HM Revenue and Customs perm sec Jim Harra has accused MPs of attempting to misrepresent his department’s anti-fraud work after members of an all-party parliamentary group complained about a press release it issued.
Acting Liberal Democrat leader Sir Ed Davey was one of three signatories to a letter criticising HMRC for the way it presented information about five fraud arrests made “on suspicion of loan charge fraud”.
Davey is co-chair of the All-Party Parliamentary Loan Charge Group, which has campaigned against the hugely controversial loan charge, designed to recoup funds lost to the exchequer by so-called “disguised remuneration” schemes over the past two decades.
The APPG said it was “concerned and disappointed” that HMRC’s news release suggested it was about disguised renumeration and gave “the misleading impression” that those arrested had promoted schemes subject to the loan charge, which was not the case.
The group has said the prospect of huge loan charge bills to cover disguised remuneration over the best part of 20 years – but which only started to come due last year – had prompted several people to commit suicide.
Now Harra has responded to Davey insisting that the release neither said nor implied that users of disguised remuneration schemes had committed fraud.
“I strongly reject the Loan Charge All Party Parliamentary Group’s assertions that HMRC’s recent press release is misleading,” he said.
“The opening sentence of that press release states unequivocally that five people were arrested ‘on suspicion of fraud in connection with promoting arrangements designed to get around paying the loan charge’”.
Harra said that as both the APPG and Sir Amyas Morse’s recent independent loan charge review had urged the tax-collection agency to take action against those who promote schemes that claim to get around the loan charge, and the press release showed it was doing exactly that.
“I am disappointed that, instead of welcoming the action we have taken, the APPG has chosen to criticise us by misrepresenting what we have said,” he wrote to Davey.
“In view of the seriousness of the latest unfounded allegations that the APPG has made against HMRC, I assume you will want to bring this response to the attention of APPG members and will arrange for it to be published on the APPG’s website.”
The loan charge APPG said on Twitter that it stood by its allegations and that last week’s HMRC press release had been the second time the agency had “misrepresented arrests as being action against promotion of schemes now subject to the loan charge when they have not been”.
Disguised remuneration schemes were principally used by contractors and other professionals who opted to take payment for work in the form of loans that were never intended to be paid back as a way to avoid income tax and national insurance. Self-assessment tax reforms now ask whether use has been made of any disguised-remuneration schemes.
The loan charge was announced at Budget 2016 and introduced in the Finance Act (No 2) 2017. It applies to loans made since 6 April 1999 if they were still outstanding on 5 April 2019 and seeks to treat them as taxable income.
Sir Amyas Morse’s review into the loan charge was published in December and proposed halving the liability period, bringing it forward from 1999 to 2010.
As of March last year, HMRC said around £1bn of the £3.2bn the charge had been expected to bring in had already been collected, around 85% of it from employers rather than individual contractors and consultants who made use of the schemes.
Despite the publicity given to stories of hardship in relation to loan-charge liabilities, the government response to Morse’s review said there was still a thriving market in schemes that was a cause of concern.
It said that around 8,000 people were still using disguised remuneration schemes, 3,000 of whom were “new users”.