Asked by: Robert Halfon (Conservative - Harlow)
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 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.
Asked by: Owen Thompson (Scottish National Party - Midlothian)
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.
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 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: Owen Thompson (Scottish National Party - Midlothian)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the total amount of revenue that will be raised by 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 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.
Asked by: Richard Fuller (Conservative - North East Bedfordshire)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, with reference to the independent review of Loan Charges published on 3 December 2020, whether he plans to commission a new review to examine the Loan Charge in the context of promoters of these schemes as well individuals using these schemes.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
An independent review of the Loan Charge has already taken place. The 2019 Review, which was conducted by Lord Morse, 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 19 of the 20 recommendations in the Review, including those related to the promoters of schemes.
Following the Review, HMRC published its strategy to challenge and deal with promoters of tax avoidance schemes. A key part of this strategy is to disrupt the business models of promoters of disguised remuneration and other tax avoidance schemes and use every tool available to prevent them marketing their schemes. HMRC has a range of legislative powers to tackle promoters, under three main regimes: Disclosure of Tax Avoidance Schemes, Promoters of Tax Avoidance Schemes, and the Enablers penalty. Penalties can be charged for various failures to comply with the requirements of these regimes.
The Government recognises that there is more to do to stop promoters from selling their schemes. Finance Acts 2021 and 2022 introduced new measures that will help HMRC to take action more quickly.
Asked by: Charles Walker (Conservative - Broxbourne)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether his Department has plans to revisit its policy on the Loan Charge; and if he will make a statement.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
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 20 recommendations in the review and the Government has no plans to revisit the policy.
The charge on disguised remuneration loans is targeted at contrived tax avoidance schemes which seek to avoid Income Tax and National Insurance contributions by paying users their income in the form of loans, usually via an offshore trust. This kind of tax avoidance deprives the Exchequer of funds to deliver vital public services.
Asked by: Lord Sikka (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government whether they will publish a table showing the number of promoters of disguised remuneration schemes who have been prosecuted; and the outcomes of such prosecutions.
Answered by Baroness Penn - Minister on Leave (Parliamentary Under Secretary of State)
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, one individual involved in the promotion of Disguised Remuneration (DR) schemes has been prosecuted. They received a sentence of two years imprisonment, suspended for two years, and 300 hours of “unpaid work”.
A number of individuals are currently under criminal investigation by HMRC for offences linked to DR Schemes.
In addition, 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. These have resulted in over 100 years of custodial sentences. The majority of these convictions relate to promoters.
The Government and HMRC are committed to tackling promoters and operators of tax avoidance schemes. This includes challenging the entities and individuals who promote DR loan schemes.
Asked by: John McNally (Scottish National Party - Falkirk)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many people seeking refunds as a result of the changes to the Loan Change made in response to 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 28 January 2022, HMRC had processed approximately 1500 applications, of which approximately 1000 had received either a repayment, a waiver, or both. Approximately 500 of the applications processed at that date were either invalid or ineligible.
Asked by: Thangam Debbonaire (Labour - Bristol West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what progress has been made on implementing the recommendations of the Morse Review into the Loan Charge; and what work remains outstanding.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
The Government announced the Loan Charge at Budget 2016, deciding that the Loan Charge is the right way to tackle and draw a line under the use of Disguised Remuneration (DR) schemes.
The Independent Loan Charge Review was led by Lord Morse in 2019. The Review 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.
The Government recognised the concerns raised by the Review and accepted 19 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 had delivered the 19 recommendations which were accepted by the Government.
Asked by: John McNally (Scottish National Party - Falkirk)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will announce a further review of the Loan Charge policy.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
An independent review of the Loan Charge has already taken place. The 2019 Review, conducted by Lord Morse, 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 20 recommendations in the Review.
The charge on Disguised Remuneration loans is targeted at contrived tax avoidance schemes which seek to avoid Income Tax and National Insurance contributions by paying users their income in the form of loans, usually via an offshore trust. This kind of tax avoidance deprives the Exchequer of funds to deliver vital public services.
Asked by: Andrew Rosindell (Conservative - Romford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, on what legal basis HMRC pursues employees and not employers for the 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 Budget 2021, with the latest estimated overall Exchequer yield of £3.3 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. At Budget 2020, the changes were costed as a separate measure, with an estimated reduction to the Exchequer yield of £745 million.
No estimate can be provided for the number of people who have fallen into debt or who have been declared bankrupt that are subject to the Loan Charge.
Where debts arise, HMRC are not always the only creditor. Some individuals are declared bankrupt as a result of a non-HMRC debt and some individuals may choose to enter insolvency themselves based on their overall financial position.
HMRC only ever considers insolvency as a last resort, and they encourage taxpayers to get in contact to agree the best way to settle their tax debts. To date, HMRC has not initiated insolvency proceedings against any taxpayer for a Loan Charge debt.
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 has brought into charge through DR settlements between Budget 2016 and the end of March 2021 has been 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. Liability for the tax is always that of the individual. Parliament has provided a range of powers allowing HMRC, in certain circumstances, to collect the amount due from the employee.