Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what recent estimate his Department has made of the amount that will accrue to the Exchequer from the loan charge.

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 Statement 2022, with the latest estimated overall Exchequer yield of £3.4 billion for the entire package, which includes the Loan Charge.

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 twenty recommendations in the review, and the Government has no plans to revisit the policy. The changes to the Loan Charge, following the review’s recommendations, were estimated to reduce the forecast yield and were introduced at Budget 2020 as a separate measure. At Spring Statement 2022 the reduction to the Exchequer yield was estimated to be £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 £3.3 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.