Loan charge review: former NAO chief condemns abuse of HMRC officials

Morse’s recommendation to cut ten years from controversial claw-back window accepted by the Treasury

Sir Amyas Morse Credit: CSW

By Jim.Dunton

23 Dec 2019

HM Treasury is introducing a range of changes to its hugely controversial loan charge after a review by former National Audit Office head Sir Amyas Morse that raised “serious questions” about how proportionate it is.

The principal change to the charge, originally aimed at clawing back £3.2bn in income tax and national insurance contributions lost through the use of so-called disguised remuneration tax-avoidance schemes, effectively halves the liability period set out by the government.

Under the current rules, the loan charge applies to disguised remuneration payments made in the form of loans never expeted to be repaid, dating back to 1999. Morse’s change brings the start-date for liability forward to 2010 – when he says “the law became clear” on disguised remuneration. 


Other changes recommended by the review and accepted by the government include a range of post-2010 exemptions for individuals declared their disguised remuneration liability but who were not investigated by HMRC, and multi-year repayment options for others.

The government said it would also invest in a new HMRC team to collect tax from those who used tax-avoidance schemes before 2010.

Morse, whose term at the helm of the public finance watchdog ended earlier this year, said he had expected the inquiry to unearth strong views because of the charge’s controversial impact on tens of thousands of people who were liable.

Protest group the Loan Charge Action Group has said it is aware of seven people taking their own lives because of the charge’s impact.

Morse said there had been a need for new policy on tax avoidance in 2016, but the loan charge had raised unique questions of proportionality and fairness.

“If asked ‘was some form of policy like the loan charge necessary and in the public interest?’ I would say ‘yes’,” Morse said.

“It is clear that most people would agree that everyone should pay their fair share of tax.

“However, the evidence provided to the review prompts serious questions about how proportionate the loan charge was in terms of its design and effect on individuals.”

Morse said the design of the loan charge had been described to him by legal and expert advisers – and the vast majority of contributors – as being “highly unusual”.

“Unusual is not always wrong. But it does need to be justified,” he said.

“In my view, elements of the loan charge go too far in undermining or overriding taxpayer protections. My recommendations are designed to bring it back in line.”

Personal targeting of officials revealed

Morse said he had been disconcerted by the level of abuse directed at civil servants working for HMRC that the inquiry had exposed.

“I received evidence of personal targeting of individual tax officials, naming and abusing them, and publishing pictures of their homes and other details,” he said.

“I strongly disapprove of and condemn this type of activity and call on the Loan Charge Action Group and others to do the same.”

The loan charge was announced at Budget 2016 and was 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.

As of March this 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”.

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