Using Time To Pay (TTP) or Individual Voluntary Arrangements (IVA) to pay disguised remuneration schemes

Whether described as disguised remuneration or tax avoidance schemes one thing is sure HMRC are clamping down and looking for ways to recoup their losses.

In the past, as a way of avoiding income tax and national insurance, employees were given tax-free loans. HMRC have been cracking down on these schemes for some time but last year they announced it would impose a loan charge on everyone that has used these schemes to avoid tax.

Any loans taken after 6 April 1999 and are still outstanding at 5 April 2019 will be subject to the charge with the full amount of any unpaid loans taxed at the individual’s marginal rates for 2018/19.

While the trend for a tougher stance on tax avoidance has been developing in recent years, HMRC has come under criticism for leaving it so long before taking action. The fact that they are trying to recoup funds that could go back as far as 20 years could leave unwitting individuals in extreme financial difficulty.

Here are two broad groups of individuals that will be affected by the new loan charge. The first are high-paid individuals receiving bonuses through employee benefit trusts including self-employed and partners.

The second group, lower-paid employees show more reasons for concern. These individuals were probably not properly informed and probably also did not have much choice. The use of umbrella companies were used to pay employees through loans and tending to be on the lower end of the pay scales will be the hardest hit by the loan charges.

The HMRC argues that that those involved in disguised remuneration schemes, on average earned twice as much as the UK average Tax payer. However, there is a huge range of income levels involved which skew the results. The most famous case of disguised remuneration being that of Rangers Football Club, in which more than £47m was reported as being paid to players, managers and directors in tax free claims. These figures do not take into account the many low paid ordinary workers that will be affected. One such example are nurses wishing to be part of the Nurse bank for certain NHS trusts. It is alleged that they were told they had to enter arrangements with umbrella companies in order to get work. The umbrella companies would have taken their own fees and deductions for administration etc. and it would be understandable if the nurses involved would have assumed these deductions were for tax and were unaware, they were being paid by means of a loan.


HMRC acknowledges that a degree of flexibility is required and have given individuals the chance to settle. The benefits of a settlement are reduced tax and also flexibility in payment with HMRC giving up to five years to repay as long as their taxable income is below £50, 000 per year and they are no longer in a tax avoidance scheme. However, there was a deadline of 30th September 2018 to apply for a settlement. Less than half of those estimated by HMRC being involved in these schemes had registered their interest to settle by this date. Those that missed the deadline can either repay the loan, an option probably not open to lower-paid employees or to approach the HMRC for a time to pay agreement. HMRC are likely to be lenient to those coming forward voluntarily but even if they grant a ‘time to pay’ request it is likely that repayments are over a relatively short time such as a year or six months and will be too much for an individual to pay monthly. They could face bankruptcy, and could be at risk of losing their homes. However, by getting advice from an Insolvency practitioner, they could get an IVA (Individual Voluntary Agreement) in place, which could help spread the payments over 5 years making monthly payments more manageable.

As with most cases of financial difficulty getting advice early is paramount to a getting a positive outcome. If you are looking for advice after being involved with a disguised remuneration or tax avoidance scheme, please do not hesitate to get in touch.