Of course, HMRC has a duty to look into all tax matters. I wonder whether the right hon. Lady was present for the previous debate, in which we talked about why we are introducing the increased social care levy in respect of the payment of dividends. One of the reasons that I pointed out was to ensure that people did not take advantage of being paid by a company through dividends rather than paying income tax.
New clauses 7 and 14 seek to require the Chancellor to publish a review on the impact of clause 85. New clause 7 would require the commissioning of an independent assessment of the information published by HMRC about disguised remuneration loan schemes. Such a review would consider HMRC’s approach to what is referred to as the loan charge scheme and consider recommendations for altering that approach. Under the new clause, the Government would be required to state to the House their response to the recommendations.
The Government already regularly review and report on their progress in tackling disguised remuneration, including on action taken against those who promote tax avoidance schemes. For example, only yesterday,
HMRC published its annual report on the use of marketed tax avoidance schemes and earlier this month it published its annual report and accounts. The information is therefore already in the public domain and will be updated in future. The Government introduced the loan charge to tackle the use of disguised remuneration schemes and it has already been the subject of an independent review that concluded less than two years ago. The Government accepted all but one of that review’s 20 recommendations. A further review is therefore unnecessary and I urge Members to reject the new clause.
New clause 14 states that any assessment
“must include consideration of the impact of the publication of a register of overseas property ownership upon the promotion of tax avoidance”.
The Government continue to make progress on work to set up a public register of beneficial owners of overseas entities that own UK property. That will enable us to combat money laundering and achieve greater transparency in the UK property market. The Government remain committed to those reforms, so the new clause is unnecessary and I urge Members to reject it.
Clause 86 allows HMRC to seek a court freezing order to freeze a tax avoidance scheme promoter’s assets. This would happen when HMRC has applied or is about to apply to a tribunal in England and Wales to charge a penalty. The measure will make sure that promoters face the financial consequences of their actions.
Clause 87 mirrors for Scotland the provisions in clause 86, clause 88 does the same for Northern Ireland, and clause 89 provides for some definitions and interpretations. The clauses I have outlined target the most persistent promoters, who repeatedly go to extreme lengths to sidestep the rules and frustrate HMRC’s efforts to tackle their behaviour.
Clause 90 introduces a new penalty that is chargeable on UK-based entities that facilitate tax avoidance schemes that involve offshore promoters. It aims to deter the enabling of such schemes by UK entities by imposing a penalty of up to 100% of the total fees earned by all those involved. This significant penalty reflects the seriousness of such behaviour.
Clauses 27 and 28 relate to the diverted profits tax, which was introduced in 2015 to target large multinationals that try to avoid tax by redirecting their profits away from the UK. The tax has been hugely successful in its main aim of changing corporate behaviour; in fact, it has helped to secure £6 billion in extra taxes to fund our public services.
Clause 27 will ensure that the UK can meet its tax-treaty obligations by allowing HMRC to implement a mutual agreement procedure decision to alter a diverted profits tax charge, should that situation arise.
Clause 28 introduces technical amendments to ensure that the diverted profits tax legislation operates as intended. First, it will ensure that HMRC cannot issue a corporation tax closure notice until after the diverted profits tax review period has ended. This means that the taxpayer must resolve their profit diversion before a diverted profits tax charge can be displaced. Government amendments 2 and 3 ensure that the clause applies as intended to those diverted profit tax cases where a foreign company has structured its UK activities to avoid them meeting the definition of a permanent establishment. This is in line with the Budget announcement. Secondly, this clause
will extend the period in which a taxpayer can amend their own company tax return to obtain relief from diverted profit tax.
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I shall now turn to clauses 91 and 92, which relate to tax evasion. Clause 91 and schedule 13 introduce changes to tackle the form of tax evasion known as electronic sales suppression. This is where a business deliberately manipulates its electronic sales records to hide or reduce the value of individual transactions. This measure will mean that those found to be making, supplying, promoting or possessing ESS hardware or software will face a penalty. It will also give HMRC additional ESS-related information powers. By tackling ESS in this way, we expect to raise £85 million in additional revenue over the next five years while helping to level the playing field for compliant businesses.
Clause 92 allows for the introduction of new, tougher sanctions to tackle tobacco duty evasion. These sanctions will be linked to the tobacco track and trace system, which controls the legitimate production, distribution and supply of cigarettes and hand-rolling tobacco. The clause also introduces a new information gateway. This will allow HMRC to share relevant data with anyone connected to the administration or enforcement of the traceability system, such as Trading Standards. This will help address tobacco duty evasion, with a focus on the small-scale regular offenders who play a key role in street-level distribution.
New clause 13 seeks to require the Government to publish an impact assessment of clauses 84 to 92 on the tax gap. The Government already publish information each year on the tax gap, including the parts of it that relate to tax avoidance and evasion. These figures bear witness to our success in driving down the amount of tax lost to avoidance from 1.1% of total theoretical liabilities in 2005-06 to 0.2% in 2019-20, and to evasion from 1% to 0.8%.
The Government are also committed to evaluating the impact of the policies and transformation programmes they implement. On 25 November, we published the first HMRC evaluation framework, which supports our work to maintain a trusted, modern tax system that is fit for the future. It sets out HMRC’s approach to evaluation in line with wider Government practice. On this basis, a separate review would be unnecessary, and I urge Members to reject the new clause.
These measures will ensure that the Government can continue to crack down on economic crime. I therefore urge Members to support clauses 27 and 28, 53 to 66, 84 to 90, 91 and 92, as well as schedules 12 and 13 standing part of the Bill. I also support Government amendments 2 and 3 to clause 28.