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Disguised remuneration is a method of tax avoidance used by both employers and employees to evade their tax obligations under the guise of reduced income. People who disguise remuneration would do so under the pretence of payment being a loan, which they have no intention of paying back. As a loan isn’t taxable income, they would then be getting payment for work without paying tax on it.
The government has recently cracked down on this, issuing penalties and tax charges to those who have been caught partaking in this scheme. Loans can also now be registered as a benefit in kind, which is taxable.
Frequently Asked Questions
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My employer gave me an advance on my wages when I was struggling - does this count as disguised remuneration?
In all likelihood, this won’t count as disguised remuneration as you would have then received a lower wage on your next payday to account for the advance you received, and you should have been taxed appropriately on the payments you received. We would recommend checking through your payslips to ensure that everything was handled correctly, however, to cover your own back.
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I’ve taken part in disguised remuneration in the past, what should I do?
HMRC will let you settle your unpaid taxes. If you think you’ll struggle to pay back what you owe, you may be able to set up a repayment plan that’s manageable to stick with. Visit the HMRC website for more details about admitting to past indiscretions and how you can make it right.
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