Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what legal advice his Department received that supports HMRC pursuing employees not employers for the use of loan schemes.

The Loan Charge was announced at Budget 2016 as part of a package of measures to tackle Disguised Remuneration (DR) tax avoidance. The forecast was last revised at Spring Budget 2021. There was an estimated overall Exchequer yield of £3.3 billion for the entire package, including the Loan Charge.

In September 2019, the Government commissioned an Independent Review into the Loan Charge which was led by Lord Morse. The Government accepted 19 of the 20 recommendations made by the review. Changes to the Loan Charge were estimated to reduce the forecast yield. At Budget 2020, the changes were costed as a separate measure, with an estimated reduction to the Exchequer yield of £745 million.

HMRC will go to the employer to settle the tax due or collect the Loan Charge in the first instance. Approximately 80 per cent of the £3.3 billion HMRC brought into charge through DR settlements between Budget 2016 and the end of March 2021 was from employers.

However, HMRC will consider other options to collect the tax when collection from the employer is not possible, such as when the employer no longer exists or is based offshore. Liability for the tax is always that of the individual, and the requirement for an employer to account for PAYE does not supersede or remove this liability. Parliament has provided a range of powers allowing HMRC, in certain circumstances, to collect the amount due from the employee.