Loan Charge letter from HMRC published by Treasury Committee

• Letter from the Chair to Jim Harra, HM Revenue and customs, relating to Disguised Remuneration Tax Avoidance Schemes and the Loan Charge, dated 5 February 2024
• Letter from Jim Harra, HM Revenue and customs, to the Chair relating to Disguised Remuneration Tax Avoidance Schemes and the Loan Charge, dated 11 March 2024
• Inquiry: The work of HMRC
• Treasury Committee

The Chair of the Committee [wrote] to HMRC requesting extensive further information on: 

• HMRC’s general understanding of how DR tax avoidance schemes caught by the Loan Charge work and their efforts to tackle them 
• The scale and demographics of those who used schemes caught by the Loan Charge 
• Progress on settling debts related to the Loan Charge 
• Action taken to tackle promotion of DR tax avoidance schemes caught by the Loan Charge 
• The 2019 Morse Review 
• Efforts to prevent current and future tax avoidance 
• Tax advice 
• Loan Charge ‘myths’ 

In his response, Mr Harra confirmed: 

• HMRC do not have any estimates of how many DR scheme users entered into schemes ‘unwittingly’, however HMRC state that the motives of those engaging in tax avoidance schemes do not affect whether tax is due.  
• When settling DR schemes with HMRC, the median settlement for individuals is £19,000 and for employers is £205,000. This will cover taxes, interest and penalties due. 
• Around 40,000 individuals and 5,000 employers have not settled with HMRC. 
• 1,200 taxpayers are currently discussing a settlement with HMRC. 
• Around two thirds of the individuals affected by the Loan Charge work in business services, including IT consultants, financial advisers and management consultants. 
• When taking into account the DR loan they received, scheme users earn on average twice as much income as the average UK taxpayer. 
• 70% of DR scheme users did so for two years or more. 
• Prevalence of avoidance scheme usage was highest in London and the South East. 
• HMRC do not expect anyone to pay more than half their disposable income after living expenses up to £3,000 per month. Expenditure deducted in calculating disposable income includes household bills, and other reasonable expenses, for example, gym membership, healthcare plans and private school fees. 
• A number of individuals are currently under criminal investigation by HMRC for offences linked to DR schemes subject to the Loan Charge. However, there have been no prosecutions of individuals for the promotion and/or operation of DR schemes subject to the Loan Charge, though one individual involved in selling DR schemes subject to the Loan Charge has been convicted for a related offence. 
• A consultation on strengthening the regulatory framework for tax advice was announced in the Spring Budget. 

Chair's comment

Chair of the Treasury Committee, Harriett Baldwin, said:

“Many of my colleagues have raised concerns about the implementation and management of the Loan Charge by HMRC. As a Committee, we believed it was important that we got answers both for our fellow MPs and their constituents. 

“I hope the information contained in Mr Harra’s response makes a useful contribution to the public debate.”

Further information

• About Parliament: Select committees
• Visiting Parliament: Watch committees

Image: Parliamentary Copyright