HMRC head challenged over loan charge ‘misinformation’

An all-party group of MPs has written an open letter to the head of HMRC challenging him about what they dub ‘clear misinformation’ in statements made by HMRC, and then repeated by the Treasury, about the 2019 loan charge, which is set to come into effect at the end of this week amid considerable controversy, reports Pat Sweet

 The all-party parliamentary loan charge group (APPLG) says the move follows increasing concern among MPs and journalists about the accuracy and honesty of statements being made by HMRC and the Treasury regarding the loan charge, which relates to the use of disguised remuneration schemes. The group describes the charge as ‘a 20-year retrospective tax that undermines the rule of law by overriding statutory taxpayer protections’.

MPs accuse HMRC of consistently issuing misleading information in documents, letters and press statements regarding the loan charge, and claim ‘partial and misleading’ answers are consistently given to written Parliamentary questions on the subject.

The letter to HMRC CEO Sir Jonathan Thompson breaks down HMRC’s and the Treasury’s misinformation into six areas.

These are:

  • statements regarding convictions on payroll loan arrangements;
  • HMRC representation of the outcome of legal cases; HMRC claims regarding ‘typical’ liability;
  • the fact that HMRC contractors are caught by the loan charge;
  • HMRC statements about bankruptcy and selling homes; and
  • HMRC claims that 75% of revenue related to the loan charge will come from what it terms ‘employers’ and that 85% paid so far has come from ‘employers’.

The APPG’s 11-page letter includes examples of what the group says are misinformation.

One example is a letter from Ruth Stanier, HMRC director general for customer strategy and tax design, to the group’s chair, which stated: ‘Since April 2016, more than 20 individuals have been convicted for offences relating to the promotion and marketing of tax avoidance schemes.

‘They have received over 100 years of custodial sentences, with an additional seven years of suspended sentences ordered.’

The APPG says it has been provided with information from a tax barrister and others about these claims that show that the convictions are not related to payroll loan arrangements.

Average liability understated

The group also challenges HMRC’s estimate of the average liability, which is said to be £13,000, which is not reflected in a recent APPG survey. This found that only 3.6% of respondents impacted by the loan charge expected their liability to be less than £15,000. Over 50% of respondents expected HMRC to estimate their liability between £50,000 and £300,000.

In addition, the MPs are sceptical about HMRC’s claim that 85% of the tax collected via the loan charge is from employers.

The APPG says it has been sent evidence to suggest that, in actual fact, what HMRC is referring to in terms of the 85% figure is money collected as a result of follower notices issued after the Supreme Court ruling in the Rangers employee benefit trusts case [RFC 2012 Plc (in liquidation) v Advocate General for Scotland [2017] BTC 22], which it says is legally entirely distinct from loans advanced to contractors.

The letter states: ‘We believe that HMRC may be deliberately conflating the two in an attempt to give the misleading impression that the majority of money collected under the disguised remuneration charge has (and will) come from employers that promoted contractor loan structures, when this is simply not the case. The money they are referring to includes (or is entirely) money that is not related to contractor loan arrangements.’

The APPG concludes its letter by asking Thompson to provide it ‘…with pertinent and relevant answers and will not attempt to do what HMRC and the Treasury have done consistently with regards to the loan charge, which is to regurgitate the same arguments in response to all challenges.

‘That is not acceptable and would be a clear refusal to answer these important questions, each and every one requiring a factual answer.’

Sir Ed Davey, chair of the loan charge APPG, said: ‘HMRC and the Treasury have, so far, appeared willing to say whatever is necessary in order to justify the loan charge.

‘It is telling that HMRC would not even attend our inquiry to answer questions in person and have also been caught out issuing misleading statements in an attempt to justify an unjustifiable policy.

‘This is totally unacceptable and we now call upon Sir Jonathan Thompson to respond to our points properly and honestly.’

Loan charge APPG letter

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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