Writing off 'damaging' loan charge policy would cost relatively trivial amount, says former Brexit Secretary

Mr Davis, the Conservative MP for Haltemprice and Howden, made the comments as part of his ongoing campaign to persuade the Government to reverse the policy.

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. Under such schemes, individuals - often freelancers or self-employed contractors - were paid via a third party in the form of loans, replacing part or all of their salary.

During Treasury questions, Mr Davis asked Jesse Norman, the Financial Secretary to the Treasury, what assessment had been made of the potential merits of suspending the loan charge during the pandemic.

Mr Norman replied: “Taxpayers with loan charge liabilities can already defer submission of their tax return until September 30 of this year.

"HMRC have always worked very hard and this is no exception..to support taxpayers who may need help to manage their disguised remuneration liabilities and will continue to offer them the time they need to settle, and that of-course, affects those who may be affected by issues related to coronavirus.”

Mr Davis responded: “September of this year will be in the middle of the recession that we’re about to face from this.

“But given the hundreds of billions the Treasury is already committing to supporting business to get us out of this recession, it would be a relatively trivial amount to write off the damaging loan charge policy.

"Originally the Treasury forecast that they would raise £3.2bn from this policy, less than £2.5bn from employees. What does he estimate he will now raise?”

Mr Norman said: “The Treasury will have published its estimate at the time of the original tax information that was published.

“I understand the passion he (Mr Davis) brings to the issue, but I would remind him that 99.8 per cent of taxpayers do not engage in disguised remuneration schemes and the fact that we are supporting people across this country in their jobs and in their livelihoods is not in itself a reason to let people who owe tax off the tax that is due.”

In a post on Twitter, the Loan Charge Action Group said: “As livelihoods across UK are affected by the coronavirus lockdown families should not have to face the additional stress of the loan charge. Both HMRC and victims would benefit from suspension during COVID-19.”

Before the election, the Loan Charge All Party Parliamentary Group said it had received reports of seven suicides of people who were facing the loan charge.

Last year, the Government said it planned to implement changes to the loan charge, after a review found that it caused “serious distress” to some people affected by it.

The review, led by Sir Amyas Morse, was commissioned to look at the impact of the charge, which was introduced to tackle what the Treasury described as “disguised remuneration schemes”.

Sir Amyas, confirmed the schemes were a form of tax avoidance but made a series of recommendations about the design of the charge and its impact on those in its scope.

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