In February/March 2025, HMRC began issuing a wave of letters to taxpayers who had participated in disguised remuneration (DR) tax avoidance schemes. Over the years, HMRC has undertaken several reviews of the Disguised Remuneration Loan Charge. However, the letters sent in 2025 mark another development – one that shouldn’t be ignored.
There are two types of letters currently that were sent:
- Pre-December 2010 participants – These letters informed recipients that the latest HMRC review does not cover their arrangements. However, this doesn’t mean you’re “off the hook.” HMRC is still expecting engagement and resolution.
- Post-December 2010 participants – These individuals were told they may be included in the current review.
Whichever letter taxpayers received, the same message applies – it’s vital to engage now with HMRC if your clients want some certainty back and keep costs down.
Why your clients should engage now with HMRC
Many people who used DR schemes feel like the issue belongs in the past. But HMRC aren’t going to go away. They won’t forget this, and the longer you leave it, the higher the penalties could be.
HMRC now has far more information than ever before about historic schemes, and it is becoming increasingly active in pursuing the taxpayers involved in them.
If your clients don’t engage with HMRC before they investigate, you will be liable to pay the tax owed, all the interest accrued and penalties. The application of penalties for tax avoidance was unheard of – now they can be applied automatically. Penalties for UK schemes start at 100% of the tax owed and can be mitigated down depending on a taxpayer’s behaviour. For offshore matters, penalties can start at 200% of the tax owed in certain jurisdictions.
Reducing potential penalties
By engaging proactively with HMRC via an expert like me, your clients can take control of the situation and potentially reduce penalties dramatically.
By cooperating with HMRC (i.e. helping, telling, and giving), there may be an opportunity to reduce penalties to nearer perhaps 30% if the taxpayer’s behaviour is regarded as careless. In those cases, I can even help suspend the penalty from ever being paid. This kind of reduction isn’t possible if your clients wait for HMRC to act first.
What if your clients don’t engage with HMRC?
Ignoring any communication from HMRC about DR doesn’t make it disappear. In fact, it can make things worse.
Whilst your clients may think it’s better left alone, doing nothing can turn a manageable problem into a costly one.
Why engaging now with HMRC could help your clients in the future
Even if your clients are not under immediate pressure from HMRC, there are compelling reasons to resolve outstanding DR issues now:
- Is your client looking to sell the business? Buyers will carry out due diligence. Unresolved HMRC issues can halt or devalue a sale. If the case is closed and your clients have written evidence of this, these issues won’t affect the sale. Ring-fencing the problem in another company doesn’t actually solve the problem.
- Is your client reviewing their will and estate planning? Settling their position now means your clients won’t leave unresolved tax disputes for their beneficiaries.
- Peace of mind. Knowing the “case is closed” gives you and your beneficiaries certainty and allows everyone to move on.
What should your clients do next?
If your client has received one of these letters or you know they might have been involved in a DR scheme, now is the time to act before the UK budget on 26 November 2025. Many commentators expect the Chancellor to announce measures to resolve matters once and for all.
Whether their DR involvement was before or after December 2010, the message is the same: Tell your clients to contact an expert like me, engage early with HMRC, disclose voluntarily, and protect clients from hefty penalties and uncertainty.
I specialise in negotiating with HMRC and guiding clients through the process. My expertise can make the difference between facing penalties of 100% (or more) and reducing them to as low as zero.
Contact me today to discuss your situation confidentially and explore the options for your clients.