Disguised remuneration is an aggressive and contrived form of tax avoidance that involves a loan, which there is never any intention of repaying, being routed via a low or no-tax jurisdiction and then back to the United Kingdom, to avoid income tax and national insurance. Her Majesty’s Revenue and Customs takes a measured, proportionate and sympathetic approach to the collection of this tax, which has always been due.
Dr Williams
My constituent contacted me about this issue and said that he had no choice in how he was contracted to work on a BP Norway project. Why is he being pursued rather than BP Norway and the other companies, such as NRL, AML and ICS (Salary) Ltd, which all work together to undermine workers’ rights and minimise their own tax liabilities? What action have the Government taken against those agencies?
I refute the suggestion that anybody is forced into making a tax-avoidance arrangement. If something looks too good to be true, it generally means that it is just that. Of the settlements to date, which have been worth more than £1 billion, some 85% have been from employers, not employees, and we are actively pursuing the promoters of these schemes in exactly the way in which the hon. Gentleman would wish.
I understand that the all-party group on the loan charge has been sent evidence of the suicide of three people facing the loan charge. More than 100 people in Edinburgh West have been affected by the charge. Many of them have come to see me at constituency surgeries and are worried about their financial future. They did not understand that this tax was going to be put in place retrospectively. In the light of all the evidence, I am concerned about the wellbeing of those constituents who say that they may face financial ruin. Surely the only responsible thing to do is to pause and announce a delay and an independent review, given that we know that people have already lost their lives.
The loan charge is not retrospective. There has never been a time in the history of our country when the arrangements that I described a moment ago were ever compliant with our tax code. Of course, the loans, which there is no intention of ever repaying—they are simply there to avoid national insurance and income tax—persist into the present. Generous “time to pay” arrangements are available with HMRC; I urge anybody who is involved in avoidance of this kind to talk to HMRC and come to sensible arrangements.
Mr Lewis
Is the Minister not aware that the people affected by this charge are strivers and people who are just about managing? They are the people who are suffering as a consequence of this decision. How many times are the Government going to hit ordinary working people, including groups like the Women Against State Pension Inequality, without Ministers fulfilling their responsibilities, intervening in such circumstances and ensuring that common sense prevails?
If we include the loans, the average earnings of those who have been involved in this egregious tax avoidance is twice our country’s national average wage. There is no need for people to get involved in these schemes, the sole purpose of which is to avoid tax. Some Members have raised amounts of some £700,000 or £900,000 that HMRC is pursuing in this context; that would equate to a couple of million pounds going through these schemes. I remind the House that these are schemes that take loans from the UK out to an offshore trust in a low or no-tax jurisdiction and route it back into the UK as a loan that is never due to be repaid, simply for the purpose of avoiding tax. We do not believe that is right.
If the Minister is right when he says that the loan charge is not retrospective, how come we have examples like the situation faced by my constituent, who was pursued with an accelerated payment notice back in 2015, in relation to a loan charge scheme? He paid the amount that HMRC asked him for, but now suddenly, out of the blue, a request has been sent to a wrong email address that means he will probably have to pay more money. Does that not show that HMRC has shifted the goalposts and therefore that the loan charge is retrospective?
I entirely stand by my earlier remarks about the measures not being in the least retrospective. Of course, I cannot comment on the tax affairs of the individual that my right hon. Friend has just referred to; it would not be right or proper of me to do so.
I have received increasingly distressed representations from constituents affected by the loan charge. One of their concerns is that in making any settlement with HMRC, they risk giving up their right to review in the event of any subsequent change in Government policy. Will the Minister advise my constituents on what they might do? They currently feel trapped between that prospect and the risk of further financial penalty from HMRC if they do not come to an agreement quickly.
I have made it very clear, as have the Government, over a long period of time—at least since 2016 when these measures were first brought into effect, which is before I arrived in my current position—that our policy is our policy and that we will not change that policy. For those who have been involved in this form of aggressive and contrived tax avoidance, the recommendation is very clear: the best thing to do is to speak to Her Majesty’s Revenue and Customs and come to a sensible and reasonable arrangement for repayment.
I understand the Minister’s sincere desire to tackle disguised remuneration and thank him for always being available to discuss my constituents’ concerns. However, something has clearly gone very wrong with the operation of the loan charge and now, too, I fear with the roll-out of IR35 to the private sector. Will the Minister commit please to pause both the loan charge and the roll-out of IR35 to the private sector until my constituents’ concerns have been fully addressed?
IR35 is often raised in the context of the loan charge, but it is a completely unrelated matter. IR35 is about making sure that those who are effectively employed by other businesses are treated as employees for tax purposes, and that is only right and proper. The loan charge is about putting right the situation of this aggressive tax avoidance.
21. Given that nurses and cleaners—the lower-paid—can be adversely affected by this and distinguished from those who are deliberately tax avoiding, will the Minister not agree at least to extend the payback period rather than people having to go through the rigmarole with the tax man?
The hon. Gentleman makes a very important point, which is that, when it comes to paying the money that is due, HMRC has a duty to be proportionate and to make sure that appropriate arrangements are in place. There is no maximum limit for the time over which repayments can occur—there are often arrangements that come into place that are well in excess of 10 years. HMRC will continue to approach these matters on that basis.
May I also thank the Minister for the way that he is engaging on this issue? Although I certainly do agree that anybody who has tried to avoid tax in this way needs to be held accountable, I do ask whether it is right that HMRC can go back 20 years to reopen accounts that were accepted. If this tax was due then, why did HMRC not obtain that tax then? Why did it not charge it then? Why has it taken it 20 years to get to this point?