The clause implements recommendations 3, 4 and 5 of Sir Amyas Morse’s independent review. It sets out that the loan charge will not apply to loans outstanding at
Reasonable disclosure is defined as a disclosure made in either an income tax self-assessment return or a corporation tax self-assessment return, where a person is chargeable to tax on employment income, or an income tax self-assessment return where a person is chargeable to tax on trading income. The term “return” includes any accompanying accounts, statements or documents. Reasonable disclosure may be made in one or more returns of the same type relating to qualifying tax years either by an individual or, in the case of employment income, an employer. That builds on HMRC’s existing compliance approach.
A qualifying tax year is the tax year 2015-16 or earlier, or for corporation tax accounting periods commencing before
The clause does not apply where there was no reasonable disclosure made for years 2015-16 and earlier, nor does it apply for 2016-17 onwards, regardless of whether a reasonable disclosure has been made or HMRC has taken steps to recover the tax. The clause thus ensures that the Government can implement three of Sir Amyas Morse’s recommendations from his independent review of the loan charge. I commend it to the Committee.
There is not much for me to add to what the Financial Secretary set out. Will he confirm that HMRC will be able to adopt a practical approach to interpreting what is a reasonable disclosure? For example, in some cases a taxpayer will not have had to file a self-assessment tax return for a tax year, but their employer or their business will have disclosed the loans and so on in a return of their own, in which case we consider that that would be an adequate disclosure by the taxpayer. Is that the Minister’s understanding? It was pointed out to us by the Chartered Institute of Taxation that
“amendments to paragraphs 1B…of Schedule 11 to F(No.2)A 2017 included in the Finance Bill legislation, as compared to the original draft legislation, appears to permit disclosures in tax returns other than the taxpayer’s to be taken into account.”
I would be grateful if the Minister confirmed whether that is indeed the case.
I thank the hon. Gentleman for his question. The principle is as laid out in the legislation and it should be recognised as wider than might originally have been contemplated, as concerns were raised during the consultation process on the draft legislation about the definition of reasonable disclosure, and the Government responded to those. The definition of reasonable disclosure in the legislation introduced in the Finance Bill has thus been widened to include disclosure in either an income tax self-assessment return or a corporation tax self-assessment return. The effect of that is to enable disclosure by either an individual or an employer to meet the definition of reasonable disclosure.
Disclosure can be made in more than one tax return of the same type and, as I have said, a tax return includes any accompanying accounts, statements or documents and has therefore been widely specified. How that is to apply in a specific context is, of course, a limitlessly varied matter, and limitless ingenuity will doubtless be deployed in showing that it can be applied to whatever the circumstances are, but that is the standard that the legislation lays down.