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Disguised remuneration

Disguised remuneration is a kind of tax avoidance scheme that pays people income via a loan – but a loan that was never meant to be repaid.

Since loans are not usually considered taxable income, these schemes would allow people to avoid paying Income Tax and National Insurance.

However, since 2019 HMRC has started to crack down on these disguised remuneration schemes through something called a “loan charge” – basically asking for Income Tax and National Insurance (plus penalties) to anyone who used these schemes, on disguised remuneration loans starting all the way in 1999.

There are also different rules now for how companies can give loans, especially to directors:

  • they need to be less than £10,000
  • the loan has to charge a fair interest rate
  • you need to pay it back by the company’s year end.

Otherwise, the loan is considered a “benefit in kind” and you have to pay tax on it.

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