The UK Chancellor of the Exchequer Philip Hammond has acknowledged that he was wrong to say that Loan Charge amounted to a tax evasion practice. Instead, he says that it was tax avoidance.

Tax evasion and avoidance are two different terms in the legal context. The former means to evade tax payment through illegal tax schemes. On the other hand, the latter means to avoid taxes through schemes that are not illegal with the intent to reduce tax liabilities.

Many tax experts across the Atlantic, in fact, encourage firms to reduce taxes through different schemes.

A red-faced Hammond has admitted that he was at fault to call loan charge as tax evasion scheme. The concession is of significance since it means that the Government was wrong in implying parties such as Loan Charge Action Grip who engaged in loan charge schemes as committing illegal acts.

However, some experts question whether the Chancellor of the Exchequer is really apologetic since the letter that was buried in a letter that addressed fixed-odds betting did not use any words of apology.

Parliament Condemn Use of Any Tax Avoidance Scheme

In Parliament, tax avoidance schemes continue to be regarded as undesirable. One Tory MP had stated that promoters of tax avoidance schemes should be condemned as they have lured people into misery.

John Glen, the Treasury minister, has stated that the five cases related to the tax avoidance schemes are in court, which cover a large number of workers. He stated that the responsibility for individuals who have been affected by tax avoidances scheme rests on those who promoted the scheme.

Mr. Glen had also shared the statistics that the loan charge has increased to 24,000. He stated that HMRC receives up to 4,000 calls a week.

Individuals whose annual income is less than £50,000 would now be ‘automatically’ allowed to avail Time to Pay arrangements lasting up to five years. In contrast, the average salary of the scheme is nearly £60,000, which indicates that the TTP arrangement would only benefit 3 percent of affected individuals

The Minister had stated that loan charge payments will continue to be subject to tax. He stated that it’s unfair for contractors who owe taxes to get away without making any payment.

Mr. Hammond has also stated that it’s not reasonable for individuals to be paid loans that are not repaid. This is not fair to the vast majority of people who pay full taxes on their income.