The All-Party Parliamentary Group on the Loan Charge have written to the Chancellor, Philip Hammond, to inform him that HMRC have been miscalculating interest charges across thousands of Loan Charge settlement letters. The calculations will need to be revisited by HMRC and corrections sent to anybody considering voluntary settlement on HMRC’s published settlement terms. Settlement of the disputed tax on HMRC’s unrelenting terms is the only way that people can avoid the Loan Charge which comes in on 5th April, in less than two weeks’ time.

The Loan Charge APPG have been sent information on the miscalculations that HMRC have made, showing a mistake in the calculation of late payment interest on thousands of settlement letters. The issue relates to a simple error of using the incorrect number of days for the 2012 leap year. Instead of dividing the annual interest rate by 366 days, HMRC have been dividing by 365, but still applying this daily rate to the 366 actual days for 2012 – the effect of which is to overcharge taxpayers for one additional day of interest.


This small, but real, error appears to be present on every settlement calculation which includes interest for 2012 and could amount to tens of thousands of pounds of additional revenue collected by HMRC that they have no legal right to. The APPG are yet to find a single example of an interest calculation for the 2012 leap year which is correct.


According to the terms of their own Charter, HMRC are required to correct the error as soon as possible and, until then, the settlements are incorrect and therefore unenforceable – leading the APPG to demand a delay to the Loan Charge.


The Loan Charge APPG has also called on the Chancellor to start an immediate investigation into how HMRC computer systems came to contain such an error, and query why it has never been spotted by any HMRC staff whose job it is to prepare and review the thousands of settlements that people have requested as a result of the Loan Charge policy.


With the Loan Charge falling due in only two weeks’ time, this could cause considerable delay to individuals who have already been waiting months for a response from HMRC. This provides another compelling reason to delay the Loan Charge.


The Loan Charge APPG has previously called for a delay due to concerns about the fairness of the overall policy and because it is a known fact that there have been cases of suicide by people facing the Loan Charge. Thousands of people are facing acute anxiety and a shocking 40% of those who completed the APPG’s Loan Charge Inquiry survey reported suicidal thoughts.[1]


Sir Ed Davey MP, Chair of the Loan Charge APPG (Liberal Democrat) said:


“The calculation of interest on late payment of tax is a core function of HMRC and is laid down in law. Taxpayers have a right to trust the figures that HMRC provide. It beggars belief that they have done something so simple as to fail to take a leap year into account.


“This miscalculation means that according to their own Charter, HMRC must now reissue correct settlements in thousands of cases. Additionally, an urgent investigation is also needed into the scale of this issue and how many previously agreed settlements are affected. Most importantly, the Government must now immediately intervene and delay the Loan Charge and suspend all related settlements”.


Ruth Cadbury MP, Vice-Chair of the Loan Charge APPG (Labour) said:


“When HMRC discovers a mistake on the part of a taxpayer, they come down on them like a ton of bricks. It is not acceptable for HMRC to be making simple mistakes like forgetting leap years and overcharging people as a result.


“The Loan Charge scandal gets even more serious. Already we know that people facing the Loan Charge have taken their own lives; now we find out that HMRC aren’t even getting their calculations correct. There must be a delay to the Loan Charge and an urgent and proper investigation into this whole fiasco”.


Ross Thomson MP, Vice-Chair of the Loan Charge APPG (Conservative) said:


“HMRC have had three years to prepare for the introduction of the Loan Charge and they still cannot even produce accurate numbers. I am also very concerned that this error may run deeper and may have been present in HMRC’s computers for the last seven years. If so, then who can say how widespread the impact is and how many tax settlements may have been affected?”


“We already know that HMRC are not coping with the volume of cases and are failing to deal with settlements in a reasonable timescale. Now we know they have made a mistake with the calculations too. There clearly must be a halt to all settlements affected and an immediate suspension of the Loan Charge. I will continue to call on the Prime Minister and Chancellor to do this”.





Notes to Editors


  1. 2012 Leap Year – miscalculation of interest


HMRC frequently state that interest on late payment is laid down in law and there is zero flexibility in how this is applied. It follows that HMRC cannot make any arbitrary decisions on how such interest is calculated such as how leap days are considered.


The error discovered relates to the treatment of the 2012 leap year. It affects any tax year ended on 5th April 2010, or any prior tax year, and for which interest has accrued during 2012. The HMRC calculation has the effect of adding an additional one day of interest for 2012, in error, due to an incorrect assumption that 2012 had only 365 days. The relevant interest rates were converted to effective daily rates based on this assumption of 365 days, but the daily interest rates were then applied to the full 366 days in the year. This error has been confirmed on seven separate examples of HMRC settlement calculations provided by individuals and has been confirmed by a tax adviser to the APPG. None of the seven examples had the correct interest calculated.


The 2008 and 2016 Leap Years did not have the same error, the calculations correctly assume that these leap years have 366 days and calculate the correct daily interest rates which are then applied to the actual 366 days in those years. This confirms that the 2012 calculations are wrong.


The effect is small for each individual settlement, but it is real and represents money that HMRC has no right, in law, to collect. In aggregate, across the settlements agreed so far with HMRC, it could represent tens of thousands of pounds that HMRC has overcharged.


  1. The All-Party Parliamentary Loan Charge Group (Loan Charge APPG) has been created to bring together parliamentarians of all parties from both Houses of Parliament who have concerns about the nature and impact of the ‘2019 Loan Charge’ which will come in to force on the 5th of April 2019 and also concerns about the wider context of fairness of tax legislation and HMRC’s conduct in enforcing it. See and Twitter @LoanChargeAPPG. The Loan Charge APPG is an officially registered Parliamentary Group, as described on the UK Parliament website


The Officers of the Loan Charge APPG are as follows:


  • Rt Hon. Sir Ed Davey MP, Chair, MP for Kingston and Surbiton (Liberal Democrat)
  • Ruth Cadbury MP, Vice-Chair, MP for Brentford and Isleworth (Labour)
  • Ross Thomson MP, Vice Chair, MP for Aberdeen South, (Conservative)
  • Hon. Baroness Kramer, Vice-Chair, (Liberal Democrat)
  • Liz Twist MP, Vice-Chair, MP for Blaydon (Labour)