Demands for disguised remuneration scheme loan repayments

Disguised remuneration schemes saw people – often contractors, consultants and agency workers – paid for their work through loans instead of regular salaries as a way to avoid tax. HMRC has sought to tackle this tax avoidance through what has been termed the loan charge and published guidance for those affected[1].

Questions have been raised about the regulatory status of these loans and whether they were ever intended to be repaid.

Some of those affected dispute liability for the amounts being claimed and challenge whether the debts can be legally enforced. If they’re unenforceable, borrowers cannot be forced to pay the money back or have any of their assets seized against the debt without a specific order.

Some consumers are, however being sent legal letters threatening potential court action and asking for immediate repayment of the loan. Repayment is being sought after these disguised remuneration loans were sold by the original provider to a third party.

Those seeking payment may ask the FCA to agree to a Validation Order. This is the formal permission needed before the loans could be enforced. We would consider any request carefully and our agreement is by no means guaranteed. If a Validation Order is required and not granted, the debt would remain unenforceable.

Anyone who receives a demand for repayment of a disguised remuneration loan, and is unsure whether they are liable for the amount claimed, should consider carefully whether to make any payment. We’d encourage them to look at the HMRC guidance and consider taking legal advice.

Consumers should not be subject to undue pressure when being contacted about a debt. If you believe you have been subjected to this type of behaviour, you should report it to us[2].

If you are experiencing any difficulties, whether they are health, money or other difficulties, or if you don't understand what is happening, you should raise this with those contacting you.