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U.K. Treasury Defends Continued Exclusions From COVID-19 Support

Posted on Apr. 28, 2021

Financial Secretary to the Treasury Jesse Norman has defended coronavirus support schemes administered by HM Revenue & Customs and new measures to tackle promoters and enablers of tax avoidance schemes.

During Treasury questions in the House of Commons on April 27, members of Parliament asked about fiscal steps being taken to support self-employed people as COVID-19 restrictions are lifted.

Norman noted that the government announced at the March 3 budget that the self-employment income support scheme (SEISS) would be extended until September. A fourth SEISS grant covers the period from February to April, and a fifth and final grant will cover the period from May to September. “This provides certainty to business as the economy reopens,” he said.

Labour MP Rupa Huq said that up to three million people have been “excluded from all of those grants” that Norman mentioned. “The SEISS is one of the most generous schemes of its kind,” Norman replied, adding that he and Treasury officials “have leant in as hard as we can to understand, and to work with, those groups to see if we can’t extend those schemes.”

However, it has not been possible to extend the schemes because of “features of the design” of the tax system, Norman said.

Many self-employed people working in the creative industries sector say they now plan to leave the sector, Labour MP Bambos Charalambous said. The “lack of support” for those excluded by the schemes administered by HMRC “risks damaging the recovery that we so desperately need,” he argued.

“A very large majority” of the self-employed are covered by the schemes, Norman said. “There will always be change in employments of different kinds, and in a dynamic economy like ours, that’s to be expected. If we can get through this desperate crisis — the worst for 300 years — with anything like any of the projected outcomes, that’s something we can all, self-employed or not, be profoundly grateful for,” he added.

James Murray, Labour’s shadow financial secretary to the Treasury, suggested that the government had given up trying to put in place a process with adequate safeguards to support “710,000 freelancers who receive a portion of their income” in the form of dividends.

“The fact of the matter is that many of the people we are talking about have other forms of income. They may have pension income. They may have dividend income. They may have property income,” Norman said. “What we have tried to do is use all the sources of information that we have that are properly assessed and certified in order to get schemes up and running as fast as anywhere in the world, and that is an astonishing achievement. We continue to use those schemes, and we continue to work with groups to see whether others can be included.”

Tax Avoidance Scheme Promoters

Conservative MP Julian Lewis asked Treasury how many people have been prosecuted for promoting and operating schemes subject to the loan charge.

“Promotion or enablement of a tax avoidance scheme is not, in and of itself, a criminal offence, as we have regularly debated in this House,” Norman replied. “However, there have been numerous cases in which HMRC has made arrests or prosecuted people in relation to fraud, and particularly in relation to disguised remuneration loan-busting schemes.”

Lewis said he understood that very few promoters have been prosecuted. “Isn’t it rather shocking that so many people who were mis-sold these schemes on the basis that they were perfectly legitimate are being pursued so relentlessly, whilst the promoters are in some cases being allowed to continue their work unhindered?”

The suggestion that promoters are being allowed to do anything is quite wrong, Norman said, citing a range of measures set out in the March 11 finance bill now before Parliament. The government launched a consultation on March 23 on further measures to tackle promoters and enablers.

Loan Charge Correspondence

Email correspondence between senior HMRC officials in 2019, released on April 21 in response to a freedom of information request, contradicts “the standard government spin” that the law on disguised remuneration schemes was always clear, tax barrister Keith Gordon of Temple Tax Chambers told LBC Radio on April 23.

“In recent months I have repeatedly tried to obtain legal analysis to understand the strength of our claim with very little success,” HMRC chief executive Jim Harra told colleagues in an email dated January 31, 2019. But an HMRC spokesperson told Tax Notes that the emails “show Jim Harra providing challenge to HMRC officials, which is one of the functions of his office.”

HMRC won “the Rangers case” in 2017 at the Supreme Court, which held unanimously “that contributions made by an employer into an offshore trust for the benefit of employees were subject to income tax and National Insurance contributions at that point,” the spokesperson noted in an emailed statement on April 26.

Finance Bill Debates

A House of Commons public bill committee began its consideration of the finance bill in two sittings on April 22.

The committee agreed to clause 21, which makes a change to ensure that Finance Act 2020 measures extending the off-payroll working legislation, which came into force on April 6, work as intended. Those measures had the effect that “some workers who were not intended to be within the scope of the rules would be caught,” Norman said.

Clause 21 also introduces a targeted antiavoidance rule “to future-proof the rules and further minimize any risk of contractors being drawn into avoidance arrangements,” Norman said, adding that this will ensure that “unscrupulous parties cannot exploit these conditions in order to avoid the rules." He went on to outline two “minor, related technical changes.”

Murray noted that Labour MP Ruth Cadbury, co-chair of the Loan Charge All-Party Parliamentary Group, had suggested that the government could amend clause 21 “to allow only compliant umbrella companies to exist.”

Umbrella companies would then be unable to “wrongly skim off money from contractors’ pay,” Cadbury said during an April 20 debate on the bill. She said her amendment “would also put the onus on clients and agencies only to use umbrella companies that were acting properly, because if they did not, they would be liable for any tax deemed to be avoided.”

But Norman told Murray that the April debate was “unfortunate and slightly misinformed.” The effect of the proposed amendment “would have been to gut the legislation,” he said.

The public bill committee also agreed to minor government amendments to schedules 2 (trade losses) and 5 (pensions).

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