Tax Avoidance

(asked on 11th February 2019) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, for what reason the Government has not put back the Loan Charge settlement date while its review of that policy is ongoing.


Answered by
Mel Stride Portrait
Mel Stride
Secretary of State for Work and Pensions
This question was answered on 14th February 2019

Disguised Remuneration (DR) schemes are contrived arrangements that pay loans in place of ordinary remuneration with the sole purpose of avoiding income tax and National Insurance contributions.

HMRC is working hard to help individuals get out of tax avoidance for good and is encouraging anyone who is concerned about their ability to pay what they owe, to contact them as soon as possible to discuss their position. In November 2017, HMRC set up a dedicated helpline for those wanting to settle their avoidance scheme use, and discuss payment options. HMRC will work with all individuals to reach a manageable and sustainable payment plan wherever possible.

Since the announcement of the 2019 loan charge at Budget 2016, HMRC has now agreed settlements on disguised remuneration schemes with employers and individuals totalling over £1 billion. Pay As You Earn (PAYE) liabilities fall on the employer in the first instance. The charge on DR loans does not change this principle and the employee will only be liable where the amount cannot reasonably be collected from the employer, such as where the employer is offshore or no longer exists. Around 85% of the settlement yield since 2016 is from employers, with less than 15% from individuals.

HMRC has also introduced a simplified process for those who choose to settle their use of DR avoidance schemes before the loan charge arises. DR scheme users who currently have an income of less than £50,000 and are no longer engaging in tax avoidance can automatically agree a payment plan of up to five years without the need to give HMRC any information about their income and assets. This arrangement has been extended to 7 years for scheme users who have an income of less than £30,000.

The Government chose to accept New Clause 26, now Clause 95, during the passage of the Finance Bill introduced by a cross party group. As set out by the Clause, the Government will lay a report no later than 30 March 2019. The report will review the effect of changes made to the time limits for recovery or assessment where tax loss arises in relation to offshore tax, and compare these with other legislation including the charge on disguised remuneration loans.

The charge on disguised remuneration loans will apply to disguised remuneration loan balances on 5 April 2019.

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