Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether HMRC has received legal advice on the pursuit of (a) employees and (b) employers for the use of loan schemes.
Answered by Richard Fuller
The Loan Charge was announced at Budget 2016 as part of a package of measures to tackle Disguised Remuneration (DR) tax avoidance. At Spring Statement 2022, this package was estimated to bring in an estimated overall Exchequer yield of £3.4 billion. The changes resulting from the 2019 independent review of the Loan Charge have reduced the Exchequer yield by an estimated £620 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 £3.4 billion HMRC brought into charge through DR settlements between Budget 2016 and the end of March 2022 was from employers.
However, liability for the tax is always that of the individual and HMRC will consider other options when collection from the employer is not possible, such as when the employer no longer exists or is based offshore. Parliament has provided a range of statutory powers allowing HMRC, in certain circumstances, to collect the amount due from the employee.
HMRC’s lawyers considered all of these points when providing legal advice that informed this policy’s development.
Asked by: Daisy Cooper (Liberal Democrat - St Albans)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, with reference to the Independent Loan Charge Review: report on the policy and its implementation, published in December 2019, if he will make an assessment of the adequacy of access to information given to Lord Morse to enable him to report on HMRC’s approach to implementing the Loan Charge.
Answered by Richard Fuller
The Independent Loan Charge Review, led by Lord Morse, drew upon all the available evidence and expert advice to consider the appropriateness of the Loan Charge as a policy response, and its impact on individuals, reflecting the main concerns that had been raised by MPs and campaigners. Lord Morse had full discretion over how the review was run, which stakeholders he engaged with, and the recommendations he made.
The Government recognised the concerns raised by the Review and accepted all but one of the Review’s 20 recommendations. The Government implemented a number of changes to the Loan Charge which were enacted in Finance Act 2020. On 3 December 2020, HMRC published a full report to Parliament on the implementation of the review recommendations. This report set out how HMRC has delivered the 19 recommendations which were accepted by the Government.
Asked by: Jim Shannon (Democratic Unionist Party - Strangford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many people seeking refunds due to the changes made by the Morse Review have been refunded by HMRC.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.
In September 2019, the Government commissioned an Independent Review into the Loan Charge, 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 by £745 million at Budget 2020.
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 where collection from the employer is not possible, such as when the employer no longer exists or is based offshore.
Following Lord Morse’s Independent Loan Charge Review in 2019, HMRC established the DR Repayment Scheme 2020 to repay voluntary payments that taxpayers had agreed to make as part of settlements concluded before changes were made to the scope of the Loan Charge. Individuals and employers had until 30 September 2021 to apply to HMRC for a refund or waiver.
HMRC repays amounts that were paid in DR scheme settlements, and/or waives amounts of instalments due that have not yet been paid if certain conditions are met.
As of 3 June 2022, HMRC had processed approximately 2100 applications, of which approximately 1300 had received either a repayment, a waiver, or both. Approximately 800 of the applications processed at that date were either invalid or ineligible.
Asked by: Jim Shannon (Democratic Unionist Party - Strangford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether HMRC has received legal advice on pursuing employees and not employers on the use of the Loan Charge.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.
In September 2019, the Government commissioned an Independent Review into the Loan Charge, 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 by £745 million at Budget 2020.
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 where collection from the employer is not possible, such as when the employer no longer exists or is based offshore.
Following Lord Morse’s Independent Loan Charge Review in 2019, HMRC established the DR Repayment Scheme 2020 to repay voluntary payments that taxpayers had agreed to make as part of settlements concluded before changes were made to the scope of the Loan Charge. Individuals and employers had until 30 September 2021 to apply to HMRC for a refund or waiver.
HMRC repays amounts that were paid in DR scheme settlements, and/or waives amounts of instalments due that have not yet been paid if certain conditions are met.
As of 3 June 2022, HMRC had processed approximately 2100 applications, of which approximately 1300 had received either a repayment, a waiver, or both. Approximately 800 of the applications processed at that date were either invalid or ineligible.
Asked by: Jim Shannon (Democratic Unionist Party - Strangford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate his Department has made of the revenue that will accrue to the Exchequer from the loan charge.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.
In September 2019, the Government commissioned an Independent Review into the Loan Charge, 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 by £745 million at Budget 2020.
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 where collection from the employer is not possible, such as when the employer no longer exists or is based offshore.
Following Lord Morse’s Independent Loan Charge Review in 2019, HMRC established the DR Repayment Scheme 2020 to repay voluntary payments that taxpayers had agreed to make as part of settlements concluded before changes were made to the scope of the Loan Charge. Individuals and employers had until 30 September 2021 to apply to HMRC for a refund or waiver.
HMRC repays amounts that were paid in DR scheme settlements, and/or waives amounts of instalments due that have not yet been paid if certain conditions are met.
As of 3 June 2022, HMRC had processed approximately 2100 applications, of which approximately 1300 had received either a repayment, a waiver, or both. Approximately 800 of the applications processed at that date were either invalid or ineligible.
Asked by: John Hayes (Conservative - South Holland and The Deepings)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many people seeking refunds due to the changes made by the Morse Review have been refunded by HMRC.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
This question is answered on the basis that your question is about HMRC’s Disguised Remuneration (DR) Repayment Scheme 2020.
Following Lord Morse’s Independent Loan Charge Review in 2019, the Government introduced legislation requiring HMRC to establish a scheme to repay relevant Voluntary Restitution elements of DR settlements.
These amounts were voluntary payments that taxpayers had agreed to make as part of settlements concluded before changes were made to the scope of the Loan Charge. Individuals and employers had until 30 September 2021 to apply to HMRC for a refund or waiver.
HMRC repays amounts that were paid in DR scheme settlements, and/or waives amounts of instalments due that have not yet been paid if certain conditions are met.
As of 18 March 2022, HMRC had processed approximately 1800 applications, of which approximately 1100 had received either a repayment, a waiver, or both. Approximately 700 of the applications processed at that date were either invalid or ineligible.
Asked by: John Hayes (Conservative - South Holland and The Deepings)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has received legal advice that supports the view that HMRC can pursue employees and not employers for use of loan schemes.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.
An independent review of the Loan Charge, which was conducted by Lord Morse in 2019, concluded that it was right for the Loan Charge to remain in force and for the Government to collect the tax due. The Government accepted all but one of the twenty recommendations in the review, and the Government has no plans to revisit the policy. The changes to the Loan Charge, following the review’s recommendations, were estimated to reduce the forecast yield and were introduced at Budget 2020 as a separate measure. At Spring Statement 2022 the reduction to the Exchequer yield was estimated to be £620 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.
Asked by: John Hayes (Conservative - South Holland and The Deepings)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will make it his policy to announce a further review of the loan charge.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.
An independent review of the Loan Charge, which was conducted by Lord Morse in 2019, concluded that it was right for the Loan Charge to remain in force and for the Government to collect the tax due. The Government accepted all but one of the twenty recommendations in the review, and the Government has no plans to revisit the policy. The changes to the Loan Charge, following the review’s recommendations, were estimated to reduce the forecast yield and were introduced at Budget 2020 as a separate measure. At Spring Statement 2022 the reduction to the Exchequer yield was estimated to be £620 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.
Asked by: John Hayes (Conservative - South Holland and The Deepings)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent estimate his Department has made of the amount that will accrue to the Exchequer from the loan charge.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.
An independent review of the Loan Charge, which was conducted by Lord Morse in 2019, concluded that it was right for the Loan Charge to remain in force and for the Government to collect the tax due. The Government accepted all but one of the twenty recommendations in the review, and the Government has no plans to revisit the policy. The changes to the Loan Charge, following the review’s recommendations, were estimated to reduce the forecast yield and were introduced at Budget 2020 as a separate measure. At Spring Statement 2022 the reduction to the Exchequer yield was estimated to be £620 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.
Asked by: Robert Halfon (Conservative - Harlow)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many promoters and operators of schemes subject to the loan charge have been prosecuted for promoting and operating those schemes.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 is committed to continuing to tackle promoters and operators of tax avoidance schemes. This includes challenging the entities and individuals who promote disguised remuneration loan schemes.
Promotion or operation of mass marketed tax avoidance schemes is not in and of itself a criminal offence. However, there are a range of offences which might be committed by those who promote tax avoidance schemes or advise on their use.
On that basis, while to date there have been no prosecutions of individuals directly related to the promotion of schemes subject to the Loan Charge, a number of individuals are currently under criminal investigation by HMRC for offences linked to schemes subject to the Loan Charge.
In addition to schemes subject to the Loan Charge, since 1 April 2016, more than 20 individuals have been convicted for offences relating to arrangements which have been promoted and marketed as tax avoidance, including offences related to DR. These have resulted in over 100 years of custodial sentences, the majority of which relate to promoters.