Thank you for contacting me about the loan charge.
The Loan Charge is designed to tackle disguised remuneration (DR) tax avoidance schemes. DR schemes seek to avoid Income Tax and National Insurance contributions by paying users their income in the form of loans. The loans are provided on terms that mean they are not repaid in practice. These loans are no different to normal income and are and always have been taxable. Less than 0.2 per cent of all individual income taxpayers used one of these schemes.
It is right that individuals pay the right amount of tax. Tax avoidance deprives funding for our vital public services, such as the NHS. In my discussions with colleagues at the Treasury I have been assured that work is being done to tackle this and other forms of tax avoidance vigorously.
After concerns were raised by MPs across the House about the impact of the Loan Charge on constituents, Sir Amyas Morse, the highly respected former head of the National Audit Office, was commissioned to lead an independent review. He received evidence from a wide range of individuals affected by the Loan Charge and from stakeholders such as, the Loan Charge Action Group, the All-Party Parliamentary Loan Charge Group and specialist tax advisers.
I have read the final report, in which Sir Amyas was clear that the Loan Charge should remain in force. However, I welcome that the Government recognised concerns raised by the Review and accepted all but one of the 20 recommendations, which included removing DR loans made before 9 December 2010 from the scope of the Loan Charge and allowing taxpayers to spread their payments over three years.
I understand that HMRC have estimated that out of the 50,000 individuals who have used DR schemes, over 60 per cent or more than 30,000 of these people, will benefit from the changes, 11,000 of whom will be taken out of scope of the charge altogether.
Thank you again for taking the time to contact me