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: Margaret Hodge (Labour - Barking)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many penalties have been issued by HMRC against UK-based entities that facilitate tax avoidance schemes involving non-resident promoters since the coming into force of schedule 13 of the Finance Act 2022; and what the total value of those penalties is.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
As a result of the action the Government has taken to clamp down on marketed tax avoidance, the estimated tax gap from marketed avoidance sold primarily to individuals has fallen from an estimated £1.5 billion in 2005-06 to £0.5 billion in 2021-22.
The primary purpose of the penalty is to deter UK based entities from acting on behalf of offshore promoters and so make it more difficult for these promoters to sell their schemes in the UK; however, HM Revenue and Customs (HMRC) has a wide-ranging approach to tackling promoters of tax avoidance.
For example, as of 31 December 2023, HMRC has published the names of 59 promoters, 23 directors and details of 64 tax avoidance schemes. Publishing this information supports taxpayers in identifying tax avoidance schemes so they can steer clear of or exit them.
Furthermore, Finance Act 2024 has introduced tougher consequences for promoters of tax avoidance. This includes a new criminal offence to strengthen the deterrent to promoting tax avoidance, making it clear promoters must stop promoting these schemes, and a power enabling HMRC to act more quickly to disqualify directors of companies involved in tax avoidance.
Asked by: John McDonnell (Labour - Hayes and Harlington)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will make an (a) estimate of the potential costs and (b) assessment of the potential merits of increasing funding for HMRC's compliance functions.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
The government regularly reviews the levels of funding provided to HMRC.
The government is committed to tackling tax avoidance, evasion and all other forms of non-compliance. The UK’s tax gap is at an all time low at 4.8 per cent of theoretical tax liabilities in 2021-22, down from 7.5 per-cent in 2005-06. It is amongst the lowest worldwide.
Asked by: Margaret Hodge (Labour - Barking)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many people have been convicted of offences relating to arrangements which have been marketed as tax avoidance since the formation of HMRC's Fraud Investigation Service on 1 April 2016.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
Promotion or operation of mass marketed tax avoidance schemes is not in, or 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.
Since the formation of HMRC’s Fraud Investigation Service on 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 and 9 years of suspended sentences being ordered, the majority of which relate to promoters.
Prosecutions are only one type of intervention available to HMRC where they identify concerns.
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 his Department has made an assessment of the potential merits of publishing the written responses to its consultation entitled Tackling disguised remuneration, which closed on 5 October 2016.
Answered by Nigel Huddleston - Financial Secretary (HM Treasury)
The Government published a technical note and summary of responses to the Tackling Disguised Remuneration consultation on 5 December 2016: Tackling disguised remuneration. Technical note and summary of responses
The Government does not routinely publish individual consultation responses.
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.