MPs demand aggressive action against promoters who have 'ruthlessly' exploited people affected by loan charge

Senior figures from the Labour Party and the SNP have called for tougher measures against the promoters behind schemes which have left a wide variety of professionals, including locum nurses and other frontline health workers, with large, unexpected tax bills.

Wes Streeting Labour MP for Ilford North. who is the Shadow Exchequer Secretary to the Treasury, told the Finance Bill Committee that the Labour Party took a dim view of tax avoidance and acknowledged the difficult work being carried out by HMRC

However, he added: “In lots of cases, there are victims of the loan charge as well as people who sought to ruthlessly exploit it, not least the promoters.”

He said many people affected by the loan charge had taken professional advice and made arrangements believing they were within law.

He added: “This has been another significant issue of controversy..There are a number of promoters who have been engaged in the promotion of aggressive tax avoidance schemes and have put their clients in an invidious position.

“I’m sure I speak for people right across the House in saying that we need tougher action against those promoters who do a real disservice to the wider profession of financial service providers. I don’t believe that despite the assurances we have been given by Ministers during successive rounds of Parliamentary debate on this, or from HMRC (during) hearings of the Treasury committee, that the action matches the rhetoric.”

Alison Thewliss, the MP for Glasgow Central, who is the SNP’s Shadow Chancellor said: “It really is something of a scandal that the tax professionals advised clients to use these loopholes. There needs to be further review into the advice that was given by these professionals and some come back on the promoters of these schemes who have quite clearly encouraged people to take up these schemes.

“People may have gone into these schemes with eyes open or eyes closed, but the promoters of these schemes almost certainly knew what they were doing.

"It’s these people we must aggressively go after to make sure they are not only held accountable for what they have done in the past but they are disincentivised and prevented and and discouraged from coming up with similar loophole schemes in the future.”

Jesse Norman, the Financial Secretary to the Treasury, said: “There is a serious problem of avoidance and evasion. There is a serious problem around the promotion or enabling of tax avoidance schemes.”

Mr Norman said a review by Sir Amyas Morse into the loan charge accepted the principle behind it . The review found that disguised remuneration schemes are a form of tax avoidance and that it was right for the Government to try to tackle them.

Mr Norman added: “What the review did was to make significant changes to the application of the principle that Sir Amyas accepted. The revenue and customs has highly effective time to pay arrangements which have been further extended in the case of the loan charge.”

"Those arrangements are very flexibly and intelligently administered by the revenue and customs.”

The loan charge is an anti-avoidance measure introduced in the 2016 Budget to address tax loss from what the Treasury called a variety of “disguised remuneration” schemes.

Last year, a review led by Sir Amyas Morse made a series of recommendations about the design of the loan charge and its impact on those in its scope.

Evidence uncovered by the Loan Charge All-Party Parliamentary Group found that, in the vast majority of cases, these arrangements were not entered as aggressive tax avoidance and were often a condition of employment, especially in the public sector.

Furthermore, a substantial number of people, especially in the public sector, did not know or understand that their pay arrangements involved loans.

Seven suicides were reported to the Loan Charge APPG in the last Parliament. The Morse review found the charge had caused “serious distress” to some of the people affected by it.

The Treasury has said it recognises the concerns raised by the loan charge review and has responded by accepting all but one of its recommendations.

More than 30,000 people are estimated to benefit from these changes, around 11,000 of whom will be taken out of the charge altogether, according to the Treasury’s estimates.

The Government has published a policy paper on tackling the promoters of loan charge schemes and it has also issued a call for evidence on how to raise standards in tax advice.

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