Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, if he will respond to Early Day Motion 1239, on the 2019 Loan Charge.

The 2019 loan charge is targeted at artificial tax avoidance schemes where earnings were paid via a third party in the form of ‘loans’ which in reality were never repaid – ‘disguised remuneration’ (DR) schemes.

The Government has taken this action to ensure that everybody pays the taxes they owe and contribute towards the public-funded services from which they benefit.

Early Day Motion (EDM) 1239 calls for the loan charge to apply only to DR loans entered into after Finance Act 2017 received Royal Assent. Restricting the loan charge in this way would not be fair to ordinary taxpayers, who have always paid the right amount of tax and have not engaged in tax avoidance schemes.

The Government recognises that the loan charge will have a significant impact on some people who have used DR schemes. HMRC is encouraging scheme users to come forward and settle their tax affairs ahead of the loan charge arising. HMRC has a strong track record in helping those who are in genuine financial difficulty. HMRC is able to agree bespoke payment arrangements, allowing individuals to pay their tax bill over time.

HMRC pursues those who promote or enable tax avoidance schemes to ensure that nobody profits from selling avoidance. HMRC is able to charge tough penalties of up to £1m where promoters do not provide clear and accurate information to their clients, and penalties of 100% of the fees earned by anyone who designs, sells, or otherwise enables the use of tax avoidance arrangements.

HMRC is proactively reporting DR scheme promoters to the Advertising Standards Authority and professional bodies where they make misleading claims about their products and services or provide misleading advice.

HMRC will also consider criminal investigation where appropriate. Promoters of tax avoidance schemes have been prosecuted, leading to convictions and jail terms.