Loan Charge Review must take evidence from people facing the Loan Charge, be free of Treasury interference and with all related HMRC action suspended

The All-Party Parliamentary Group on the Loan Charge have welcomed the announcement from the Treasury of the expected Loan Charge review, to be chaired by former Comptroller and Auditor General of the National Audit Office, Sir Amyas Morse. But the APPG have stated that to be a genuine review it must take evidence from people facing the Loan Charge and be free of Treasury interference. It is also essential that all HMRC activity be suspended, including the threat of the Loan Charge itself, until the review concludes.

The Terms of Reference of the review have been published and how the review will work. It will take place in a relatively short time scale, reporting in mid-November.

The review does make clear that, unlike the whitewash Treasury report, it could recommend changes (legislative changes) to the Loan Charge. The Government would then consider any such recommendations. This is positive, but the APPG is calling on the Government (and any subsequent Government) to agree to implement the recommendations in full.

The scope, however, seems unnecessarily narrow and focused on the Loan Charge itself, not the wider issues of whether the Loan Charge undermines the rule of law by imposing HMRC’s opinions of the operation of various tax legislation. Opinions that have not yet been tested by the courts. It leaves out the APN’s that HMRC have issued en masse and which have been battled over for many years. It leaves out the fact that HMRC opened investigations many years ago and then did nothing year after year. So the review must look at the whole history of the Loan Charge and HMRC’s conduct around it, something that has been strongly highlighted by many individuals and tax professionals as well as in the APPG’s Loan Charge Inquiry Report

The review guidance does make clear that settlements are on hold till the review concludes, however it appears to state that taxpayers need to decide now if they will settle, regardless of whether they have agreed settlement figures from HMRC. If they are settling then they don’t have to complete the additional Loan Charge disclosure by the end of September, if they are not settling then they do have to complete the disclosure. This disclosure carries the threat of penalties for not properly disclosing. If the taxpayer is unsure whether they will, or if they even can settle, then they are in limbo. This is contradictory and unfair.

The APPG and many MPs are especially concerned that the Loan Charge is not being suspended, as it clearly should be, to allow for a review that might lead to legislative changes. The Loan Charge itself should be postponed which would allow sufficient time for a genuine review. With the amount of controversy around the Loan Charge, it makes sense to look at this issue properly and resolve it once and for all, independently and fairly.

The Loan Charge APPG had written to the Chancellor of the Exchequer saying that three things must be the case, when the review was announced:

  1. The review must be genuinely independent of the Treasury and HMRC
  2. The review must take evidence from outside parties including those facing the Loan Charge
  3. All settlement activity, enforcement & penalties must be suspended pending the outcome of the review and the implementation of the recommendations

There are concerns that the review announcement has failed to fulfil these three simple, fundamental points and that there is an ongoing attempt from the Treasury and HMRC to dictate the terms of the review. The Loan Charge APPG welcome the appointment of Sir Amyas Morse as an independent Chair, however the fact that the review will be staffed exclusively from the Treasury and HMRC is clearly wholly inappropriate. This must be changed. Even more troubling, the Director of Personal Tax of the Treasury would appear to be holding a key position in relation to the review staffing and ensuring that HMRC are cooperating with the review. This again is incompatible with a review that is independent of the Treasury.

The Loan Charge APPG has also expressed concern that the Terms of Reference clearly suggest that the review will be dictated behind the scenes by the Treasury. It states “the timing and manner of the publication will be determined by the Chancellor of the Exchequer; the Reviewer is expected to use their discretion and will have the final say on the content of the report” and that “the Reviewer has the final say on what is published in the report”. This strongly suggests that there may be prior stages of writing the report that could involve the Treasury and HMRC. It must be clearly stated that this is not the case and that the Treasury and HMRC will have no role in the review. Without this, the review cannot be deemed reliable, independent or genuine.

The Loan Charge APPG also welcomes that the Terms of Reference states that “It will be for the Reviewer to decide what arrangements are needed to engage with stakeholders during the Review” but it must be clearly laid out that the review will take evidence and base the review and report on this evidence. This must include evidence from those facing the Loan Charge and sector professionals. So the Loan Charge APPG are insisting that there must be a call for external evidence to be supplied, including from those facing the Loan Charge. In the meantime, the APPG will be sending the Loan Charge Inquiry Report and the 820 impact assessments which individuals permitted be shared, to the review. These were delivered to the Financial Secretary to Treasury, Jesse Norman on 19th July 2019, but the APPG has so far had no response from the Minister as to whether he has read these.

The Loan Charge APPG has also expressed concern that insufficient time has been allocated to properly explore all the issues. The Loan Charge was first announced in March 2016. We now have a report that will be produced in a very short time-frame (similar to the previous whitewash NC26 report from earlier this year) to examine a complex issue and situation, with tens of thousands of British citizens in turmoil over the Loan Charge and the unexpected sums they are being asked to pay or are already paying.

The Loan Charge APPG have also criticised the wholly inappropriate way that the Treasury announced the review, with a biased press statement repeating some of the misleading propaganda that has been an ongoing part of the Loan Charge Scandal. The Introduction to the Terms of Reference appears to prejudge the reasons why people entered the arrangements. It presents the government’s opinions as facts, which once again suggests that the Treasury are intending to control the review and start from a position that they are right, which is unacceptable and worrying.

The Loan Charge APPG have called for the following steps to ensure the review is a genuine review and is genuinely independent.

  1. The Secretariat must not be staffed by (any) HMRC and Treasury officials. Sir Amyas must recruit and appoint the review staff, none of whom must be current HMRC or Treasury staff or have worked for either in the last five years.
  2. The review must include a call for evidence, including from those facing the Loan Charge and sector professionals. The review and report must be based on this evidence.
  3. HMRC and the Treasury should and must supply their view to the review, but have no other role. Key to the review is looking at the introduction of the Loan Charge by the Treasury (on the suggestion of HMRC) and the conduct of HMRC officials, Treasury officials and Ministers.
  4. HMRC and the Treasury must have no input into the report at any stage nor sight of it until it is published by Sir Amyas and his independent review team. This needs to be clearly stated now or people will simply not have confidence that the report is not going to be influenced, controlled or largely determined by HMRC and the Treasury.
  5. All Loan Charge related settlement activity, enforcement (including APN’s) & penalties must be suspended pending the outcome of the review and the implementation of the recommendations.
  6. If the review finds that the timescale suggested is insufficient, then Sir Amyas must be allowed to propose a long time period to continue and complete a proper review. And, the Loan Charge and associated activity must be further suspended for this.
  7. The Government must commit to implement the recommendations of the Loan Charge review in full and in a timely manner taking account of the timescales impacting those facing the Loan Charge.

The Loan Charge APPG have and are writing to the Prime Minister, to the Chancellor and to Sir Amyas Morse calling for the points listed above and will continue to press for them.

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

“Finally the Government has done the right thing and announced a review, to be led by Sir Amyas Morse, which must now be a properly independent, genuine review to examine all aspects of the Loan Charge Scandal.

“We welcome Sir Amyas’ appointment and believe he will seek to carry out a proper and independent review. The Loan Charge APPG are concerned, however, as to how independent it will actually be, so we are writing to Sir Amyas and the Prime Minister demanding that there is no Treasury or HMRC involvement beyond them supplying evidence, otherwise it will neither command confidence nor resolve the serious issues around this deeply controversial policy.

“The review also must be evidence based with those facing the Loan Charge and sector professionals asked to give evidence and we will be sending Sir Amyas the hundreds of case studies that we have, to ensure this happens”.

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

“I’m disappointed that, despite the Loan Charge APPG and over 200 MPs calling for an independent review of the Loan Charge, that the Government are saying it will be staffed by HMRC and Treasury officials. This is a clear conflict of interest and entirely incompatible with an independent review, part of which must be examining the role and conduct of HMRC and Treasury officials and Ministers.

“So Sir Amyas Morse must be permitted to appoint his own staff or people will not believe this isn’t another tightly controlled stitch-up”.

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

“I warmly welcome the news that an independent review of the unfair and unjust Loan Charge has been announced, following my question to the Prime Minister last week and his commitment to this. This signals a real shift from the position taken by the previous administration.

“We do, however, also need a suspension of the Loan Charge. So I and we will continue to press for this, to wait for the outcome of what must be a genuine and genuinely independent review, without HMRC and Treasury interference”.