Tax Avoidance

Treasury written question – answered on 11th June 2018.

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Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Brexit), Shadow PC Spokesperson (Cabinet Office), Shadow PC Spokesperson (International Trade)

To ask Mr Chancellor of the Exchequer, what assessment he has made of the effect the introduction of the 2019 loan charge on people who used umbrella companies on the advice of professionals after the introduction IR35.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Brexit), Shadow PC Spokesperson (Cabinet Office), Shadow PC Spokesperson (International Trade)

To ask Mr Chancellor of the Exchequer, what estimate he has made of the number of people in (a) Arfon constituency, (b) Wales, and (c) the UK who will be affected by the introduction of the 2019 loan charge.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Brexit), Shadow PC Spokesperson (Cabinet Office), Shadow PC Spokesperson (International Trade)

To ask Mr Chancellor of the Exchequer, whether his Department undertook a consultation exercise on the effect on individuals of the introduction of the 2019 loan charge.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Brexit), Shadow PC Spokesperson (Cabinet Office), Shadow PC Spokesperson (International Trade)

To ask Mr Chancellor of the Exchequer, whether his Department plans to measure the effect of the introduction of the 2019 loan charge on people affected by the charge.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Brexit), Shadow PC Spokesperson (Cabinet Office), Shadow PC Spokesperson (International Trade)

To ask Mr Chancellor of the Exchequer, whether he has made an assessment of the potential merits of applying the 2019 loan charge only to arrangements made after the Finance Act 2017 came into force.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

The 2019 loan charge is targeted at artificial tax avoidance schemes where earnings are paid in the form of non-repayable loans made by a third party - “disguised remuneration” (DR) schemes.

DR schemes are clear examples of contrived tax avoidance. It is not normal, or indeed reasonable, to be paid in loans that are unlikely ever to be repaid. It is an individual’s responsibility to ensure they pay the right amount of tax and to understand the consequences of engaging in tax avoidance.

It is unfair to ordinary taxpayers to let anybody benefit from contrived tax avoidance of this sort, and that is why this Government has taken action to ensure that everybody pays the taxes they owe. The announcement of the loan charge at Budget 2016 provided scheme users with a three-year period to repay their DR loans, or to agree a settlement with HM Revenue and Customs (HMRC) before the charge takes effect.

50,000 individuals are estimated to be affected by the introduction of the DR loan charge across the UK. It is estimated that less than 0.1% of the population of Wales will be affected. Information is not held at constituency level.

The impact of the DR loan charge on these individuals was considered at Budget 2016, when the measure was first announced. ­HMRC consulted on the measure in August 2016. The latest tax information and impact note (TIIN) can be found at: https://www.gov.uk/government/publications/disguised-remuneration-further-update/disguised-remuneration-further-update

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