April is a significant month of deadlines for those using disguised remuneration schemes or non-UK domiciliaries with overseas bank accounts living in the UK, an accountancy firm has warned.
Tim Stovold, head of tax at Kingston Smith, pointed to two April deadlines in his tax warnings for the coming year.
Loans to employees under disguised remuneration will be taxed unless repaid by April 2019, with individuals who participated in a contractor loan scheme and received loans after April 1999 liable to an income tax charge under the new rules if outstanding after this date.
The government website stated: "It is HM Revenue & Custom's view that disguised remuneration schemes that replace income with loans do not work. You should settle your use of these schemes now.
"The loan charge will arise in April 2019 to tax outstanding disguised remuneration loans.
"In most cases early settlement will cost less than under the disguised remuneration loan charge."
Mr Stovold said: "Although concessions have been made for lower earners, allowing them longer to pay, this income tax charge could still cause individuals to suffer serious financial hardship for something they did 20-years ago."
In December HMRC faced criticism from the House of Lords Economic Affairs committee, with claims the government’s current approach to the loan charge applied to disguised remuneration schemes "disproportionately" affected unrepresented and lower income taxpayers.
Speaking at the time, Lord Forsyth of Drumlean, chairman of the House of Lords Economic Affairs committee, said: "This [the loan charge] is devastating the lives of middle and lower income individuals, from the private and public sector, including the National Health Service, who used disguised remuneration schemes, in many cases being required to do so by their employers."
This April also heralds the deadline for non-domiciliaries to "cleanse" mixed funds in order to comply with the new rules introduced in April 2017.
Non-UK domiciliaries have until 5 April to "clean up" bank accounts and bring money held overseas into the UK without a tax charge, Mr Stovold said.
He added: "To benefit from this opportunity, detailed analysis is needed of bank accounts, which can be very complex and time-consuming.
"For wealthy individuals who have made the UK their home, to ignore this opportunity means that they may never be able to remit amounts from these overseas bank accounts without incurring a UK tax charge."
Rachael Griffin, tax and financial planning expert at Old Mutual Wealth, said: "If you have got clients who are non-domicile, who are utilising remittance basis of tax, then you need to check if they have mixed fund, such as a bank account into which different types of income, such as bank interest, dividends and earnings, or capital have been paid then they might be eligible to take advantage of this window
"The complexity of the situation mean advisers need to act now to ensure all relevant clients meet the deadline."
rachel.addison@ft.com
