Questioner: Andrea Leadsom (CON - South Northamptonshire)
Question
To ask the Chancellor of the Exchequer, if he will (a) make a statement on his assessment of the impact of the loan charge on families and (b) make an assessment of the potential merits of introducing a right of court appeal for people experiencing significant contested charges.
Answered by Lucy Frazer
The Government takes concerns about the wellbeing of all taxpayers very seriously and recognises that the Loan Charge can add a significant pressure for some taxpayers.
The impact of the Loan Charge on those affected was assessed ahead of the introduction of the policy and was considered as part of the Independent Loan Charge Review, led by Lord Morse in 2019.
The November 2017 Tax Information and Impact Note which covered the Loan Charge stated that it was not expected to have a material impact on family formation, stability, or breakdown, because the impact was assessed across the entire UK population, of which users of affected avoidance schemes make up a very small minority.
In his independent review, Lord Morse recommended that future published Government impact notes of tax changes should consider the direct impact on the affected population, rather than looking at the impact across the entire UK population. This is one of the 19 recommendations that the Government accepted to mitigate the impact of the Loan Charge and to ensure that the right support is in place for those who need it.
HMRC’s powers are balanced by a comprehensive suite of safeguards for taxpayers, and the Loan Charge follows these. All taxpayers have the right to appeal tax decisions made by HMRC, and that right includes the opportunity to appeal to an independent tribunal. Where someone disagrees with HMRC’s assessment that the Loan Charge applies, they are able to appeal that decision.
Questioner: Julian Lewis (CON - New Forest East)
Question
To ask the Chancellor of the Exchequer, if he will list the grounds on which HMRC determines which Film Partnership investors were (a) genuine and (b) engaged in exploitation of tax reliefs for the purpose of tax avoidance; what consideration was given to the latter possibility when Film relief was introduced in 1997; what protection is currently offered to people who invested in Film Partnership schemes (i) primarily to support the UK film industry and (ii) in good faith after obtaining advice from qualified financial experts; what the typical time-lapse has been between an individual having made an investment in a Film Partnership scheme and the commencement of a tax recovery initiative by HMRC in respect of that investment; and if he will make it his policy to discriminate between those investors who can be proved to have abused the Film Partnership tax relief concession and those who sought to use it for its ostensible purpose.
Answered by Lucy Frazer
In 1997, the Government introduced a form of relief for investment in films, which has since been repealed. Whilst many partnerships sought to invest in British films and take advantage of the relief afforded, there were also many which sought to use the relief in ways not intended, often trying to obtain tax relief well in excess of the amount that they put in.
Significant legislative action was taken over a number of years to try and prevent these various forms of abuse, and HMRC continues to actively investigate and counter those schemes where it has concerns. As reliefs are typically generated via partnership structures, HMRC enquiries are made into the tax returns of the partnerships. Enquiries are opened into partnership returns within 12 months of them being submitted, as permitted by legislation, and the outcome of these enquiries is determined on the facts of each individual case.
HMRC continues to settle and litigate these complicated schemes which have typically taken years to unpick and prepare for litigation. HMRC settles disputes with taxpayers in line with its published Litigation and Settlement Strategy.
Questioner: Dan Carden (LAB - Liverpool, Walton)
Question
To ask the Chancellor of the Exchequer, if he will restrict access to the Annual Investment Allowance to bar companies with a history of tax avoidance.
Answered by Lucy Frazer
The Annual Investment Allowance (AIA) gives 100 per cent tax relief to businesses on their investments in plant and machinery up to a threshold of £1 million. This provides upfront support to encourage businesses to invest in the equipment they need, including more efficient equipment.
At the Autumn Budget 2021, the Government extended the AIA’s £1 million limit until April 2023. The AIA and the super-deduction announced at Spring Budget 2021 will support business investment in capital assets across the nation. Over the course of 2021, business surveys have pointed to a strong recovery in forward-looking investment intentions.
Questioner: Kevin Hollinrake (CON - Thirsk and Malton)
Question
To ask the Chancellor of the Exchequer, what the (a) annual budget and (b) number of staff was for HMRC's Fraud Investigation Service in each of the last five years.
Answered by Lucy Frazer
HMRC is determined that tax fraud should not pay. Since the launch of our Fraud Investigation Service in 2015-16, we have secured and protected nearly £30 billion for our vital public services and secured more than 3,800 criminal convictions. In addition, HMRC’s Spending Review settlement includes £100 million for more resources for HMRC to tackle all forms of non-compliance, including avoidance and evasion, and continued funding of over £70 million for the Taxpayer Protection Taskforce to combat fraud and abuse of the Covid-19 schemes.
The tables below detail the full-time equivalent staffing levels in both Fraud Investigation Service (1) and the Proceeds of Crime unit (2).
1. HMRC's Fraud Investigation Service | |||||||||||||
| 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 * | ||||||||
a) Annual Budget (approx.)- includes Pay-bill, Other Resource Costs, Income & Capital. | £240m | £260m | £300m | £300m | £300m | ||||||||
b) Full-time equivalent staff at the end of the year (approx.) | 4,100 | 4,400 | 4,900 | 4,400 | 4,900 | ||||||||
*2021-22 staff number is a year-end projection | |||||||||||||
2. HMRC's Proceeds of Crime Unit (HMRC’s Fraud Investigation Service hosts this function) | ||||||
| 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 * | |
b) Full-time equivalent staff at the end of the year (approx.) | 400 | 350 | 400 | 350 | 400 | |
*2021-22 staff number is a year-end projection | ||||||
Questioner: Kevin Hollinrake (CON - Thirsk and Malton)
Question
To ask the Chancellor of the Exchequer, what the (a) annual budget and (b) number of staff was for HMRC's Proceeds of Crime Unit in each of the last five years.
Answered by Lucy Frazer
HMRC is determined that tax fraud should not pay. Since the launch of our Fraud Investigation Service in 2015-16, we have secured and protected nearly £30 billion for our vital public services and secured more than 3,800 criminal convictions. In addition, HMRC’s Spending Review settlement includes £100 million for more resources for HMRC to tackle all forms of non-compliance, including avoidance and evasion, and continued funding of over £70 million for the Taxpayer Protection Taskforce to combat fraud and abuse of the Covid-19 schemes.
The tables below detail the full-time equivalent staffing levels in both Fraud Investigation Service (1) and the Proceeds of Crime unit (2).
1. HMRC's Fraud Investigation Service | |||||||||||||
| 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 * | ||||||||
a) Annual Budget (approx.)- includes Pay-bill, Other Resource Costs, Income & Capital. | £240m | £260m | £300m | £300m | £300m | ||||||||
b) Full-time equivalent staff at the end of the year (approx.) | 4,100 | 4,400 | 4,900 | 4,400 | 4,900 | ||||||||
*2021-22 staff number is a year-end projection | |||||||||||||
2. HMRC's Proceeds of Crime Unit (HMRC’s Fraud Investigation Service hosts this function) | ||||||
| 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 * | |
b) Full-time equivalent staff at the end of the year (approx.) | 400 | 350 | 400 | 350 | 400 | |
*2021-22 staff number is a year-end projection | ||||||
Questioner: Kirsten Oswald (SNP - East Renfrewshire)
Question
To ask the Chancellor of the Exchequer, what recent discussions he has had with Cabinet colleagues on the potential merits of introducing a right of appeal for people affected by the Loan Charge.
Answered by Lucy Frazer
The Loan Charge was introduced to tackle a particular form of tax avoidance that has been going on in many forms for years. It would be unfair to ordinary taxpayers to let anybody benefit from tax avoidance of this sort, and that is why the Government took this action.
In 2019, the Independent Loan Charge Review, led by Lord Morse, found that it was right for the Government to ensure that the tax was collected and that the Loan Charge should remain in force, though with changes to manage its impact. The Government implemented 19 of the 20 recommendations made by Lord Morse.
HMRC’s powers are balanced by a comprehensive suite of safeguards for taxpayers, and the Loan Charge follows these. All taxpayers have the right to appeal tax decisions made by HMRC. Where someone disagrees with HMRC’s assessment that the Loan Charge applies they can appeal that decision.
Questioner: Kirsten Oswald (SNP - East Renfrewshire)
Question
To ask the Chancellor of the Exchequer, what recent assessment he has made of the compatibility of the Loan Charge scheme with the principles of natural justice.
Answered by Lucy Frazer
The Loan Charge was introduced to tackle a particular form of tax avoidance that has been going on in many forms for years. It would be unfair to ordinary taxpayers to let anybody benefit from tax avoidance of this sort, and that is why the Government took this action.
In 2019, the Independent Loan Charge Review, led by Lord Morse, found that it was right for the Government to ensure that the tax was collected and that the Loan Charge should remain in force, though with changes to manage its impact. The Government implemented 19 of the 20 recommendations made by Lord Morse.
HMRC’s powers are balanced by a comprehensive suite of safeguards for taxpayers, and the Loan Charge follows these. All taxpayers have the right to appeal tax decisions made by HMRC. Where someone disagrees with HMRC’s assessment that the Loan Charge applies they can appeal that decision.
Questioner: Daisy Cooper (LDEM - St Albans)
Question
To ask the Chancellor of the Exchequer, what plans he has to establish a 24-hour helpline for people subject to the Loan Charge.
Answered by Lucy Frazer
The Government takes concerns about the wellbeing of all taxpayers seriously and recognises that the Loan Charge can add significant pressures for some taxpayers.
Following Lord Morse’s Independent Loan Charge Review, the Government has taken further steps to mitigate the impact of the Loan Charge and to ensure that the right support is in place for those who need it.
HMRC operates a settlement helpline and a debt helpline for taxpayers who have used disguised remuneration avoidance schemes. All call handlers are trained to identify taxpayers who might need additional support. For taxpayers who need specialised help, HMRC advisors suggest they contact organisations like Samaritans or Mind. The Government is working with HMRC to consider what additional specialised support could be provided to taxpayers who need extra help.
HMRC has referred eight cases to the Independent Office for Police Conduct (IOPC) where a taxpayer has sadly taken their life and used a disguised remuneration scheme, as required by the law governing the IOPC’s oversight of HMRC. Following referral, HMRC has conducted independent investigations and the completed investigations have concluded that there was no evidence of misconduct by an HMRC officer.
Any loss of life is a tragedy, and my thoughts are with the families of those affected.
Questioner: Daisy Cooper (LDEM - St Albans)
Question
To ask the Chancellor of the Exchequer, how many people who were liable for the Loan Charge have taken their own lives.
Answered by Lucy Frazer
The Government takes concerns about the wellbeing of all taxpayers seriously and recognises that the Loan Charge can add significant pressures for some taxpayers.
Following Lord Morse’s Independent Loan Charge Review, the Government has taken further steps to mitigate the impact of the Loan Charge and to ensure that the right support is in place for those who need it.
HMRC operates a settlement helpline and a debt helpline for taxpayers who have used disguised remuneration avoidance schemes. All call handlers are trained to identify taxpayers who might need additional support. For taxpayers who need specialised help, HMRC advisors suggest they contact organisations like Samaritans or Mind. The Government is working with HMRC to consider what additional specialised support could be provided to taxpayers who need extra help.
HMRC has referred eight cases to the Independent Office for Police Conduct (IOPC) where a taxpayer has sadly taken their life and used a disguised remuneration scheme, as required by the law governing the IOPC’s oversight of HMRC. Following referral, HMRC has conducted independent investigations and the completed investigations have concluded that there was no evidence of misconduct by an HMRC officer.
Any loss of life is a tragedy, and my thoughts are with the families of those affected.
Questioner: Sarah Olney (LDEM - Richmond Park)
Question
To ask the Secretary of State for Work and Pensions, what steps she is taking to reduce the cost of transferring (a) workplace and (b) personal pensions overseas through a Qualifying Recognised Overseas Pension Scheme (QROPS).
Answered by Guy Opperman
In the same way as transfers to UK pension schemes, a transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS) is covered by the requirement to take regulated financial advice if transferring more than £30,000 from a Defined Benefit scheme. This cost is a commercial matter for the firms and financial advisors who are subject to Financial Conduct Authority authorisation to conduct this activity, and who choose to provide the service.
A transfer to a QROPS may also be subject to the overseas transfer charge (OTC). This is not a cost of transferring, it was introduced to limit the opportunities for tax avoidance so that the generous tax regimes of the UK and the tax rules of other countries cannot be manipulated to provide more relief than was intended. Whilst the Government keeps all policy under review there are no plans to make any changes to the overseas transfer charge at this time.
Transfers to overseas schemes have been connected to pension scams in recent years and this is why HMRC requirements around QROPS were tightened in 2017. My department has been working alongside the FCA on regulations in relation to pension transfers, which aim to facilitate transfers to legitimate schemes while preventing transfers to scams.
Questioner: Stephen Hammond (CON - Wimbledon)
Question
To ask the Chancellor of the Exchequer, whether he has made an assessment of the potential merits of a further independent review of the Loan Charge since Lord Morse's 2019 Review.
Answered by Lucy Frazer
A comprehensive independent review of the Loan Charge has already taken place. In September 2019, the Government commissioned Lord Morse to lead this Review. There are no plans for a further review of the Loan Charge.
Lord Morse’s report was published in December 2019 and concluded that it was right for the Government to collect the tax due, but also recommended changes to how the Loan Charge works.
The Government accepted all but one of the Review’s 20 recommendations, which is estimated to benefit over 30,000 individuals, removing 11,000 from the Loan Charge entirely.
These changes have improved how the Loan Charge operates, which ensures that individuals pay the right amount of tax and ensures fairness for all taxpayers and the wider public.
Questioner: Daisy Cooper (LDEM - St Albans)
Question
To ask the Chancellor of the Exchequer, how many promoters and operators of schemes now subject to the Loan Charge have been prosecuted for promoting and operating those schemes to date.
Answered by Lucy Frazer
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, to date, while there have been no prosecutions of individuals related to 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 disguised remuneration. These have resulted in over 100 years of custodial sentences, the majority of which relate to promoters.
HMRC are 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.
Prosecutions are only one type of intervention available to HMRC where they identify concerns.
Questioner: Daisy Cooper (LDEM - St Albans)
Question
To ask the Chancellor of the Exchequer, what recent estimate he has made of the amount of revenue that will be raised from the Loan Charge.
Answered by Lucy Frazer
The Loan Charge was announced at Budget 2016 as part of a package of measures to tackle Disguised Remuneration 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 an element of Loan Charge.
In September 2019, the Government commissioned an Independent Review into the Loan Charge, led by Sir Amyas Morse. The changes to the Loan Charge following the independent review were estimated to reduce the yield forecast through Loan Charge. At Budget 2020, the changes were costed as a separate measure, with an estimated reduction to the Exchequer yield of £745 million.
Questioner: Daisy Cooper (LDEM - St Albans)
Question
To ask the Chancellor of the Exchequer, what plans he has to announce a further review of the Loan Charge.
Answered by Lucy Frazer
A comprehensive independent review of the Loan Charge has already taken place. In September 2019, the Government commissioned Lord Morse to lead this Review.
Lord Morse’s report was published in December 2019 and concluded that it was right for the Government to collect the tax due, but also recommended changes to how the Loan Charge works.
The Government accepted all but one of the Review’s 20 recommendations, which is estimated to benefit over 30,000 individuals, removing 11,000 from the Loan Charge entirely.
These changes have improved how the Loan Charge operates, which ensures that individuals pay the right amount of tax and ensures fairness for all taxpayers and the wider public.
Questioner: Daisy Cooper (LDEM - St Albans)
Question
To ask the Chancellor of the Exchequer, how many people seeking refunds of Loan Charge payments under the changes adopted following the Morse Review have been (a) successful and (b) refused.
Answered by Lucy Frazer
Following Lord Morse’s Independent Loan Charge Review, the Government introduced legislation requiring HMRC to establish a scheme to repay relevant Voluntary Restitution elements of disguised remuneration 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 disguised remuneration scheme settlements, and/or waives amounts of instalments due that have not yet been paid if certain conditions are met.
By 18 October 2021, HMRC had processed approximately 940 applications, of which approximately 740 had received either a repayment, a waiver, or both. Approximately 200 of the applications processed at that date were either invalid or ineligible.