Chief secretary to the Treasury Danny Alexander has moved to close what he has dubbed a tax “loophole” relating to loans made by private equity firms.
Speaking at the Liberal Democrat conference in Glasgow yesterday, Alexander said the tax policy agreed by the party earlier this week to introduce a mansion tax, cut the lifetime allowance from £1.25m to £1m, and reform capital gains tax, would ensure those who “have the most will continue to contribute the most.”
He said he made “no apology for going after tax dodgers”.
Alexander said: “We are cutting corporation tax to encourage firms to invest, not to give the wealthy a way to avoid the 45p tax rate.
“So when the vast majority of people in an industry are finding ways to exploit that difference, and that industry is the preserve of the very wealthy, I have no hesitation in acting. So I can announce today that following a brief consultation we will be closing the loophole that allows private equity shareholders to siphon money out of their firms while dodging the intended income tax.
“And it is why I can also announce we will also be closing the loophole that allows partners in partnership firms to structure their staff arrangements so they avoid paying the correct amount of income tax. It’s wrong, it’s unfair, and it’s got to stop and with Liberal Democrats in government, it will.”
Speaking to The Daily Telegraph, the private equity trade body The British Venture Capital Association denied that the structures were “loopholes” and argued they were “commercial transactions” and that its tax experts had been in “continuous dialogue with the Treasury and HM Revenue & Customs on the issue”.
Alexander also referred to the need for the Government’s Help to Buy scheme, saying it was right to build more affordable homes and help borrowers who can afford to repay their mortgage but do have the money for the large deposit required.
He also attacked “rogue” landlords with large portfolios, including student and holiday lets, who fail to pay the appropriate tax on their rental income.
Alexander said the amount owed to HMRC totalled £500m, and said his simple message to the “rogue minority” of landlords was to “pay up or face the consequences”.