Tax under consideration is HM Revenue and Customs’ (HMRC) estimate of the maximum potential additional tax liability in each case, before they have carried out a full investigation of the specific facts or analysis of relevant law. It is not actual tax either owed or unpaid; it is a tool to guide HMRC enquiries to focus on the most significant risks that exist at any particular time with the largest businesses. In many cases, when HMRC have looked at the full facts it becomes clear that there is some lesser additional liability or even no additional liability at all. Tax under consideration is a snapshot of work in progress and will naturally vary from time to time as outstanding issues are settled and new risks are identified. Tax under consideration covers all taxes, including Corporation Tax, VAT, PAYE and National lnsurance contributions. As it is an internal estimate used within HMRC, it is not subject to challenge by large businesses.

Until 31 March 2014, HMRC’s Large Business Service dealt with the tax affairs of around 800 of the largest businesses in the UK. From 1 April 2014 HMRC’s Large Business directorate deals with the tax affairs of around 2,000 large businesses.

Snapshots of tax under consideration in each year were:

HMRC’s Large Business directorate (largest 2,000 businesses):

31 March 2015 - £19 billion

HMRC’s Large Business Service (largest 800 businesses):

31 March 2014 - £15.7 billion

31 July 2013 - £18.8 billion

31 July 2012 - £21.3 billion

31 March 2011 - £25.5 billion

31 March 2010 - £33.4 billion

The estimate of total tax under consideration shown in Measuring Tax Gaps Table 7.1, page 62, differs from the figures above for two reasons:

• it shows tax under consideration for the individual financial years relating to liability

• it includes corporation tax only.

Tax under consideration is HM Revenue and Customs’ (HMRC) estimate of the maximum potential additional tax liability in each case, before they have carried out a full investigation of the specific facts or analysis of relevant law. It is not actual tax either owed or unpaid; it is a tool to guide HMRC enquiries to focus on the most significant risks that exist at any particular time with the largest businesses. In many cases, when HMRC have looked at the full facts it becomes clear that there is some lesser additional liability or even no additional liability at all. Tax under consideration is a snapshot of work in progress and will naturally vary from time to time as outstanding issues are settled and new risks are identified. Tax under consideration covers all taxes, including Corporation Tax, VAT, PAYE and National lnsurance contributions. As it is an internal estimate used within HMRC, it is not subject to challenge by large businesses.

Until 31 March 2014, HMRC’s Large Business Service dealt with the tax affairs of around 800 of the largest businesses in the UK. From 1 April 2014 HMRC’s Large Business directorate deals with the tax affairs of around 2,000 large businesses.

Snapshots of tax under consideration in each year were:

HMRC’s Large Business directorate (largest 2,000 businesses):

31 March 2015 - £19 billion

HMRC’s Large Business Service (largest 800 businesses):

31 March 2014 - £15.7 billion

31 July 2013 - £18.8 billion

31 July 2012 - £21.3 billion

31 March 2011 - £25.5 billion

31 March 2010 - £33.4 billion

The estimate of total tax under consideration shown in Measuring Tax Gaps Table 7.1, page 62, differs from the figures above for two reasons:

• it shows tax under consideration for the individual financial years relating to liability

• it includes corporation tax only.

In the last six years HM Treasury argued one case on taxation as the lead Department before the European Court of Justice. The judgment went against the UK, but the protective purpose was nevertheless served.

As far as I am aware there were no cases of this kind in the period 2009-10 to the present.

Catering Services in 1 Horse Guards Road are provided at zero subsidy under our 35 year PFI agreement with Exchequer Partnerships Plc. (EP). Food is procured by a sub-contractor to EP.

The latest period for which figures are available is July 2014 to September 2015. In this period, 84.81% of dairy products procured were sourced from UK producers.

This Government has fundamentally reformed the UK’s system of financial regulation.

We established the Financial Policy Committee (FPC) to act as the UK’s macroprudential authority, tasked with identifying, monitoring and addressing systemic risks to financial stability. This involves monitoring levels of leverage, debt or credit growth of all banks active in the UK, including so-called “challenger banks”.

In June 2014, the FPC took action to limit mortgage lending at high loan-to-income ratios; this action provided insurance against a rise in the number of highly indebted households.

We also established the Prudential Regulation Authority (PRA) as the UK’s micro-prudential regulator, responsible for promoting the safety and soundness of the individual firms it regulates, through minimising the risk they pose to financial stability.

The FPC’s latest assessment of financial stability risks from UK credit growth can be found in the record of its March 2016 meeting, which is available on the Bank of England’s website.

The Government has ensured that the UK will never be required to pay for any future Eurozone bail outs.

The Bank Recovery and Resolution Directive (BRRD) requires Member States to put in place a bail-in tool, which will allow resolution authorities to write down liabilities in a failing bank and convert their debt instruments into equity. The BRRD represents an important step forward in ensuring that the EU effectively addresses the risks posed by the banking system.

The Chancellor announced at Budget 2016 that the soft drinks industry levy will be charged on drinks with added sugar and a total sugar content above 5g/100ml, with a higher charge for drinks with more than 8g/100ml of sugar.

These sugar thresholds provide a strong incentive for companies to reformulate and are set to give industry certainty over the next two years. If companies reformulate their products, as many already have, then they will pay less. But it is up to companies how they respond to the levy.

There is no plan to include a time limit in the terms of the soft drinks industry levy, but the Chancellor keeps all taxes under review as part of the Budget process.

HM Revenue and Customs published its latest tax gap estimates on 22 October 2015 in Measuring tax gaps 2015 edition, which is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/470540/HMRC-measuring-tax-gaps-2015-1.pdf.

The total tax gap for Income Tax, National Insurance Contributions and Capital Gains Tax for the years from 2009-10 to 2013-14 is set out in Table 1.3 (page 18).

Separate estimates for each of these three components are not available.

Statistics on the percentage of gross income paid in direct and indirect taxes by household income quintile are produced as part of the Office for National Statistics publication ‘The Effects of Taxes and Benefits on Household Income’, which can be found here: http://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/2015-06-29

The latest release shows that in the financial year ending 2014, the top household income quintile paid 24% and 11% of gross income in direct and indirect taxes respectively.

It is not possible to identify the share of direct and indirect taxes paid by the top 1% of households using this data. However, data on the share of total income tax receipts paid by the top 1% of earners can be found in HM Revenue and Customs’ ‘Income Tax statistics and distributions’ publication, which can be found here:

https://www.gov.uk/government/collections/income-tax-statistics-and-distributions

The UK initiated the Organisation for Economic Co-operation and Development (OECD) work on country-by-country (CbC) reporting by large multinationals to tax authorities. The UK was one of the first countries to commit to the OECD model of CbC reporting with legislation in Finance Act 2015, and regulations were laid on 26 February 2016 setting the details of implementation in the UK, which apply to accounting periods beginning on or after 1 January 2016. The UK together with 30 countries has signed the OECD Multilateral Competent Authority Agreement (MCAA) to exchange CbC reports.

The Chancellor has recently pressed the case for public CbC reporting on a multilateral basis. On 12 April 2016 the European Commission published a legislative proposal for public CbC reporting by large multinationals. The UK welcomes this work as a step in the right direction towards new international rules for greater public transparency.

The Government is committed to making sure multinational enterprises pay their share of tax. The UK has been at the forefront of multilateral action through the G20 and the Organisation for Economic Co-operation and Development (OECD) to reform the international tax rules.

We used our Presidency of the G8 in 2013 to successfully initiate the G20-OECD Base Erosion and Profit Shifting (BEPS) project. The final recommendations were published by the OECD in October 2015, and endorsed by the G20 leaders in November 2015.

The BEPS project represents major and unprecedented efforts. The international project involved over 60 countries, including developing countries, to work together on an equal footing to better align the taxation of profits with economic activity and value creation.

The UK has been a leader on implementing the BEPS outputs – we have adopted the OECD country-by-country reporting template; and, at Budget 2016, the UK announced that it would be the first country to act on the OECD recommended rules on interest deductibility.

The UK will continue to participate in international efforts to address BEPS by participating in the OECD’s inclusive framework to monitor implementation, which also involves developing countries, and in work to develop toolkits to assist developing countries implementing the BEPS outcomes.

The new Lifetime ISA will provide savers with the flexibility to save towards a first home and retirement at the same time.

From April 2017, people aged 18 to 40 will be able to save up to £4,000 each year into a Lifetime ISA and receive a 25% bonus from the Government.

The Government is engaging with the industry on the detail of implementation, regulation and advice on the Lifetime ISA. Further details will be announced when the Government brings forward legislation to enact the Lifetime ISA in the autumn.

The new Lifetime ISA will provide savers with the flexibility to save towards a first home and retirement at the same time.

From April 2017, people aged 18 to 40 will be able to save up to £4,000 each year into a Lifetime ISA and receive a 25% bonus from the Government.

The Government is engaging with the industry on the detail of implementation, regulation and advice on the Lifetime ISA. Further details will be announced when the Government brings forward legislation to enact the Lifetime ISA in the autumn.

Private credit growth grew at 3.7% in the year to March, below the 2003-08 average of 11.5%. Industry sources such as Nesta estimate that peer-to-peer lending for consumers and business facilitated £2.4 billion of gross lending in 2015, 85% higher than in 2014. The volume of payday lending fell 35% in the first six months after the government transferred regulatory responsibility of the consumer credit market to the Financial Conduct Authority in April 2014.

The government created the independent Financial Policy Committee (FPC) to ensure we don’t repeat the mistakes of the past, and they have judged that financial stability risks from domestic credit growth are not elevated. The FPC has already taken action on loan-to-income ratios and mortgage affordability to ensure against risks from indebted households, and interest payments as a proportion of household income have fallen to a record low of 4.7% in Q4 2015, compared to 10.6% in Q1 2008.

The Government has fundamentally reformed regulation of the consumer credit market, which includes the credit card sector. Consumer credit regulation transferred from the Office of Fair Trading to the Financial Conduct Authority (FCA) on 1 April 2014.

The FCA is currently undertaking a thorough review of the credit card market through its ‘credit card market study’. On 3 November 2015 the FCA published its interim report which found that the market was working reasonably well for most customers.

The Government is committed to the principle that people who have worked hard and saved should have access to appropriate and accessible investment options and understand the charges that they face. We appreciate the efforts that industry have made to fulfil this aim.

Since last April, the Government has ensured that trustees of defined contribution pension schemes report charges levied on members in schemes used for auto enrolment.

We are also engaging with international work on transparency, such as the legislation agreed at European Union level through the Packaged Retail and Insurance Based Investment Products (PRIIPs) and Markets in Financial Instruments Directive (MiFID). MiFID II will introduce new measures to increase transparency of research costs for clients of portfolio managers. Under these new measures, portfolio managers may only pay for research through their own funds or from a specific research payment account funded by its clients and subject to specific controls, including a research budget.

The Financial Conduct Authority (FCA) is also currently conducting a market study into asset management, which covers the issue of whether the level of fund management fees charged to consumers reflects a competitive market. We await the FCA’s assessment of competition in this sector. The FCA expect to publish an interim report in summer 2016 and a final report in early 2017.

The Government is committed to the principle that people who have worked hard and saved should have access to appropriate and accessible investment options and understand the charges that they face. We appreciate the efforts that industry have made to fulfil this aim.

Since last April, the Government has ensured that trustees of defined contribution pension schemes report charges levied on members in schemes used for auto enrolment.

We are also engaging with international work on transparency, such as the legislation agreed at European Union level through the Packaged Retail and Insurance Based Investment Products (PRIIPs) and Markets in Financial Instruments Directive (MiFID). MiFID II will introduce new measures to increase transparency of research costs for clients of portfolio managers. Under these new measures, portfolio managers may only pay for research through their own funds or from a specific research payment account funded by its clients and subject to specific controls, including a research budget.

The Financial Conduct Authority (FCA) is also currently conducting a market study into asset management, which covers the issue of whether the level of fund management fees charged to consumers reflects a competitive market. We await the FCA’s assessment of competition in this sector. The FCA expect to publish an interim report in summer 2016 and a final report in early 2017.