April 2019 loan charge and other considerations: A practical guide


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

April 2019 loan charge: A practical guidance


This is designed as a ‘practical guide’ to dealing with the April 2019 loan charge. We have made our views on this pernicious legislative wrecking ball clear over the last months. If one wants to read them then please refer here.

Secondly, if one wants to look at our detailed and historic technical overview of the charge then read our submissions to the Finance Bill Committee here. We suspect that you will then be one up on the Committee, who probably didn’t.

This note is designed at what someone who is confronted with the spectre of the loan charge on the phantom income, and associated tax charge, that it will bring.

Clearly, this is a very difficult position for a taxpayer. It is also difficult for an adviser. Accelerated Payment Notices (“APNs”) may have been received. One may have received or be in danger of receiving a Follower Notice (“FN”) on the back of Rangers. One might have multiple years of assessment ‘open’ by HMRC interventions.

As such, one might not simply be able to focus on the loan charge.

April 2019 Loan Charge: What are the options?

Taking into account the above, a list options might be as follows

  • Explore settlement with HMRC – this is clearly HMRC’s preferred route. It involves the least resources and practical difficulties on their part and this is reflected in the extensive guidance and terms offered;
  • Repay the loan to the Trustees; or
  • Suffer the April 2019 loan charge.

There is, in theory, a final option of do nothing and ignore the loan charge. Don’t do this. We set out the reasons why below.

Settlement ahead of April 2019 loan charge

Settlement – general

Clearly, one might have had enough of DR schemes. As such throwing in the towel, paying HMRC and getting on with more important things in life might be of immense attraction. Clearly, there still remains the ‘small’ matter of finding the cash to settle either immediately or through a time to pay arrangement.

Indeed, it is clear that the settlement route is the preferred option for HMRC perhaps highlighting in many cases the difficult job they will have in collecting under the April 2019 loan charge.

This is supported by the fact that, by HMRC’s standards, they are offering some important concessions

On the other hand, HMRC also requires one to make ‘voluntary restitution’ in respect of ‘closed years’ (where no enquiry or assessment and no longer in time to do so) for these years. A charitable contribution if you will. Or more accurately, essential consideration for the deal!

It is important to point out that settling seems to be the only way one will have finality. There will be no issues with Rangers and Follower Notices (see later) and no April 2019 loan charge.

Due to the size and shape of so-called disguised remuneration schemes, the settlement facility is cast wide to reflect this. Accordingly, the settlement opportunity is open to employers, employees and contractors who have participated in such arrangements.

Why settle?

Reaching a settlement will close earlier tax years and prevent the 5 April 2019 loan charge arising.

On one hand, one is calculating whether the liability under the loan charge will be less or more than under settlement.

However, it also seems possible that, even if the loan charge gets you, HMRC could try and argue that other liabilities exist. In theory, if HMRC were to run a Rangers argument that the contribution was subject to PAYE upfront then this could result in a higher liability then one would suffer under the loan charge.

Double however, any Rangers argument will be constrained by the normal enquiry and discovery rules – not a retrospective 20 years or require any charitable contributions to the Exchequer to seek resolution.

In an attempt to coral taxpayers down their favoured (read easiest) route HMRC state that the only way to bring finality is to settle under these terms.

Settlement terms


Of course, we are used to HMRC’s mantra that there are no deals to be done. Unless paying all the tax they assert plus interest is your kind of deal!

However, it does seem that, in a departure from their normal view, they are offering a few baby carrots to encourage early settlement. A sign that HMRC perhaps don’t fancy what lies ahead in the form of the loan charge or applying the Rangers decision.

The settlement terms are broadly similar for employers, employees and contractors and they require participants in these schemes to pay the income tax and National Insurance Contribution (“NIC”) liabilities that would have arisen if the loans had been treated as remuneration when made.

As stated above, this includes making voluntary payments in relation to tax years where HMRC is formally out of time to assess the liabilities.

Settlement terms – Employers and employees

Under the settlement terms, they must pay income tax and NICs on funds paid to the relevant third party, e.g. an EBT, or the amount allocated within the scheme for “protected years”. These are years for which HMRC has raised assessments or determinations.

The amounts assessable will be net of scheme expenses such as trustee fees.

Liabilities will be calculated with reference to the tax years the loans were taken.

Mechanically, this is probably one of the advantages of settlement. If the loans were made over a number tax years then the slicing and dicing of the loans outstanding in to difference tax years may mean there is more of a chance that there is, say, some basic rate allowance available in a particular year.

By contrast, if they were subject to the April 2019 loan charge the outstanding loans would be dumped into a single tax year. The result being that many users could be pushed into higher or additional rate tax bands on this phantom income source.

Certainly, for Mr A who may have been paid, say, £15k as a salary and, say, £45k as a loan for the last decade then the opportunity to go back and utilise unused basic rate band will be more attractive than the full loan balance becoming taxable on 5 April 2019.

Corporation tax deductions, Interest & Benefits in Kind (“BIKs”) paid

Where corporation tax returns are open, or in time to be amended, the employer will be able to claim a tax deduction for the contribution to the scheme as well as any fee paid to the promoter, if they have not already done so.

What about interest? Interest will arise for protected years. However, there will be no late payment interest on voluntary restitution.  So that’s very kind of HMRC not to charge interest on the voluntary (but at the same time mandatory!) restitution.

Otherwise there is unlikely to be an opportunity to claim such a deduction without taking other steps.

Where taxpayers have paid a BIK on his or her loan over the years then relief will be available for that tax paid. Relief may only be claimed in years that remain open or is in time for a claim for overpayment relief.

 Show me the money…anybody

In their new liberal(!) approach to tax dispute resolution, Employees may also settle on similar terms if their employer is yet to settle and does not wish to do so.  An employee will need to pay the income tax and late payment interest due.  NICs will only be payable if the employer still exists.

In short, HMRC don’t care who pays as long as they get their money!

Settlement terms – Contractors

Contractors must pay the income tax and NICs on all their relevant loans and other payments on a net receipt basis meaning that the heavy fees paid under the scheme will be tax deductible.

Although I note this does not make great reading for those affected, the ability to deduct fees paid (which can be as much as 18% for some promoters) will be a small silver lining to a very grey cloud.

Employed contractors will not have to settle NIC liabilities, although HMRC may pursue the employer.

However, self-employed contractors, including those operating through partnerships, will need to pay the Class 2 and Class 4 NICs on loans and payments and will also be required to make voluntary restitution payments where HMRC is out of time.

Double tax relief & APNS

There may well be situation where multiple income income tax / NIC liabiliies arise on the same underlying income. For example, when an amount is contributed to the scheme initially and then, again, at a later date when the April 2019 loan charge arises.

Helpfully, the statutory provisions (rather than HMRC guidance) prevent such double tax arising in respect of the same income. Perhaps Mel Stride (and other retrospective tax deniers) should note that this is the same income.

Similarly, the April 2019 loan charge legislation also allows credit for amounts paid under the APN regime.

Repaying the loan


Temporarily ignoring any other relevant attacks, the legislation is clear. One stands at a fork in the road. Do you repay the loan or do you suffer the April 2019 loan charge? A valid choice presented by the legislation.

Ignoring other considerations, I would rather pay money back to the trustees than to HMRC. This is because it is money that could be used by me again in the future. Even if, in the worst cases scenario, that income proves to be taxable when I choose to use I will at least be able to control the tap.

That said, it is clear that those funds can be used for commercial opportunities and retain the IHT attractions of the trust at the same time.

The difficult case of the APN

Firstly, if one has received an APN then this presents a practical problem. My view here is that, sooner or later, one is going to have to hand over some of your cash. This is regardless of whether it has just plopped through your letter box or you are involved in a complex judicial review.

In the absence of a particular technical point, then you are likely to have to pay.

Rangers and Follower Notices

The Rangers case is never far away when one considers this type of scheme.

Most were taken by surprise by the ruling (including, I think, HMRC) which has, to an extent, rendered the April 2019 loan charge redundant.

Indeed, the ruling presented HMRC with a legal principle on which to collect cash without relying on the pernicious and retrospective loan charge. However, settlement, and failing that the April 2019 loan charge, are an easier and preferred route.

Be aware that HMRC have the ability to issue a Follower Notice on the basis that Rangers is a ‘relevant judicial ruling’.

My understanding is that such notices are now being issued. One will be clear by 5 July 2018 at the latest as to whether one is at risk of receiving one of these notices. HMRC has 12 months to issue following the ruling which was 5 July 2017. This is after the deadline for notifying HMRC (deadline is 31 May 2018) of one’s intention to settle.

It should be noted that if this does arise, one will not have to pay tax in relation to any closed years. This beats the settlement opportunity and also the 20-year look back on the April 2019 loan charge.

Lend me a tenner

The April 2019 loan charge legislation states that the loan must be paid in ‘money’. It seems clear to me that that the real requirement of the legislation is for the loan to be repaid in ‘cash’.

If one does not have liquid cash then one may have to sell a capital asset or, alternatively, seek finance on the back of such assets.

Once one has the cash then you can repay the Trustees.

Doing nothing – paying the April 2019 loan charge

One will not have a liability to pay the loan charge if:

  • There is an APN (or Follower Notice) that covers the charge in full;
  • You have settled
  • You have repaid the loan
  • You have paid an equivalent amount of tax on the same ‘income’ in some other way

However, where this is not the case the loan charge will be triggered on any outstanding loan balance that has built up over the last 20 years as at 5 April 2019.

The April 2019 loan charge will be earned income. This ‘phantom’ earned income will fall in the 201/19 tax year.

Initially it will fall on the employer, however, HMRC may take steps to recover this from the employee by a ‘transfer of liability’.

Doing nothing – and hoping no one will notice 

Do not consider this as an option!

Having spoken to many people about these issues, and many people (such as contractors) who will be financially decimated – and perhaps worse – by the loan charge I understand the ‘burying one’s head’ response and the familiar justification ‘because no one will ever know?’ The fact is HMRC might know even where no letters have been received from them.

Where you are a participant in a non-UK scheme then HMRC may seek significant penalties and, as of more recently, may look to take advantage of the new strict liability offence for offshore tax evasion.

This could mean you are brought in front of the Magistrate who will have the power to send you down for six months (and impose an unlimited fine) between the times it takes from him or her to hear a couple of careless driving offences.

Next steps


Firstly, seek some advice and from someone who understands the legislation and issues thoroughly.

Although settlement might be the best advice do not appoint an adviser whose sole role in life is to settle cases with HMRC. There are a number of firms who take great pride in the number of HMRC settlements they agree each week. So what. Phoning up HMRC, saying you want to send them a cheque and then sending them that cheque is not hard work. They like getting cheques. You will be making them happy. The same can be said for a time to pay arrangement.

There is an Accelerated Payment Notice in play

My view is that this gives one the least options. I am assuming that the APN was issued some time ago, representations have been made (and failed) and there is no judicial review. My experience is that when one is faced with an APN most taxpayers are minded to settle the APN – probably on a time to pay basis.

Assuming that the APN covers all of the disputed income then, as under any settlement one can take in to account amounts paid under the APN, there should in theory be no additional tax to pay.

If settlement is chosen then the employer, employee or contractor must notify HMRC by 31 May 2018 of their intention to settle.  Additional information must then be provided to HMRC by 30 September 2018 to allow a settlement to be reached by 5 April 2019.

Where there is no Accelerated Payment Notice in play

The first step might be to calculate what one might owe under this settlement opportunity.

Do your own calculations (or get your accountant or adviser to do them) and think about your options. You can register with HMRC at a later date, within the timeframes, if it is the right thing to do.

One could decide to suffer the loan charge if it was cheaper (a big if). However, one might still be at the mercy of HMRC coming along with another demand. It seems to me unlikely that, unless they calculate there is additional tax due, they are going to be chasing up a second chunk of tax on the same income (see above).

Alternatively, if one is in a position to repay then this might be an attractive option. Clearly, if one settles or pays the tax charge then, without wishing to state the obvious, that money belongs to the Treasury.

However, if one repays the loan to the Trustees then this will be held by the Trustees in a trust that one can use. Clearly, if one benefits or takes loans from the structure then a tax charge will apply. However, it seems to me quite acceptable for this trust to perhaps fund commercial and investment ventures in a tax neutral fashion.

Such an approach might be more complicated if you are in a multi-participator scheme.

As I have said, one might still run the risk of an attack from HMRC – say on the back of Rangers. In the worst-case scenario, HMRC will not be able to re-open closed years in these cases. Secondly, one could challenge the APN on the basis that one’s scheme was sufficiently different from Rangers. There will be many whose schemes are on different terms.

Good luck.


If you have any queries on the April 2019 loan charge, would like a review of your position or want any help or advice on any other tax matters then please get in touch.


  • Numerous commenters on other sites have suggested that repaying the Loan won’t avoid a tax charge under Part 7A as the funds were ‘earmarked’. Can you comment how repaying into the trust and drawing down later would avoid the original tax under an earmarking charge?

    • Andy Wood / Reply

      Hi Ma La,

      Clearly, repaying the loan prior to April 2019 will remove the loan charge.

      You are correct if the trustee just made another loan out the back then there would be a charge under Part 7A (albeit not under the earmarking limb).

      However, the Trustees can make other investments without creating a taxable relevant step.


      • Hi Andy,

        Also looking at being hit by this. I am not UK resident tho, so could I in theory just repay the loan and then retrieve the funds from the trustee (IoM-domiciled) with no UK liability?


        • Andy Wood / Reply

          Hi Matthew,

          Thanks for the comment.

          The funds in the trust will retain its ’employment income’ tail and (if earned whilst UK resident) will remain referable to UK employment earnings. As such, becoming non-UK resident is unlikely to assist.

          Please call the office on 01925 363 006 and speak to one of our advisers.


          • Hi Andy,
            Sorry for very late reply – I didn’t see a reply to this for some reason.
            My question is the same as Matts really – when I meant the earmarking after repaying, I didn’t mean taking another loan, I meant taking an income distribution from the trust. My sit is same as Matt in that I’m non resident.
            Looking at the original Part 7a DR legislation (2011) the earmarking treats the relevant step and subsequent ‘income charge’ as occurring in the year when the relevant step (i.e. earmarking) took place.
            This either took place when the original payment was made to trust (which was before this DR legislation existed in 2011 so I can’t see how it applies when that legislation was forward looking….) OR it takes place when the loan is repaid but if I am non resident when the loan is repaid then surely the earmarking occurs in that tax year and can’t create a uk income charge as I am non resident?
            Surely then being non resident does help?
            If not, then what other way can a trust pay this out (while I’m non resident) to not be liable for uk tax?

  • John Beckmann / Reply

    If I repay the loan to the trustees, can I then get the trustees to pay the money into a UK pension, which I believe is not taxable. Failing that, can I just get it paid to me @10k per year, which is tax free, as I no longer earn an income in the UK.

  • My company went into insolvency in 2013 and therefore all letters relating to the EBT have not been received by me. I did find out on the 31st May the dead line for registering with the HMRC and did so. But I thought that it was the company’s loan and not the directors – however I can now see this has changed. Do I have any leverage as my company has now been struck off ? Also the law at the time of my insolvency was that HMRC would have been a preferred creditor – I know I’m clutching at straws here but I’m still in shock and trying to find out the best way forward – thank you

    • Andy Wood / Reply

      Hi Tracey – thanks for this. Please give someone a call at the office 01925 363 006. Rgds

  • Matt Banham / Reply

    Hi Andy,
    I spoke to a tax law barrister and he said best advice was to ignore the APN. don’t talk to HMRC and don’t pay anything and sit it out and wait to see if HMRC are able to get a transfer of liability. His view is that there was enough precedence that they wouldn’t get it.

    • Andy Wood / Reply

      Thanks Matt. You have taken advice – and he has a better understanding than me of your case – so that’s great.

      If you want a second opinion then give us a buzz


  • Gabriel / Reply

    IT, doctors, nurses and other professionals have been occasionally employed by Umbrella companies who in connection with a company located offshore have been offering ‘tax efficient” payrolls through a loan system as opposed to the classic PAYE.

    My question is how HMRC will become aware of such loans, are the details of the employers sending money offshore are being given to HMRC?

    If someone involved in the above payroll solution wishes to wait and pay the ‘loan charge’ will he or she have to sit and wait until notified by the employer (if they still exist) or HMRC?

    Thank you

    • Andy Wood / Reply

      Hi Gabriel – you will be required to self-assess the position. In addition, there are also reporting obligations (around the outstanding loans) that arise this year. Please give someone a call at the office if you need a steer.


  • If I repay the loans, what are the real IHT risks and costs/ issues and is the 10;year charge payable. The EBT was funded by a close company owned by me

    • Andy Wood / Reply

      Hi John, my view is that HMRC is over zealous with their IHT threat. However, as is usually the case with tax, it will depend on the precise circumstances. Please call the office if you want a discussion.


  • I believe most EBTs and EFRBS use offshore Trusts, as did mine. If the loan is repaid, does an IHT risk still remain in relation to a Lifetime transfer, and a 10 year discretionary trust periodic charge? In my case I owned the Close company but the company itself was not the Settlor.

    The Company now almost dormant, little by way of assets, and no issues about that, HMRC Reg 80:assessments out of time.

    My concern is that IHT and the imminent Requirement to Correct, with an offshore structure, could,give rise to a massive bill even the loans are repaid?

  • Hi Andy,

    I’m not a UK resident and returned to Australia.
    Is there any way HMRC can access my funds in Aust?

    Will I be able to re-enter the UK for a holiday in the future if I don’t settle with HMRC? Will I be stopped at the airport?

    • Andy Wood / Reply

      Hi Steve – assuming you are referring to a scheme you entered in to whilst a UK resident contractor, then you will still have a UK tax liability. Rather than look at your position at the time the charge arises, it looks back at your status at the time the ‘contributions’ to the scheme were made

      [Another crack in the argument that this is not retrospective!]


  • Hi Andy
    re John Beckmann’s point above, if loans were repaid to the trustees (or what could be afforded), could they then distribute those proceeds going forwards a portion at a time, allowing use of future years’ tax allowances (eg pension, sipp, personal allowance etc)?

    • Andy Wood / Reply

      Hi Ravi,

      Just because the funds are back in the EBT (or similar) they are not trapped forever. So, yes, you could drip feed the funds out of the scheme. The ‘relevant step’ is treated as employment income. This employment income is added in with the rest of your income and you would benefit from the relevant allowances and rates if they remain available.

      Funds in the trust can be used in other ways to, say, help fund a commercial venture.


  • What Steve says… I’ve been in Australia since 2013. I get the occasionally threatening letter from the HMRC. Can they get my Australian funds?

  • Hi Andy,

    What are your thoughts regarding HMRC and Reg 81 linking the company to the individual if you are able to repay the loans to the EBT?

    I am lead to believe that even if you repay the EBT’s, HMRC could and will still come after you personally for the tax they see owed by the company as a result of the funds that went into the EBT from the company.

    Up until we heard about Reg 81, it seemed the favoured route was to repay the outstanding loans to the EBT. As others have put, the funds can be re-invested enabling the beneficiaries to make withdrawals at a later stage, being taxed at their marginal rate.

  • Hi Andy,

    I have paid the APN’s and the respective interests for those tax years. Withdrew the appeals on Followers notices, stating that I wish to settle these. Can HMRC still apply a loan charge towards this?

    Appreciate your response.

    • Andy Wood / Reply

      Hi Samit, Thanks for this. If your APNs / Follower Notices have been paid and they are for the same amount of the loan charge then, as the law allows for a credit, there would be no further tax to pay. The problem is there is a good chance the amounts will differ. It sounds like you have had enough of this and are looking to settle – the better way of doing this would be to come to a settlement with HMRC as this should finalise matters. If you need any assistance in the matter then please get in touch. My email address is andy@www.etctax.co.uk but please feel free to get in touch with the office on 01925 363006 and there are plenty ready to help. Regards Andy

  • Hi Andy, I was involved with an EBT scheme in 2004-08 and do not have any records of the EBT loan amounts and the consulting firm has been dissolved – how can I resolve my situation with HMRC if I don’t have the required records?

  • Hi Andy, I’ve been investigated as HMRC considered I was involved in a tax avoidance scheme. The fact is when I joined to the umbrella company they assigned me a number of shares. When I left the company they used these shares to net the loan. Based on this the loan was fully repaid, but HMRC still invites me to settle this period. The umbrella shut up the door and vanished and now I’m in an uncomfortable situation regarding this loan charge and how to settle this period. How do you think I should deal with this? Should I just wait? Should I try to settle the issue? Is the loan actually paid?

    • Andy Wood / Reply

      Hi Pablo – I have sent you an email on this. Rgds Andy

      • Hi, we currently have a third party loan with a fixed interest rate above the HMRC required level. The loan is secured by shares. Assuming the company agrees, is it possible to sell the shares back to the company and treat the sale as a capital gain, using the proceeds to discharge the loan? We would report the capital gain and pay appropriate taxes before the 5th April 19. Thanks John

  • GERNOT LAVER / Reply

    would it possible repay to a trust the value of loans, in the form of property, and physical assets ie gold ect

    • Hi Gernot, unfortunately not. The loan must NOW be repaid in cash. This is an express term of the legislation I am afraid.


  • Hi Andy,
    Is there an interaction between the Requirement to Correct and the Loan charge if trusts are offshore?
    Would this mean that loan charge information (required to be declared in 2019) needs to be declared before 30 sep 2018?
    And any difference between being resident, non resident here?

  • Hi Andy,


    I am a british citizen in US. I received letter from HMRC 2 days back suggesting that I settle before the LC kicks in. However, in my case, it is actually preferred that I don’t settle but pay LC, for two reasons:
    1) I used the scheme in 2010 for only 5 months – total loan £26000 – when I was new to UK
    2) I presently have very low UK income (rental income less than £10,000 a year).
    So, even if they add up loan to my income derived from UK, I should be in 20% bracket.

    My question is, what is my course of action if I want to pay LC? should I ignore HMRC’s letter? or should I respond to them (they have given me email address) and let them know that I will pay LC?

    Thanks !

    • Hi there – Thanks for the email. You will get an email from a colleague on this. regards Andy

  • I have settled with HMRC tax owed for the period I was involved with an EBT and HMRC has confirmed that there will be no loan charge as I have settled the tax years ago. However, I am now receiving correspondence from a company claiming to be acting on behalf of the trustees of the EBT (Trust Help Line) demanding I pay 5% of the loan outstanding and a fee of £250 to be issued with a deed of release/ deed of exclusion, If I do not pay this I am told the trustees may claim repayment of the loans in full in the future which total £25k – am I still liable to repay these loans to the trustees having settled the tax owed with HMRC as if it were income rather than a loan?

  • Gernot Laver / Reply

    Andy has there been any legal challenges to this decision by Hmrc

  • Mike Cook / Reply

    Hi Andy – thanks for the posts so far. I used AML in the Isle of Man and sadly HMRC have added nearly £7k of IHT onto the settlement amount. £19k of tax owning has grown to £32k!
    My trustee has basically said they will write the loans off for free but I should pay the IHT or risk the accumulation of more interest at 0.25% per quarter. HMRC are just saying it’s due because of the offshore.
    Have you found a solution at all with your other clients (e.g. pay the IHT and try to claim back as within a £300k+ allowance), as concerned I’m snookered on this one have have to pay?
    Many thanks

  • Hi
    In the same position as Mark (income <£2k in 2018/19) and £18k loan with offshore EBT that is non existent.
    Will have to submit self assessment + suffer loan charge. What will be tax payable? Will it’s payment settle the issue ?

  • ChrisK – pls call the office on 01925 363 006 and someone can assist. Cheers A

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