MPs accuse HMRC of being 'consistently misleading' on loan charge
All-party group demands perm sec Jon Thompson clarifies key questions on controversial remedy to tax-avoidance measure
APPG chair Ed Davey. Photo: PA
HM Revenue and Customs permanent secretary Sir Jon Thompson has been hit with a new list of demands by MPs battling the government’s controversial loan charge, which aims to recoup billions of pounds in so-called disguised remuneration lost to the Treasury over the past two decades.
The All Party Parliamentary Loan Charge Group has previously accused the tax agency of playing down reports of people taking their own lives because of the financial predicament they face because they are now being asked to repay thousands in tax they avoided through disguised remuneration schemes years ago.
This week, the APPG called on Thompson to answer a list of questions on HMRC and the Treasury’s previous assertions on the loan charge – which the government expects to bring in £3.2bn from employers and former contractors who have used disguised remuneration schemes since 1999. Around 50,000 people are thought to have made use of arrangements where their pay was received as a loan that was never intended to be repaid, in order to avoid paying income tax and national insurance.
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In a letter to Thompson signed by APPG chair Sir Ed Davey, and deputy chairs Ruth Cadbury and Ross Thomson, the MPs accused HMRC and the Treasury of “consistently issuing misleading information” on the loan charge, and of giving “partial and misleading” answers to written parliamentary questions.
The group asked HMRC 15 questions about its loan charge statements, including the convictions it has so secured so far in relation to payroll-loan arrangements; the legal precedent for the loan charge; and its statements about typical liabilities of those affected by the charge. It also questioned the department’s assertion that 75% of the anticipated £3.2bn in loan charge income will come from employers.
Davey, a Liberal Democrat who was energy secretary for the coalition government, also reprimanded HMRC and the Treasury for declining to attend an APPG evidence session last month at which the questions could have been answered.
“Parliamentarians need straight answers from ministers and civil servants in order to perform our role of oversight,” he 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.”
Yesterday, HMRC director general for customer strategy and tax design Ruth Stainer wrote to Davey in response to a March query seeking a response from the Treasury to loan-charge case studies the APPG provided to the department.
Stainer said the department felt unable to comment on the submissions, despite Davey having said the individuals involved had given their consent for their case studies to be shared.
“HMRC has carefully reviewed your letter and submissions provided,” she said.
“These did not include the permissions that would be needed for us to correspond further with the APPG about the individual cases.”
The loan charge was announced at Budget 2016 and was introduced in the 2017 Finance Act. It applies to loans made since 6 April 1999 if they are still outstanding on 5 April this year.
A government spokesperson said: “Like all civil servants, HMRC and HMT are bound by the Civil Service Code which demands that we uphold the highest possible standards of integrity, honesty, objectivity and impartiality. We are confident that we have done that.
“Disguised remuneration schemes are contrived arrangements that pay ‘loans’ in place of ordinary remuneration, usually via an offshore trust. The loans are provided with no expectation that they will ever be repaid with the sole purpose of avoiding income tax and national insurance contributions – this is not normal or reasonable. We therefore have to consider this as normal income and liable for taxation.
“We have never said that our action against promoters was DR or loan charge related. We have been asked what action we have taken against promoters of tax avoidance schemes and have answered that question consistently.”
This story was updated at 17:30 on 3 April 2019 to include a response from HMRC and the Treasury.
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