Loan Charge APPG calls for a genuine settlement opportunity and a delay to the Loan Charge to allow this
The Loan Charge APPG has called on the Government and HMRC to offer a genuine and reasonable settlement opportunity for those who used loan schemes, which would allow many people to reach affordable settlement and also allow HMRC to collect some of the tax it claims it is owed. The APPG, one of the largest in Parliament, has also called for a delay of the Loan Charge declaration from the end of September 2020 to the end of January 2021, to allow a 6 month period for such voluntary settlement agreements to be agreed.
Despite changes to the Loan Charge as a result of the Morse Review, and despite on-going concern from many MPs and Peers, thousands of people still face huge bills for tax that has never been legally proven to be due. The current terms of settlement insisted on by HMRC make settlement unaffordable and impossible for many. As well as being unfair, the terms demand far more tax from people and small businesses than the financial benefit received, with the promoters of the loan schemes not facing any such bills. Additional charges included in the settlement terms, such as interest, inheritance tax and APN penalties, mean that HMRC are often demanding sums far in excess of the disputed tax amount. The payment terms that HMRC are insisting on are often far harsher than those imposed on people guilty of criminal offences such as fraud and theft which, as has been raised before, is indicative of the vindictive way those facing the Loan Charge are treated.
The Loan Charge APPG continues to oppose the retrospective nature of the Loan Charge and the way it has taken away people’s right to defend themselves in court. However, with no further chance to change the law in Parliament before the end of September, the APPG is urging the Government and HMRC to offer a genuine and reasonable settlement opportunity that seeks to reclaim the disputed tax fairly, with the settled terms adjusted to reflect the reality of the benefit that people actually received.
This proposal is for individuals and small businesses to volunteer to pay an Income Tax rate of 10% on loan balances as full and final settlement. This builds on the recommendation made by the Loan Charge APPG in it’s Loan Charge Inquiry published in April 2019. This proposal is based on the reality of who actually benefited from the loan schemes that HMRC have clamped down on. It works on the principle that individual taxpayers can pay a proportion of the disputed tax, acknowledging that they did benefit from the schemes, but that any benefit should be compared to the returns of someone working through a limited/personal service company and not with an employee (as they were not an employee and did not receive pension contributions, sickness or other employee benefits).
In addition, the APPG is also calling on the Government to move the date of the declaration of the Loan Charge from 30 September 2020 to 31 January 2021. This would not only allow for a six month period in which people could set up such settlement arrangements with HMRC, but would also give HMRC a realistic chance of conducting the settlement processes, something that at the moment, they simply do not have the time or resource to do. According to most recent figures, HMRC have completed only approximately 10,000 settlements in 3 years, yet need to finalise three times as many as that before the end of September. In addition, HMRC resource has rightly been focused on dealing with the Covid crisis and are more stretched than ever. Every individual engaged in the settlement process has the right to have their settlement fully and properly conducted before being hit by the Loan Charge. It is clear that there is very little chance of HMRC completing all settlements before the end of September, meaning a delay is essential.
As well as having the support of the Loan Charge APPG, this proposal for a genuine, fair and affordable settlement and a six-month delay to allow settlements to be concluded are supported by the Loan Charge Action Group and by tax advisers and lawyers who have been advising the APPG.
Commenting, the Loan Charge APPG Co-Chairs said:
Sir Mike Penning MP, Co-Chair of the Loan Charge APPG (Conservative):
“The unjust Loan Charge is now looming for thousands of families who never broke the law and who are being asked to pay sums that are unfair and unaffordable. The Loan Charge APPG still opposes the retrospective nature of the Loan Charge and believes that all taxpayers should have the right to access the legal process, but there also needs to be a conclusion to this whole issue to allow people to get on with their lives.
So we urge the Government and HMRC to do the right thing and to announce a delay and genuine fair settlement opportunity to allow many people to settle under fair and affordable terms”.
Sir Ed Davey MP, Co-Chair of the Loan Charge APPG (Liberal Democrat):
“With this Government determined to press ahead with the unfair Loan Charge, our cross-party group has decided to look for a new arrangement, that makes sense for everyone involved.
HMRC’s current settlement terms are simply unpayable for most people so produces no money for the Exchequer and only prolongs misery for the taxpayer.
There needs to be a sensible and fair settlement opportunity that recognises the reality that in many cases it was the promoters of the scheme who benefitted the most, so it is unfair to demand all the disputed tax from a scheme’s user.
If HMRC offered taxpayers lower and affordable settlements, then HMRC should pursue other losses from the promoters: this is what is needed for a fair and final resolution to the whole issue of the Loan Charge, avoiding many bankruptcies and making it far less likely that any more people will take their own lives as a result of the Loan Charge liability.”
Ruth Cadbury MP, Co-Chair of the Loan Charge APPG (Labour):
“The Loan Charge Scandal is not going to go away as a political issue or as a serious mental health crisis for thousands of individuals and without a fair and affordable settlement opportunity. It is clear that many people simply will not pay the Loan Charge and many cannot do so. Doing nothing will mean individuals are at risk of bankruptcy, homelessness, breakdown and suicide.
So we implore the Government and HMRC to do the right thing but also the sensible thing and to announce a 6 month period for a fair, affordable settlement opportunity and we hope they will listen.”
Notes to Editors
- The All-Party Parliamentary Loan Charge Group (Loan Charge APPG) consists of parliamentarians of all parties from both Houses of Parliament who have concerns about the nature and impact of the ‘2019 Loan Charge’ and also concerns about the wider context of fairness of tax legislation and HMRC’s conduct in enforcing it. See loanchargeappg.co.uk and Twitter @LoanChargeAPPG. The Loan Charge APPG is an officially registered Parliamentary Group, as described on the UK Parliament website www.parliament.uk/about/mps-and-lords/members/apg/.
- The Officers of the Loan Charge APPG are as follows:
- Rt Hon. Sir Ed Davey MP, Co-Chair, MP for Kingston and Surbiton (Liberal Democrat)
- Ruth Cadbury MP, Co-Chair, MP for Brentford and Isleworth (Labour)
- Sir Mike Penning MP, Co-Chair, MP for Hemel Hempstead (Conservative)
- Hon. Baroness Kramer, Vice-Chair (Liberal Democrat)
- Rt Hon Sammy Wilson MP, MP for East Antrim, Vice-Chair (DUP)
- The APPG’s Loan Charge Inquiry Report was published in April 2019 and can be found on the Loan Charge APPG’s website https://www.loanchargeappg.co.uk/wp-content/uploads/2019/05/Loan-Charge-Inquiry-Report-April-2019-FINAL.pdf