Asked by: Andrew Rosindell (Conservative - Romford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent estimate his Department has made of the number of people who will become bankrupt as a result of the (a) loan charge and (b) associated activity.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
HM Revenue and Customs (HMRC) only ever considers insolvency as a last resort. Anyone who is worried about being able to pay what they owe should contact HMRC, who may be able to agree an instalment arrangement based on the individual’s financial circumstances. There is no maximum length for these arrangements.
Where people are facing insolvency, HMRC is 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. To date, HMRC has not initiated insolvency proceedings against any taxpayer solely for a Loan Charge debt.
As set out in the answer to PQ 17136, since 2022, HMRC has issued around 2,700 decisions under s.684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003 to disguised remuneration scheme users.
Asked by: Andrew Rosindell (Conservative - Romford)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many people have been issued section 684 notices by HMRC in relation to disguised remuneration schemes in the last 12 months.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
HM Revenue and Customs (HMRC) only ever considers insolvency as a last resort. Anyone who is worried about being able to pay what they owe should contact HMRC, who may be able to agree an instalment arrangement based on the individual’s financial circumstances. There is no maximum length for these arrangements.
Where people are facing insolvency, HMRC is 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. To date, HMRC has not initiated insolvency proceedings against any taxpayer solely for a Loan Charge debt.
As set out in the answer to PQ 17136, since 2022, HMRC has issued around 2,700 decisions under s.684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003 to disguised remuneration scheme users.
Asked by: Daisy Cooper (Liberal Democrat - St Albans)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 21 March 2024 to Question 19192 on Tax Avoidance, whether it is his Department's policy to cease recovery of any liabilities incurred before December 2010 in cases where a taxpayer has not received an update for a period of 12 months or more from the initial date of an open enquiry or assessment.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In the 2019 Independent Loan Charge Review, Lord Morse recommended that the Loan Charge should only apply to loans made on or after 9 December 2010. The Government accepted this recommendation.
Lord Morse was also clear that, for years before this date, where there is an open enquiry or assessment under appeal, HM Revenue and Customs (HMRC) should still have the ability to pursue the tax due under the existing rules. HMRC has proceeded on this basis and it is its policy to collect tax where it has the ability to do so.
As part of its overall compliance processes and its commitment to update taxpayers at least annually, all of these taxpayers should have received correspondence from HMRC in the last 12 months.
When HMRC opens an enquiry, the information sheet provided includes information about a taxpayer’s right to apply to the First Tier Tribunal for the enquiry to be closed. One of the grounds for making such an application is where there has been an excessive delay during which a taxpayer has not received any communication from HMRC.
Asked by: Daisy Cooper (Liberal Democrat - St Albans)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 12 March 2024 to Question 17136 on Tax Avoidance, whether it is HMRC’s policy to seek to recover tax due for liabilities incurred before December 2010, where a taxpayer has not received correspondence relating to an open compliance check for longer than 12 months.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In the 2019 Independent Loan Charge Review, Lord Morse recommended that the Loan Charge should only apply to loans made on or after 9 December 2010. The Government accepted this recommendation.
However, Lord Morse was also clear that, for years before this date, where there is an open enquiry or assessment under appeal HM Revenue and Customs (HMRC) should still have the ability to pursue the tax due under the existing rules. HMRC has proceeded on this basis.
HMRC continues to work with and support taxpayers to resolve all outstanding enquiries and assessments relating to their use of disguised remuneration (DR) loans, in accordance with their published DR settlement terms and HMRC’s Litigation and Settlement Strategy
As part of its overall compliance processes and its commitment to update taxpayers at least annually, all of these taxpayers should have received correspondence from HMRC in the last 12 months.
Asked by: Matthew Offord (Conservative - Hendon)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate his Department has made of the number of prosecutions that have been made against the promoters and operators of schemes now subject to the Loan Charge.
Answered by Bim Afolami - Economic Secretary (HM Treasury)
I refer the hon. Member for Hendon to the answer given on 8 February 2024 to Question UIN 12466.
Asked by: Desmond Swayne (Conservative - New Forest West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent representations has he received on section 684 notices.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In May 2022, the Court of Appeal confirmed that HMRC could use provisions in tax legislation (section 684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003). HMRC is using these provisions in line with the Court of Appeal judgment.
The Government has received representations about s684(7A)(b) from several Members on behalf of their constituents, as well as the All Party Parliamentary Group on the Loan Charge and Taxpayer Fairness.
Asked by: Sammy Wilson (Democratic Unionist Party - East Antrim)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many section 684 notices were issued by HMRC in each of the last five years.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In the context of Disguised Remuneration (DR), HM Revenue and Customs (HMRC) has in some circumstances used the power provided under s.684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003 (the Discretion) to collect the tax owed; and since 2022, HMRC has issued around 2,700 decisions using the Discretion.
In his independent review, Lord Morse recommended that the Loan Charge should no longer apply to loans made before 9 December 2010. However, Lord Morse said “HMRC should continue being able to settle and investigate cases prior to this point under their normal powers where they have appropriate grounds, and a legal basis, to do so”.
In line with this recommendation, HMRC is still seeking to recover the tax due where it had taken the necessary steps in the past to ensure there is an open tax enquiry or assessment which gives it the legal basis to do so.
In May 2022, the Court of Appeal said that HMRC could consider using the Discretion to collect tax directly from the individual who received income through a DR scheme.
Asked by: Sammy Wilson (Democratic Unionist Party - East Antrim)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many notices under section 684 of the Income Tax Act 2007 have been issued to individuals with Loan Charge liabilities incurred before December 2010.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In the context of Disguised Remuneration (DR), HM Revenue and Customs (HMRC) has in some circumstances used the power provided under s.684(7A)(b) of the Income Tax (Earnings and Pensions) Act 2003 (the Discretion) to collect the tax owed; and since 2022, HMRC has issued around 2,700 decisions using the Discretion.
In his independent review, Lord Morse recommended that the Loan Charge should no longer apply to loans made before 9 December 2010. However, Lord Morse said “HMRC should continue being able to settle and investigate cases prior to this point under their normal powers where they have appropriate grounds, and a legal basis, to do so”.
In line with this recommendation, HMRC is still seeking to recover the tax due where it had taken the necessary steps in the past to ensure there is an open tax enquiry or assessment which gives it the legal basis to do so.
In May 2022, the Court of Appeal said that HMRC could consider using the Discretion to collect tax directly from the individual who received income through a DR scheme.
Asked by: Janet Daby (Labour - Lewisham East)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the number of people who have been affected by the loan charge.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
In September 2023, HM Revenue and Customs published an updated issue briefing on disguised remuneration and the loan charge. The issue briefing contains information at UK level and is available on GOV.UK here:
Asked by: Drew Hendry (Scottish National Party - Inverness, Nairn, Badenoch and Strathspey)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether he has made an assessment of the compatibility of the issuing of section 684 notices by HMRC with the recommendations of the independent loan charge review led by Sir Amyas Morse.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
The Loan Charge is targeted at contrived tax avoidance schemes that sought to avoid Income Tax and National Insurance contributions by paying users their income in the form of loans.
In his independent review, Lord Morse recommended that the Loan Charge no longer apply to loans made before 9 December 2010. However, Lord Morse said “HMRC should continue being able to settle and investigate cases prior to this point under their normal powers where they have appropriate grounds, and a legal basis, to do so”. The government accepted this recommendation. In line with this recommendation, HMRC is still seeking to recover the tax due where it had taken the necessary steps in the past to give it the legal basis to do so.
In May 2022, the Court of Appeal said that HMRC could consider using certain provisions in the PAYE system (referred to as ‘section 684(7A)(b)’) to collect tax directly from the individual who received income through a DR scheme. HMRC using these provisions where appropriate is in line with Lord Morse’s recommendation.