disguise remuneration via

The loan charge was introduced by the Finance Act (No.2) 2017. Its introduction meant that the amount of a loan received by an individual, via a disguised remuneration scheme, was to be treated as taxable income for income tax and national insurance contributions. The loan charge creates a PAYE liability for the employer that has participated in the scheme.

The government announced a review of the loan charge in December 2019, following an independent review of the loan charge policy by Sir Amyas Morse.

  • this review led to a number of key changes to how the loan charge would be applied to companies and individuals who have participated in a disguised remuneration scheme;
  • for example, it was determined that it would only apply to loans made to individuals after 9 December 2010. Previously, the intention was that the loan charge apply to loans made after 6 April 1999.

However, it is important to note that the independent review confirmed that disguised remuneration schemes were a form of tax avoidance which warranted the application of a loan charge.

Transfer of liability

The issue of greatest concern for these charges is who should pay the sums due to HMRC.  In most cases, the company is the taxpayer and therefore, the company is liable for all taxes due, including the above loan charges.

However, HMRC can transfer liability for PAYE (and in some instances for NIC) plus interest, to a beneficiary of a disguised remuneration scheme, where the correct notices are issued. Steps should be taken to verify that HMRC have followed the correct process to transfer liability from a company to a beneficiary (often a director or employee) of a disguised remuneration scheme.

Whilst traditionally HMRC did not tend to transfer liability to individuals personally, there has been an increase in this practice.

Claims by liquidators

Increasingly, directors of liquidated companies that were involved in a disguised remuneration scheme are finding themselves subject to a claim by both HMRC and the company liquidator.

We have assisted many directors subjected to a claim by both HMRC and the company liquidator (the later being on the basis that a director breached his / her fiduciary duties to the company by allowing the company to participate in a disguised remuneration scheme).

HMRC loan charge – FAQs

What is the HMRC Loan charge?
What is an HMRC Loan Charge Settlement?
What is a regulation 80 determination in the context of an HMRC Loan Charge?
Can I appeal a regulation 80 determination for an HMRC Loan Charge?
What are a director’s liabilities in respect of an HMRC Loan Charge Demand?
Are my personal assets at risk if HMRC issue a Loan Charge against me?

“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.

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Lefteris Kallou

Lefteris Kallou


Andy Lynch

Andy Lynch


Stephen Downie

Stephen Downie


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