The loan charge that was announced in last year’s budget will be included in Finance Bill 2017.
The loan charge will apply to any loans outstanding at 6 April 2019 that had been advanced from an EBT structure to the beneficiary on or after 6 April 1999. The legislation will treat the employee as if the trustee had taken a ‘relevant step’ on 5 April 2019, which will mean that the whole value of the outstanding loan will be treated as the employee’s taxable employment income on that date.
This will leave the employer with an obligation to operate PAYE and NIC on that date. If the employer company has ceased to exist in the meantime, the tax liability will instead be collected through the employee’s self-assessment return.
The proposed introduction of a parallel charge for self-employed people who have used similar schemes has also been confirmed.
The only significant change set out in the Budget documents is that the proposed introduction of a new disguised remuneration close-company ‘gateway’ has been deferred until 6 April 2018. This proposal is intended to prevent owners of close companies from arguing that they fall outside the disguised remuneration rules, as their arrangements are related to their ownership of the company, not their office or employment with the company.
This last proposal has been heavily criticised by the profession, as the draft legislation released in December 2016 is densely written and adds complexity to rules that are already distinguished by their convolutedness.