The purpose of “disguised remuneration” schemes is to avoid paying income tax and national insurance contributions. To control this, participants are given remuneration through loans or payments from other parties instead of regular taxable salary. It is exceedingly unlikely that these loans or payments will ever be fully repaid, whatever the terms they are made. Due to these schemes, the government has lost hundreds of millions of pounds in unreported PAYE each year.

Both employers and workers adopt “hidden pay” strategies, while the latter is more prevalent in privately owned businesses. When utilised by independent contractors, these loans should be called “contractor loans.”

The Finance Act 2011 of the United Kingdom put the disguised remuneration rules into place in December 2010. Since then, it has been abundantly clear that anyone who takes part in a disguised remuneration arrangement is acting in a way that is at odds with the goal of Parliament. The claim that they would be able to succeed under the rules of disguised remuneration is made by some of the individuals who pushed these schemes, together with their legal counsel. They are still trying to advertise these schemes or updated versions of them. Accepting such promises before getting specific legal and financial counsel would be reckless.

The new loan charge was initially suggested in the 2016 budget, and the Finance (No. 2) Act of 2017 made it law. It was due to all loans for disguised remuneration that were still owing as of April 5, 2019. Later, it was extended to include any loans obtained after April 5, 2010. To prevent fines and any tax investigations, you must resolve your tax issues with HMRC as soon as possible if you or your business participates in one of these schemes.