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76 Parliamentarians have signed an open letter to the Prime Minister and Chancellor urging a ‘fair resolution’ to ‘the Loan Charge debacle’ as HMRC own head calls it, following damning revelations exposed through Freedom of Information (FOI) requests.

The information revealed by FOI has exposed three significant and serious things, that deepens the controversy around what has become known as the ‘Loan Charge Scandal’ and that further strengthens the case for the Government to change course, to avoid many bankruptcies and risking further suicides.

The three things exposed in the FOI responses are:

  • That HMRC tried and failed to find legal precedent for them being permitted to pursue individuals, rather than employers
  • It was HMRC who came up with the idea of the Loan Charge, not the Treasury
  • Even HMRC realise that the Loan Charge is a “debacle”

First Permanent Secretary and Chief Executive of HMRC Jim Harra has admitted (in an internal email to senior colleagues) that HMRC states “In recent months I have repeatedly tried to obtain legal analysis to understand the strength of our claim with very little success”. This undermines the claim that that the Loan Charge is based on the outcome of legal cases. The reality is that the Supreme Court judgment in the Glasgow Rangers’ case in 2017, often wrongly cited as legal precedent for the Loan Charge, deemed employers to be liable for any tax deemed to be avoided and did not give HMRC the right to directly pursue individuals. The admission by Mr Harra also fundamentally undermines the conclusion of the Morse report, which claimed ‘the law was always clear’ from December 2010, when HMRC themselves can’t prove that – and when in reality the law was far from clear, hence the decision to legislate in 2016.

Also, as has long been suspected, it HMRC, not the Treasury, who came up with the idea of the Loan Charge. HMRC, who had at that stage lost several related court cases and were out of time to pursue many taxpayers, proposed the Loan Charge to Treasury ministers in September 2015. The Loan Charge was then introduced on the back of a seriously inadequate impact assessment, which failed to predict the inevitable disastrous impact for many people and families. This suggests that HMRC misled the Treasury over the whole policy, its legal basis and the reality of the impact it would have, none of which was understood when it was taken through Parliament.

First Permanent Secretary and Chief Executive Jim Harra calls it the “Loan Charge debacle”, well aware of the mess that has been created by this deeply controversial and ill-considered policy. It’s clear that as well as being a life-ruining disaster for thousands of ordinary families, it is also a policy making fiasco and now a practical mess for HMRC, who have failed to deal with the workload created, as well as causing them significant reputational damage.

The letter calls on the Prime Minister and the Chancellor, in the light of these revelations, to come up with a fair resolution to the whole issue, that avoids the many bankruptcies that will otherwise follow. The letter also urges the Government to now accept that the vast majority of people facing the Loan Charge are clearly victims of mis-selling and that there needs therefore be a different approach, that reflects this. A recent survey conducted by the Loan Charge APPG shows that people facing the Loan Charge were not warned of the risks of being pursued by HMRC and followed professional advice. Whilst those who were mis-sold schemes face ruin, those who mis-sold the schemes are not being pursued by HMRC, which is at the heart of the injustice of the Loan Charge.

The need for intervention from the top of Government is critically important, with HMRC expected to demand payment this year. If HMRC enforce the Loan Charge, it will inevitably lead to thousands of bankruptcies, which makes no sense at all, each one has a cost to the taxpayer and in many cases, for many affected, being declared bankrupt will prevent them from working again or paying any taxes. Seven people facing the loan charge are confirmed to have committed suicide.

Commenting, Loan Charge APPG Co-Chairs said:

Sammy Wilson MP, Co-Chair of the Loan Charge and Taxpayer Fairness APPG (DUP):

“The latest revelations about the Loan Charge, exposed through Freedom of Information requests, shows still further than this really is a policy making scandal. We now know that HMRC can’t find legal analysis to justify them pursuing individuals, who were advised to use these schemes and that they have misled Ministers about the whole thing.

“The more that is revealed from internal correspondence, the more it exposes concerns about the integrity of HMRC in this whole matter. As the APPG has previously called for, there needs to be a proper, independent inquiry into the whole Loan Charge debacle, as HMRC themselves call it and a new system of proper accountability of oversight of HMRC to ensure this can never happen again”.

Greg Smith MP, Co-Chair of the Loan Charge and Taxpayer Fairness APPG (Conservative):

“The Loan Charge continues to be a problem not just for families, but also for HMRC and the Government. It is in everyone’s interests now to come up with a fair and final resolution to this problem, that avoids thousands of bankruptcies and also allows HMRC to focus on other things. I hope that the Prime Minister will listen and act as he did when he was first elected, having recognised that there is a real injustice.

“It’s abundantly clear that individuals were mis-sold these schemes, given no warning of any risk of pursuit by HMRC, yet it is these individuals who are facing ruin, whilst those who mis-sold the schemes to them have faced no action at all. This is unfair and we implore the Government to look at the Loan Charge again and find a better way to resolve this whole mess without ruining lives”.

Mohammed Yasin MP, Co-Chair of the Loan Charge and Taxpayer Fairness APPG (Labour):

“The Loan Charge remains a huge worry, with thousands of UK families set to face unpayable bills, when all they did was to take and follow professional advice. We are deeply concerned that if HMRC and The Treasury don’t look at this again, there will be many bankruptcies and a risk of further suicides.

“There are serious question marks about the way the Loan Charge was introduced and how it has been communicated to Parliament. Now we know that even HMRC can’t find legal analysis to back up their claims, it’s apparent that the Loan Charge has been mis-sold to Parliament, which is deeply ironic considering those facing the Loan Charge are victims of mis-selling. The Government needs to stop persecuting these people and instead go after well connected promoters who made huge sums from selling and operating these schemes, rather than bankrupting ordinary people”.

[Ends]

Notes to Editors

  1. The Loan Charge and Taxpayer Fairness APPG (All Party Parliamentary Group) consists of parliamentarians of all parties from both Houses of Parliament to raise concerns about the 2019 Loan Charge as well as the wider context of fairness of tax legislation and the conduct of HMRC. The Loan Charge & Taxpayer Fairness APPG is an officially registered Parliamentary Group, as described on the UK Parliament website www.parliament.uk/about/mps-and-lords/members/apg/. The APPG website is www.loanchargeappg.co.uk and the APPG is also on Twitter @LoanChargeAPPG.
  2. The Officers of the Loan Charge APPG are as follows:
  • Sammy Wilson MP (DUP) – Co-Chair and registered contact
  • Greg Smith MP (Conservative) – Co-Chair
  • Mohammed Yasin MP (Labour) – Co-Chair
  • Baroness Susan Kramer (Liberal Democrat) – Vice-Chair
  • Dr Lisa Cameron MP (SNP) – Vice-Chair
  • Gerald Jones MP (Labour) – Vice-Chair
  • Sarah Olney MP (Liberal Democrat) – Vice-Chair
  • Rushanara Ali MP (Labour) – Vice-Chair
  • Fleur Anderson MP (Labour) – Officer
  • Alex Sobel MP (Labour) – Officer