Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what recent assessment his Department has made of the potential impact of the Loan Charge on (a) staff, (b) administration, (c) legal advice and (d) consultancy costs for businesses since the implementation of that scheme.
Answered by Richard Fuller
The impact of the Loan Charge on businesses was considered as part of the 22 November 2017 Tax Information and Impact Note (TIIN).
The TIIN assessed that the Loan Charge would only affect businesses engaging in avoidance schemes and would have no impact on the administrative burdens of compliant businesses undertaking normal commercial transactions.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how much of the tax HMRC believes was avoided through disguised remuneration schemes will be paid by those who (a) recommended, (b) promoted and (c) operated those schemes.
Answered by Richard Fuller
Disguised remuneration (DR) avoidance schemes seek to avoid tax that is due from those that use them, so action to counteract this involves a tax charge on the scheme user, rather than the promoter or enablers of such schemes.
Where the user was employed, HMRC will go to the employer to settle the tax due or collect the Loan Charge in the first instance. Where collection from an employer is not possible, such as when the employer no longer exists or is based offshore, HMRC considers other options to collect the tax due. 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.
The Government and HMRC are committed to tackling promoters and enablers of tax avoidance schemes. HMRC can charge enablers of defeated tax avoidance schemes penalties of up to 100 per cent of the fees earned, and legislation included in Finance Acts 2021 and 2022 strengthens and accelerates this power and other measures to tackle promoters and enablers. The First-Tier Tribunal has recently imposed a penalty on a promoter for failing to disclose a scheme under the Disclosure of Tax Avoidance Schemes (DOTAS) regime in excess of £1 million.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how many (a) promoters and (b) operators of schemes now subject to the loan charge have been prosecuted for (i) promoting and (ii) operating those schemes.
Answered by Richard Fuller
I refer my hon. Friend to the answer that was given on 3 November 2021 to the Question UIN 62867: https://questions-statements.parliament.uk/written-questions/detail/2021-10-25/62867.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the potential impact of the loan charge on trends in the level of bankruptcies.
Answered by Richard Fuller
No estimate can be provided for trends in bankruptcy rates for people 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 or may choose to enter insolvency proceedings themselves, based on their overall financial position.
HMRC only ever considers insolvency as a last resort. They encourage taxpayers to get in contact with them, with a view to agreeing the best way to settle the tax debts.
To date, HMRC has not initiated insolvency proceedings against any taxpayer for a Loan Charge debt.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
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 Richard Fuller
Following Lord Morse’s Independent Loan Charge Review in 2019, HMRC established the Disguised Renumeration (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 30 September 2022, HMRC had processed approximately 2350 applications, of which approximately 1350 had received either a repayment, a waiver, or both. Approximately 1000 of the applications processed at that date were either invalid or ineligible.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will commission an independent review into the adequacy of the Government's loan charge policy.
Answered by Richard Fuller
The 2019 Independent Loan Charge Review drew upon all the available evidence and expert advice to consider the appropriateness of the Loan Charge policy, and its impact on individuals, reflecting the main concerns that had been raised by MPs and campaigners. The Government accepted all but one of the twenty recommendations in the review.
While there are no plans for a further independent review, the Government continues to look carefully at this issue to ensure that we provide taxpayers with all the support they need.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what estimate he has made of the revenue that will accrue to the Treasury from the loan charge.
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: 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: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will make an estimate of the additional revenue the energy profits levy would raise each year in the event that it were extended until 2030.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
The Energy Profits Levy (EPL) is expected to raise around £5 billion in its first 12 months. The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.
In future years, if oil and gas prices return to historically more normal levels, the Government will phase out the Energy Profits Levy. The legislation also includes a sunset clause, effective at the end of December 2025.
No assessment of additional revenue the Levy would raise each year in the event that it were extended until 2030 has been made.
Asked by: Wera Hobhouse (Liberal Democrat - Bath)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment his Department has made of the impact of a windfall tax on renewable energy generators on investment in renewable energy generation in the UK.
Answered by Lucy Frazer - Secretary of State for Culture, Media and Sport
Within the Economy Update on 26th May, the Chancellor announced the Government is urgently evaluating the scale of extraordinary profits in the electricity generation sector and the appropriate next steps. As part of this process, Government officials are currently engaging with industry stakeholders.
The Government recognises that any measures, tax or otherwise, need to be proportionate and avoid creating undue distortion or impacts on investment in UK electricity generation.