ICAEW’s Tax Faculty reminds agents and taxpayers that applications to reclaim tax under the disguised remuneration repayment scheme must be completed and received by HMRC by 30 September 2021.
The Finance Act 2020 introduced the disguised remuneration repayment scheme (DRRS) enabling taxpayers with loans advanced under disguised remuneration arrangements to reclaim tax/NIC paid voluntarily as part of previous settlements with HMRC.
The DRRS applies to loans advanced between 6 April 1999 and 5 April 2016. Different qualifying criteria apply for loans advanced before 9 December 2010 and those advanced on or after that date.
Taxpayers that HMRC believes are eligible for a repayment should have been sent an application form by 30 September 2020. This form must be completed and returned to HMRC by 30 September 2021, and ICAEW’s Tax Faculty recommends any individuals who have not yet taken action to do so as a matter of urgency. Taxpayers who believe they qualify and who have not yet received an application form from HMRC should contact HMRC immediately (email: email@example.com).
After an application has been received, HMRC will generate an initial tax repayment calculation and issue a repayment decision. The individual can accept HMRC’s decision or request a review on the basis that the calculation is incorrect. Where HMRC’s calculations are challenged, proposed corrections and supporting grounds should be included with the response to HMRC. An independent HMRC Review Officer will then consider the case and confirm or vary the decision.
Conversations around these applications with HMRC have shown that inspectors are adopting a strict approach to whether “reasonable disclosure” (as defined in s20(5), Finance Act 2020) was made for disguised remuneration arrangements made after 9 December 2010. If not, claims for repayment are being rejected. The qualifying criteria for repaying tax/NIC paid voluntarily on disguised remuneration loans advanced before 9 December 2010 are different and the DRRS 2020 “reasonable disclosure” provisions do not apply.
ICAEW’s Tax Faculty advises agents to check their clients’ position carefully to confirm, if relevant, that all the qualifying criteria to meet the “reasonable disclosure” requirements were met.
The DRRS 2020 is enabled via primary legislation in Finance Act 2020. The legislation does not contain the right of appeal to a tribunal. Consequently, anyone wishing to challenge HMRC’s final decision will have to do so via judicial review (which has a high threshold and is a substantially different process).
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.