An FOI response has exposed the bombshell fact that HMRC did a secret settlement deal with multinational companies allowing them to settle the use of payroll loan schemes for just 15% – giving them a huge 85% discount – whilst at the same time persuading the Treasury to introduce the draconian Loan Charge to allow them to issue retrospective max-tax bills to contractors, freelance workers and small company directors mis-sold the same arrangements, a strategy that has caused ten suicides.
The FOI response has revealed minutes of a meeting during the 2019 Morse Review between Sir Amyas Morse, the then reviewer and Ray McCann, who is conducting the current review into settlement terms. The minutes report Ray McCann as stating:
“The earlier settlement opportunity that had been open to large companies had included significant discounts, so that eventually the companies settled for somewhere in the region of 15% in 2015…”
This was only one year before the Loan Charge was introduced to Parliament In the 2016 Budget, which means that at the same time as doing this sweetheart deal with multi-million pound companies, they were coming up with a law to retrospectively hit individual workers with huge bills, despite the fact that some of the tax HMRC is demanding should itself been collected by HMRC from agencies and employers too, under the agency rules. HMRC failed to do this, hence conceiving of a retrospective law to allow them to issue demands regardless of their own failures.
The extraordinary deal was revealed by Greg Smith MP, Co-Chair of the Loan Charge and Taxpayer Fairness All Party Parliamentary Group in Treasury Questions on Tuesday 1st July. Greg Smith said:
“A recent freedom of information request has revealed that, for a number of schemes, HMRC has settled with large corporations for just 15% of what was owed. With the loan charge review ongoing, does the Chancellor agree with me that individuals should be treated no differently from the large corporations for which this precedent has been set?”
An Early Day Motion has now also been tabled by APPG member, Angus Macdonald MP. EDM 1579 on ‘Loan Charge and settlement terms offered to large companies and individuals’ expresses astonishment at the 15% deal and the fact Parliament has never been told about it – and calls for the same terms for individuals affected by the Loan Charge as those offered to multi-million pound companies.
The meeting notes also has Ray McCann stating that contractors have been offered no such terms and no discounts – and are the only group that have not. The minutes state:
“The contractors weren’t offered these terms.”
“Settlement opportunities have always had a discount, and contractor one is the only one that didn’t. Even ingenious who are battling away with HMRC still had a 25% discount offered”.
In the minutes Ray McCann makes clear that he regards this as discriminatory:
“RM thinks that contractor arrangements discriminate against contractors for reasons that aren’t apparent”.
The revelation about the secret ‘sweetheart’ deal with large companies comes at the same time Ray McCann is concluding his review into settlement terms for individuals, yet despite knowing about the 15% settlement figure, there has been no mention of this by him or by the Treasury. MPs from the Loan Charge and Taxpayer Fairness APPG are now demanding that individuals must be offered the same discounts as large companies and indeed that they should be asked to pay less, because the Treasury Ministers have acknowledged that they are victims of mis-selling.
The APPG has written to the Chancellor and also to Ray McCann, saying that these individuals – cannot now be asked to pay more than multi-million pound companies.
The Chancellor said in January last year: “HMRC seem to be coming after the people who were mis-sold these products rather than the people who were mis-selling them, and that is a real scandal”. Exchequer Secretary James Murray has similarly said in 2021, “The [previous] Government should be going after the promoters who were driving people towards these schemes. There is a strong feeling that the promoters are getting away with it while people in everyday jobs are victims of mis-selling”.[1] Chief Secretary to the Treasury Darren Jones MP last year also stated: “It can’t be right that HMRC are pursuing victims of mis-selling so aggressively but not those who misled victims.”[2]
Yet despite this, the current Government commissioned a very restricted review into individual settlement terms, conducted by a former Assistant Director of HMRC, which leaves the Loan Charge in place and thus only pursues the individuals affected and does nothing about the role of promoters, umbrella companies and accountants who were responsible for the mis-selling of schemes now subject to the Loan Charge. Now that it has been revealed that HMRC offered settlement terms of 15%, individuals must also be offered the same terms, regardless of what Ray McCann – who knew about the corporate deal all along – concludes in his report.
If HMRC had offered all contractors 15% and fair payment terms (and of course ideally pursued the agencies/employers where possible, as HMRC failed in its duty to collect tax due from them at the time) then there would have been no need for the retrospective draconian Loan Charge at all, no Loan Charge Scandal and none of the huge costs HMRC has incurred in both administering the 50,000 plus cases and dealing with all the scrutiny and coverage. There would also not have been any suicides and there needs to be a proper investigation, including whether HMRC’s ruthless and discriminatory targeting of individuals could constitute corporate manslaughter.
The Freedom of Information response also reveals that Ray McCann is well aware of HMRC disinformation regarding the Loan Charge, something that LCAG and the Loan Charge and Taxpayer Fairness APPG has consistently raised. Ray McCann is recorded as saying, with regard to the then Permanent Secretary and Chief Executive of HMRC, Sir Jon Thompson:
“last year’s statement – you could say it was lies. Jon Thompson said that HMRC had won case after case, and it wasn’t wrong but it wasn’t right either. HMRC had one on corporate tax deductions, but they lost on PAYE. No case on record where they’ve won a loan scheme”.
The Loan Charge and Taxpayer Fairness APPG has asked that the Chancellor investigate this statement and well as making clear that there needs to be a independent inquiry into the whole Loan Charge Scandal.
Steve Packham from the Loan Charge Action Group said:
“Ten people have killed themselves as a direct result of HMRC’s ruthless persecution of people who the Chancellor herself has described as “victims of mis-selling”. Yet we now know that just a year before the Loan Charge was introduced to Parliament, HMRC agreed a deal with large companies letting them pay just 15% of what they said they owed.
“The contrast with HMRC’s treatment of contractors is stark, ruthlessly refusing to offer any meaningful discounts and imposing penalties and interest, meaning some people have been hit with bills that were even more than they even earned at the time. As Ray McCann told Sir Amyas Morse, contractors are the only group that have not been offered any discounts and that this is discrimination by HMRC.
“If HMRC had offered all contractors 15% and fair payment terms and of course also pursued the agencies/employers for tax that HMRC should have collected from them at the time) then there would have been no need for the retrospective draconian Loan Charge, no Loan Charge Scandal and none of the huge costs HMRC has incurred in both administering the 50,000 plus cases and dealing with all the scrutiny and negative publicity.
“There would also have been no suicides and there must now be a proper investigation into the deliberate discrimination and persecution of those now facing the Loan Charge, including the possibility of corporate manslaughter charges as well as of potential charges for malfeasance in public office for the clear dishonesty associated with the official presentation of the whole issue and the deliberate and unfair demonization of victims of mis-selling and reckless professional advice”.
Greg Smith MP, Co-Chair of the Loan and Taxpayer Fairness APPG said:
“It’s absolutely staggering to discover that just a year before the Loan Charge was introduced to Parliament, that HMRC agreed a deal allowing large companies to settle for just 15% of what HMRC said they owed, for use of similar arrangements.
“The Treasury has known all along that large companies were allowed to settle for just 15%, representing an 85% discount, yet then wasted yet more taxpayers’ money calling for a review of settlement terms when clearly the maximum HMRC should be asking from individuals is also 15%. Considering that Ministers have acknowledged that people facing the Loan Charge are victims of mis-selling, then it would be outrageous to ask them to pay more than large companies, who unlike the victims of mis-selling, did know what they were getting into.
“Regardless of what Ray McCann recommends in his report on settlement terms, all those facing the Loan Charge and those pushed to settle to avoid it must all be offered no more than 15% as full and final settlement. Anything else would be unfair and represent different treatment of taxpayers which is a breach of HMRC’s duty to treat taxpayers fairly and not to discriminate between them.
“There also must now be an independent inquiry into the whole Loan Charge Scandal including this secret deal and why Parliament was not informed about it, as well the extent of HMRC’s dishonesty, with Ray McCann himself referring to one of their statements by saying “you could say it was lies”. “
Sarah Olney MP, Vice Chair of the Loan Charge and Taxpayer Fairness APPG:
“This revelation exposes how wrong it is that Ministers are continuing to refuse to hold a ‘truly independent review,’ which they promised to victims of the Loan Charge. It is particularly worrying that the FOI seems to suggest that Ray McCann himself seems to have known about this secret settlement deal and yet there has been no mention of it by him or Ministers.
“It is unacceptable that victims have been consistently refused the justice they deserve while large companies received settlements a decade ago.
“This information shows the need for a proper, independent inquiry that looks at the whole Loan Charge Scandal”.
ENDS
[1] Yorkshire Post, interview with Greg Wright, 8th December 2021.
[2] Twitter/X, 18th January 2024.