Financial Secretary promises “extra support” for those who owe under loan charge scheme

The Chancellor and Financial Secretary answered questions on the loan charge, non-dom tax status and energy windfall taxes at Tuesday’s Treasury Questions in the House of Commons. Other areas covered in the hour-long session included a global minimum tax, VAT rates for electric vehicle charging and tax avoidance.

Loan charge

Labour’s Ruth Cadbury and Conservative Richard Fuller both asked about the impact of the loan charge on mental health. Introduced in 2017, the policy allows HMRC to levy charges on people who took part in loan schemes that it believes to be “disguised remuneration” devices, allowing them to avoid paying national insurance and income tax. It requires taxpayers to pay the outstanding tax retrospectively as a lump sum, but has been the subject of fierce criticism and has been linked to 10 suicides amid claims taxpayers were pressured to pay off high bills accumulated over a number of years.

Financial Secretary Victoria Atkins said the charge was independently reviewed in 2019 by Lord Morse and the Government has accepted 19 of the 20 recommendations made in the review. She said HMRC support for those affected by the loan charge was “at the core of its work”, with trained advisers working in its extra support teams.

She said: “We have made referrals to the Independent Office for Police Conduct in relation to those 10 events. In the eight concluded investigations, no evidence has been found of misconduct by any HMRC officer, but we are very sensitive to the pressures that people are under, which is precisely why we have the extra support teams in place: teams of trained advisers who can, where appropriate, support taxpayers towards voluntary and community organisations that can help.

“The difficulty is that a large sum of money is still outstanding from these disputes. We have had an independent review of the matter, through which we have been able to reduce the number of people affected, but the issue of outstanding tax remains. I encourage anyone affected by these historic issues to please talk to HMRC so that we can find a resolution for both sides.”

Non-doms and fairness in the tax system

Labour MPs questioned whether the Government would consider abolishing non-dom tax status, amid criticism that it allows the wealthy to avoid tax. Catherine West said researchers from the London School of Economics and the University of Warwick found that ending the current rules could bring in as much as £3 billion each year in public finances. She called for the Government’s own estimates on the cost of non-dom policy to be published.

Ellie Reeves added that the extra revenue that would be collected by abolishing the status could be used to fund the NHS and education, while Kate Hollern asked how many government ministers have benefited from non-dom tax status. Chancellor Jeremy Hunt responded that no MPs have had the status since 2010.

The Financial Secretary added that measures in the Autumn Statement were designed to ensure that “those with the highest wealth pay their fair share in taxes”. These include increasing corporation tax for the most profitable 30% of companies and protecting less profitable small businesses with the small profits rate, so only around 10% will pay the full main rate.

She said: “I again emphasise that our economy needs to be open to people around the world who come to the UK to do business. What is more, they pay UK taxes on their UK incomes, which last year was worth £7.9 billion.”

West and Reeves both also asked about steps to ensure more general fairness in the tax system.

The Financial Secretary reiterated that it was right that “those with the broadest shoulders contribute the most” and the reforms announced in the Autumn Statement did that by ensuring energy companies pay their fair share. She added the personal tax system had been made fairer through changes to the income tax additional rate threshold and reforms to dividends and capital gains tax allowances.

Windfall tax

Questioned by SNP’s Peter Grant on the pressures faced by small businesses while gas and oil giants are enjoying huge profits, James Cartlidge said the Government has already introduced two new levies to collect extra tax on higher profits from energy companies - the Energy Profits Levy, which relates to investment in North Sea oil and gas; and the Electricity Generators Levy, which targets “exceptional” profits as a result of the invasion of Ukraine.

However, Labour’s Rachel Reeves called for a “proper” windfall tax, highlighting that both Shell and BP, both of which have announced record profits in the last week, spent more on share buybacks than they invested in renewables last year.

The Chancellor said the current windfall taxes are “balanced and fair,” adding: “Anything higher will stop investment, increase dependence on Putin and increase energy prices. The total tax take from that sector is £80 billion over five years.”

Global Minimum Corporate Tax

Shadow Minister James Murray said Prime Minister Rishi Sunak, while Chancellor in 2021, had announced his aim to implement a global minimum corporation tax by 2023 and asked for a commitment that it would be in place by the end of the year.

The Financial Secretary said it would be.

Former Home Secretary Priti Patel also asked about the OECD proposals, asking ministers to “provide some kind of clarity over the plans for the dispute resolution mechanism under pillar two and, importantly, [to] say something about the assurances that will be given to businesses that will be affected by it in the next financial year”.

In her response the Financial Secretary said that the proposed new tax will mean that companies with revenues of €750 million (£666 million) or more will be subject to a “top-up tax” if they don’t already pay at least 15% tax on their profits. She continued: “The reason that the international community is coming together to draw up these rules is precisely to do with the new shape that all our economies are taking, with international businesses spreading out around the world. We are trying to find a way to ensure that those very profitable businesses pay their fair share of tax.” She did not respond to Patel’s question about the dispute resolution mechanism.

Other issues

Plaid Cymru’s Liz Saville Roberts called for the Government to extend the time limit for cases when taxpayers are in dispute with HMRC. She said she had been contacted by constituents who “missed out on thousands of pounds-worth of statutory maternity pay support”, which they blame on delays and poor communication from HMRC. The Financial Secretary asked her to write to her ao she could look at the detail of the case.

SNP’s Gavin Newlands questioned why those who can charge their electric cars at home pay just 5% VAT as part of their domestic energy bill, while those unable to must pay 20% on public chargers. The Financial Secretary said the Government is committed to supporting the transition to electric vehicles but introducing VAT relief for public charging points would put “additional pressures” on public finances.

Labour’s Barbara Keeley called for the Government to reconsider tapering the 50% orchestral tax relief from the end of March amid fears many theatres and entertainment venues may go out of business.

On new measures to tackle tax avoidance, the Financial Secretary said there has been increased investment in compliance teams “to ensure that we are investigating, prosecuting or finding other remedies for those attempting to defraud the taxpayer”.

Ahead of next month’s Budget, the Chancellor also confirmed there will be “no tax cuts funded by borrowing”.