Disguised remuneration (DR) schemes have been used since the 1990s.

The Government announced targeted anti-avoidance legislation to tackle DR schemes in a written ministerial statement in 2010, and introduced it in 2011. This aimed to put beyond doubt that DR schemes are ineffective and to discourage their use.

Despite the Government’s attempts to eliminate the use of these schemes it was clear by Budget 2016 that DR schemes continued to proliferate. That is why the Government announced a package of measures to ensure DR scheme users pay their fair share of tax. These measures, including the Loan Charge, strengthened existing rules and aimed to draw a line under the use of DR tax avoidance schemes. This was legislated for in the Finance (No.2) Act 2017.

HMT officials work closely with colleagues on all tax policy, including on the Government’s response to the use of DR tax avoidance schemes and on the introduction of the Loan Charge in Finance (No.2) Act 2017.

HMRC vigorously pursue those who promote or enable tax avoidance schemes.

HMRC recently published on GOV.UK a summary of the evidence they provided to Sir Amyas Morse’s Independent Review of the Loan Charge. This includes information on the measures introduced and action taken to tackle promoters and enablers of disguised remuneration and other tax avoidance schemes: https://www.gov.uk/government/publications/independent-loan-charge-review-summary-of-evidence/section-8-powers-to-tackle-tax-avoidance

In addition, HMRC published a policy paper in March 2020 laying out their approach to tackling promoters of mass-marketed tax avoidance schemes, and those who facilitate the use of these schemes. This can be found at the link below: https://www.gov.uk/government/publications/tackling-promoters-of-mass-marketed-tax-avoidance-schemes/tackling-promoters-of-mass-marketed-tax-avoidance-schemes

The Government also announced at Budget 2020 two calls for evidence to assist with future initiatives; a forthcoming call for evidence on tackling future use of disguised remuneration, and a call for evidence on raising standards in the tax advice market: https://www.gov.uk/government/consultations/call-for-evidence-raising-standards-in-the-tax-advice-market.

New rules for valuing the taxable benefit of the use of assets were introduced in April 2017. As these might have adversely affected a small number of individuals using emergency vehicles for private use, the Government introduced transitional arrangements in 2018 so that the previous basis for valuing any benefit for users of emergency vehicles would apply until April 2020.

In addition, the Government extended the existing tax exemption for users of emergency vehicles to include ordinary commuting. Where the only private use of the vehicle is for ordinary commuting or for journeys made while on call, there is no income tax liability.

Employers and employees have had time to review any contractual arrangements for the provision of an emergency vehicle for private use and have had the option to limit private use of the vehicle so that it is compatible with the extended tax exemption.

This legislation applies where an individual is using an emergency vehicle provided by their employer and not to individuals using their own vehicles.

An estimate of the cost of amending the loan charge to remove loans made before 2017 is not available. The loan charge was legislated in the Finance (No.2) Act 2017 and is part of a package which was estimated to yield £3.2 billion over five years.

HMRC have written directly to scheme users identified through their compliance work, IT records and tax return data. This includes individual scheme users, employers and company directors.

In addition, HMRC have actively encouraged DR scheme users to come forward through their regular contact with taxpayers, and seek to increase awareness through their series of Spotlight publications, social media activity, and webinars.

HMRC are not aware of any individuals affected whom they have not yet contacted.

The charge on disguised remuneration (DR) loans is targeted at artificial tax avoidance schemes where earnings were paid via a third party in the form of ‘loans’ which in reality were never repaid.

DR scheme users took home almost all of their pay tax-free. However, despite the claims made by promoters, these schemes never worked and the amounts paid were always taxable under the law at the time.

The Government has decided that the charge on DR loans is the right way to ensure that everybody pays the taxes they owe and contributes towards the public-funded services from which they benefit.

Restricting the charge only to DR loans entered into after Finance Act 2017 received Royal Assent would not be fair to ordinary taxpayers, who have always paid the right amount of tax and have not engaged in tax avoidance schemes.

The 2019 loan charge is targeted at artificial tax avoidance schemes where earnings were paid via a third party in the form of ‘loans’ which in reality were never repaid – ‘disguised remuneration’ (DR) schemes.

The Government has taken this action to ensure that everybody pays the taxes they owe and contribute towards the public-funded services from which they benefit.

Early Day Motion (EDM) 1239 calls for the loan charge to apply only to DR loans entered into after Finance Act 2017 received Royal Assent. Restricting the loan charge in this way would not be fair to ordinary taxpayers, who have always paid the right amount of tax and have not engaged in tax avoidance schemes.

The Government recognises that the loan charge will have a significant impact on some people who have used DR schemes. HMRC is encouraging scheme users to come forward and settle their tax affairs ahead of the loan charge arising. HMRC has a strong track record in helping those who are in genuine financial difficulty. HMRC is able to agree bespoke payment arrangements, allowing individuals to pay their tax bill over time.

HMRC pursues those who promote or enable tax avoidance schemes to ensure that nobody profits from selling avoidance. HMRC is able to charge tough penalties of up to £1m where promoters do not provide clear and accurate information to their clients, and penalties of 100% of the fees earned by anyone who designs, sells, or otherwise enables the use of tax avoidance arrangements.

HMRC is proactively reporting DR scheme promoters to the Advertising Standards Authority and professional bodies where they make misleading claims about their products and services or provide misleading advice.

HMRC will also consider criminal investigation where appropriate. Promoters of tax avoidance schemes have been prosecuted, leading to convictions and jail terms.

The 2019 loan charge is targeted at artificial tax avoidance schemes where earnings were paid via a third party in the form of ‘loans’ which in reality were never repaid – ‘disguised remuneration’ (DR) schemes.

The Government has taken this action to ensure that everybody pays the taxes they owe and contribute towards the public-funded services from which they benefit.

Early Day Motion (EDM) 1239 calls for the loan charge to apply only to DR loans entered into after Finance Act 2017 received Royal Assent. Restricting the loan charge in this way would not be fair to ordinary taxpayers, who have always paid the right amount of tax and have not engaged in tax avoidance schemes.

The Government recognises that the loan charge will have a significant impact on some people who have used DR schemes. HMRC is encouraging scheme users to come forward and settle their tax affairs ahead of the loan charge arising. HMRC has a strong track record in helping those who are in genuine financial difficulty. HMRC is able to agree bespoke payment arrangements, allowing individuals to pay their tax bill over time.

HMRC pursues those who promote or enable tax avoidance schemes to ensure that nobody profits from selling avoidance. HMRC is able to charge tough penalties of up to £1m where promoters do not provide clear and accurate information to their clients, and penalties of 100% of the fees earned by anyone who designs, sells, or otherwise enables the use of tax avoidance arrangements.

HMRC is proactively reporting DR scheme promoters to the Advertising Standards Authority and professional bodies where they make misleading claims about their products and services or provide misleading advice.

HMRC will also consider criminal investigation where appropriate. Promoters of tax avoidance schemes have been prosecuted, leading to convictions and jail terms.

The 2019 loan charge is targeted at artificial tax avoidance schemes where earnings are paid in the form of non-repayable loans made by a third party - “disguised remuneration” (DR) schemes.

DR schemes are clear examples of contrived tax avoidance. It is not normal, or indeed reasonable, to be paid in loans that are unlikely ever to be repaid. It is an individual’s responsibility to ensure they pay the right amount of tax and to understand the consequences of engaging in tax avoidance.

It is unfair to ordinary taxpayers to let anybody benefit from contrived tax avoidance of this sort, and that is why this Government has taken action to ensure that everybody pays the taxes they owe. The announcement of the loan charge at Budget 2016 provided scheme users with a three-year period to repay their DR loans, or to agree a settlement with HM Revenue and Customs (HMRC) before the charge takes effect.

50,000 individuals are estimated to be affected by the introduction of the DR loan charge across the UK. It is estimated that less than 0.1% of the population of Wales will be affected. Information is not held at constituency level.

The impact of the DR loan charge on these individuals was considered at Budget 2016, when the measure was first announced. _­HMRC consulted on the measure in August 2016. The latest tax information and impact note (TIIN) can be found at: https://www.gov.uk/government/publications/disguised-remuneration-further-update/disguised-remuneration-further-update

The loan charge is not retrospective. It is a new charge arising on disguised remuneration loan balances that remain outstanding on 5 April 2019. Its announcement at Budget 2016 provided scheme users with a three year period to repay their loans, or to agree a settlement with HMRC before the charge takes effect. The government estimates that around 50,000 individuals are affected by this legislation.

HMRC are able to help taxpayers who are not able to pay their taxes and will work with those who are in genuine difficulty to help them to get back on track.