The loan charge at Finance (No. 2) Act 2017 Schedule 11 is the most distinctive piece of tax architecture of the past decade: a one-off income tax and National Insurance contributions charge that crystallised on outstanding balances of disguised-remuneration loans at 5 April 2019, sweeping up a population of historic tax-planning participants in a single date-stamped event. For property-business directors with pre-2019 EBT, contractor-loan, or remuneration-trust history inside their property-development LtdCo wrappers, the loan charge is a live exposure that the published Settlement Opportunity (now closed for new entrants since 30 September 2020) used to address through an administrative HMRC route. The residual route forward is voluntary disclosure to HMRC's Counter Avoidance team, with Schedule 24 and Schedule 41 penalty exposure attaching to the underlying tax loss.

This page is for property-business directors. It is not a general contractor-loan or IR35 page. The architectural points are common to both populations, but the cohort framing here is the landlord LtdCo, the property-development LtdCo, and the family-property structure where pre-2019 remuneration planning sat alongside the rental or development trade. Where the remuneration-planning vehicle was wholly separate from the property activity (a contractor-loan umbrella with no property element), the principles still apply, but the boundary against the parallel section 455 close-company loan charge becomes more central to the analysis.

The statutory architecture: Schedule 11 sits on top of Part 7A

The loan charge is not a free-standing regime. It sits on top of an existing disguised-remuneration framework at ITEPA 2003 Part 7A (sections 554A to 554Z21), inserted by Finance Act 2011 Schedule 2 from 6 April 2011. Part 7A treats certain payments and benefits provided through third parties as employment earnings of the worker. The 2011 architecture caught disguised remuneration going forward; the 2017 loan charge swept up the historic outstanding-loan balances that the 2011 architecture had not retrospectively reached.

The layered structure has two practical consequences. First, an arrangement can sit within Part 7A on its underlying mechanics (the bonus was redirected through a trust, the loan replaced what would otherwise have been earnings) without also engaging the Schedule 11 charge (because the loan was repaid before 5 April 2019, or because the Morse cut-off removes pre-2010 loans). Second, an arrangement that engages Schedule 11 also engages the underlying Part 7A; HMRC has consistently used both regimes in parallel, with the loan charge providing the date-stamped sweep-up and Part 7A providing the year-of-receipt analysis where time limits permit.

The Morse review and Finance Act 2020 Schedule 2

The loan charge as originally enacted in FA (No. 2) 2017 swept all outstanding disguised-remuneration loans back to 6 April 1999. The reach was politically and operationally contested. Sir Amyas Morse's independent review reported in December 2019, and Finance Act 2020 Schedule 2 enacted the recommendations.

The Morse amendments restructured the regime on four axes:

  • 9 December 2010 cut-off: loans made before 9 December 2010 are removed from the loan-charge sweep. The date is the announcement date of the disguised-remuneration legislation that became Part 7A. Pre-cut-off loans escape the loan charge but remain subject to the underlying Part 7A analysis if time limits allow.
  • Disclosed-and-unactioned carve-out: loans made between 9 December 2010 and 5 April 2016 are removed from the loan charge if the taxpayer disclosed the arrangement (typically via a DOTAS return) and HMRC did not open an enquiry within the relevant window. The carve-out recognised that taxpayers who played straight with disclosure should not be caught by the 2019 sweep-up where HMRC had the opportunity to enquire and did not.
  • PAYE-instalment deferral: a route to pay the loan-charge liability in instalments through PAYE rather than as a single year-of-charge lump sum. The deferral spread the tax across the borrower's future earnings cycle, recognising that the 2019 crystallisation point produced a disproportionate cash-flow shock for many participants.
  • Double-charging prevention: where pre-2019 income tax had already been settled on the underlying arrangement (for example, through an earlier voluntary disclosure or a closed enquiry), the loan-charge calculation prevents the same amount being charged twice.

The Morse amendments narrowed the regime materially. They did not retire it. A 2015 EBT-loan arrangement that was not disclosed via DOTAS and is still outstanding at 5 April 2019 is squarely within the loan charge.

What the property-business director population looks like

The cohort that this page is written for typically sits in one of four positions:

  • EBT-funded bonus structures inside property-development LtdCos: the company contributes to an offshore EBT; the EBT lends back to the director on apparently-commercial terms. The director treats the loan as a non-taxable receipt; the company treats the contribution as a corporation-tax-deductible expense (a deduction that was challenged in many cases by HMRC's restitution proceedings post-Rangers).
  • Contractor-loan arrangements used in property-trade activity: the director operates through a contractor-loan umbrella for a period of property-trade activity (project management, development consultancy, or similar). Earnings are routed through an offshore entity and returned as loans.
  • Remuneration trusts marketed in the 2015 to 2018 window: structures presented as "non-loan alternatives" to EBT, often involving distributions rather than direct loans. HMRC has treated these as within Part 7A regardless of the non-loan labelling.
  • Family-property structures with a remuneration overlay: family investment companies or property holding companies where a director-shareholder participated in a remuneration scheme separately from the property activity. The scheme exposure is independent of the property exposure but the same individual carries both.

The page does not assume one of those four positions specifically. The architectural points are common to all of them.

Worked example: post-2010 EBT loan still outstanding at 5 April 2019

The Aldgate Developments scenario. In 2015 a property-development LtdCo director participated in an EBT-funded bonus scheme. £180,000 was contributed by the company to an offshore EBT, then loaned to the director on apparently-commercial terms. The director continued to hold the loan with no repayment activity. Outstanding loan balance at 5 April 2019: £180,000.

The Schedule 11 loan charge crystallises a one-off income tax and NICs charge on the £180,000 at the director's marginal rate for the 2018/19 tax year. The detailed liability is fact-specific to the director's tax-band profile in 2018/19, but as an illustrative estimate at a 40% income-tax marginal band:

  • Income tax at 40% on £180,000 = £72,000.
  • Employee Class 1 NICs at 2% on the gross above the upper-earnings limit = £3,600.
  • Employer Class 1 NICs at 13.8% (settled via the LtdCo wrapper) = £24,840.
  • Aggregate exposure: roughly £100,000-plus before any interest accrued from 2019 onwards.

The 2015 loan post-dates 9 December 2010, so the FA 2020 carve-out does NOT exempt it. The disclosed-and-unactioned carve-out (loans made between 9 December 2010 and 5 April 2016 with disclosure and no HMRC action) only applies if a DOTAS notification was made; on these facts no DOTAS return was filed, so the carve-out does not engage. The loan is within the charge in full.

Operationally, with the published Settlement Opportunity closed to new entrants since 30 September 2020, the residual route is voluntary disclosure to HMRC's Counter Avoidance team. Schedule 24 and Schedule 41 penalty exposure attaches to the underlying tax loss; unprompted-disclosure mitigation floors apply if the director self-corrects before HMRC initiates contact.

Worked example: pre-9-December-2010 loan (Morse carve-out applies)

The Mawell-Estate scenario. In 2008 the director participated in a contractor-loan arrangement; £95,000 in loans were outstanding at 5 April 2019. The 2008 loans pre-date the FA 2020 cut-off of 9 December 2010.

The Morse review carve-out exempts loans made before 9 December 2010 from the loan charge. The £95,000 is NOT within Schedule 11.

That does not end the analysis. The underlying ITEPA 2003 Part 7A architecture still operates on the loan if the underlying employment income should have been declared at the time. HMRC's discovery powers under TMA 1970 sections 29 and 36(1A) (the 20-year deliberate-behaviour limb) may still apply to a 2008-era arrangement if HMRC argues deliberate non-declaration. The director is OUT of the loan-charge limb but possibly still in the underlying Part-7A limb.

The FA 2020 cut-off is not a blanket pre-2010 amnesty; it removes the loan-charge sweep-up but does not retire the underlying disguised-remuneration framework. "Pre-9-December-2010, no exposure" is not a safe reading. The discovery-window architecture survives.

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Worked example: remuneration trust without a literal loan

The Singh-Estate Developments scenario. In 2017 the company participated in a remuneration-trust structure marketed as a "non-loan" alternative to EBT. £240,000 was contributed; £200,000 reached the directors in 2017/18 and 2018/19 in the form of distributions.

The Schedule 11 loan charge bites on OUTSTANDING LOANS at 5 April 2019. Where the structure operates by distribution (not loan), the loan-charge limb may not engage on a literal reading. However, the ITEPA 2003 Part 7A head-rule applies if the distributions are treated as earnings under the section 554A gateway tests. Operationally, HMRC has treated remuneration-trust structures as within Part 7A regardless of the "non-loan" labelling.

Where HMRC characterises the structure as within Part 7A but the literal Schedule 11 loan charge does not engage, the exposure operates on the year-of-receipt basis (2017/18 and 2018/19 in this example). Discovery time limits run from the end of each tax year of receipt. The voluntary disclosure route still operates; it just routes through the Part 7A architecture rather than through the Schedule 11 crystallisation date.

The CoP9 boundary: where the loan charge stops and serious-fraud territory begins

HMRC's Code of Practice 9 (CoP9) / Contractual Disclosure Facility (CDF) is the civil-route framework for suspected serious fraud. It offers conditional immunity from criminal prosecution if the taxpayer makes a full and frank disclosure within the 60-day window. Where the loan-charge case involves clear deliberate concealment, multiple years of substantial undeclared receipts, or active scheme promotion alongside participation, HMRC's response may take the CoP9 form rather than a routine settlement invitation.

The Carmichael-Estate scenario. The director participated in a 2013-2017 contractor-loan arrangement and was advised by the scheme promoter that the structure was "tax-free". The director did not file any DOTAS return at the time. In 2026 HMRC issued a letter offering CoP9 representation rather than directing the director to the Counter Avoidance team for a routine settlement.

The appropriate response is to engage specialist tax-investigation counsel within the 60-day window. The Settlement Opportunity (now closed in any event) was never the appropriate route for serious-fraud-suspected cases; the appropriate route is CoP9, which carries criminal-prosecution immunity if the disclosure is comprehensive. Treating a CoP9 letter as if it were a routine settlement invitation, or responding with the documentation that would have suited the published Settlement Opportunity, can prejudice the criminal-prosecution-immunity position.

Distinguishing the loan charge from the close-company section 455 charge

One of the most operationally important boundaries on this page. Property-business directors with LtdCo wrappers face TWO loan-related tax regimes that are commonly conflated:

  • The disguised-remuneration loan charge (FA (No. 2) 2017 Schedule 11): a one-off income tax and NICs charge on the BORROWER in a Part-7A arrangement. Operative date 5 April 2019. Not refundable on repayment of the loan. The subject of this page.
  • The close-company section 455 loan charge (CTA 2010 sections 455 to 464A): a corporation-tax-style charge on the CLOSE COMPANY where a loan to a participator is outstanding more than 9 months after the end of the accounting period. Current rate 35.75% from 2026/27 onwards. REFUNDABLE under section 458 when the loan is repaid. Operates on the company side, not the director side.

The two regimes are different in nature (income tax vs corporation tax), in payer (borrower vs close company), and in refundability (no vs yes). Directors who navigate the close-company DLA cycle annually are familiar with section 455; the disguised-remuneration loan charge under Schedule 11 is a separate regime that the same individual may also face if there is a Part-7A history in the background. Confusing the two regimes is a recurring drafting trap on tax-investigation sites, including on some firm-side competitor pages.

What to do if you have a live exposure

The operational priority sequence for a property-business director with a pre-2019 disguised-remuneration history that has not yet been settled:

  1. Characterise the structure. Was it an EBT-funded loan, a contractor-loan umbrella arrangement, or a remuneration-trust variant? Was the loan outstanding at 5 April 2019, or was it repaid before that date? Was the loan made before or after 9 December 2010? Was any DOTAS return filed at the time?
  2. Identify the regimes that engage. Schedule 11 only, Part 7A only, both, or neither. Where Schedule 11 applies, identify the borrower's 2018/19 marginal income-tax band for the rate calculation.
  3. Quantify the exposure. Outstanding-loan principal at 5 April 2019, plus interest from that date, plus the Schedule 24 and Schedule 41 penalty bands that may apply depending on the unprompted-vs-prompted status and the careless-vs-deliberate characterisation.
  4. Determine the disclosure route. Counter Avoidance team for routine voluntary disclosure; CoP9 if HMRC has signalled serious-fraud suspicion. The published Settlement Opportunity is closed to new entrants.
  5. Engage specialist representation early. The architecture is technical (Schedule 11, Part 7A, ITEPA 2003, FA 2020 Schedule 2, TMA 1970 discovery powers) and the consequences of a misdirected disclosure can be material. Tax-investigation counsel can route the case correctly between Counter Avoidance and CoP9 channels.

If your property-business history includes a pre-2019 EBT, contractor-loan, or remuneration-trust arrangement that has not yet been settled, the residual disclosure route remains open via HMRC's Counter Avoidance team. We work with property-business directors on the characterisation question (Schedule 11 vs Part 7A vs both, Morse carve-outs, close-company section 455 boundary navigation) and coordinate with tax-investigation counsel where the case sits on the CoP9 boundary.