LCAG Media Release 19th February 2019
HMRC have been caught out issuing a deliberately misleading statement about the 2019 Loan Charge to journalists. The misleading statement was issued following increasing coverage of the controversial Loan Charge that overrides basic taxpayer protections and the rule of law, allowing HMRC to go back as far back as 20 years, claiming tax that legally was not due at the time.
In the latest coverage, in this case in the Guardian on Saturday 16th February, HMRC have again been challenged about whether they are pursuing promoters of the schemes subject to the Loan Charge.
Yet when challenged about this by journalists, an unnamed ‘HMRC spokesperson’ has said “Since the formation of HMRC’s fraud investigation service on 1 April 2016, more than 15 individuals have been convicted for offences relating to arrangements which have been promoted and marketed as tax avoidance schemes and sentenced to over 95 years custodial.”
Yet it turns out that NONE of these cases were about promoters promoting loan-based arrangements, meaning that HMRC have deliberately and cynically misled journalists, in an attempt to justify their increasingly aggressive behaviour – and to cover up years of inaction, having failed to challenge these arrangements at the time.
Moreover, a prominent loan solution provider (AML) has recently confirmed in a separate article in the national press that HMRC has not approached them for any form of tax payment and are not facing any action from HMRC.
So far HMRC have failed to provide any evidence that they have done so in any meaningful way, other than reporting three adverts to the Advertising Standards Authority using powers under the Promoters of Tax Avoidance Schemes (POTAS) regime and taking litigation action against five scheme promoters for failure to disclose under the Disclosure of Tax Avoidance Schemes (DOTAS) regime. HMRC say that they are investigating over 100 promoters and others involved in promotion of tax avoidance, but they have only successfully litigated against one of them for non-disclosure whilst the decisions in the other four litigation actions remain outstanding.
The Loan Charge breaks normal legal convention and allows HMRC to go back twenty years, demanding huge tax bills for arrangements that were legal and declared to them at the time. Thousands of freelance workers face bankruptcy, anxiety and stress due to the Loan Charge. The victims – who include social workers, teachers, doctors, nurses, oil and gas workers as well as IT contractors – simply followed professional advice and submitted their tax returns every year, with HMRC never challenging them in a timely manner. Yet now they face life-destroying tax bills they cannot pay, with the right to appeal removed from them.
To try to justify the Loan Charge, having got it through without any meaningful Parliamentary scrutiny, HMRC and the Treasury have been waging a cynical campaign of misinformation to justify the controversial Loan Charge and to cover the years of HMRC inaction that the Loan Charge has been devised to replace.
The Chancellor was forced to correct a false statement to the Treasury Select Committee that the arrangements involved were tax evasion. They were not evasion and were legal at the time. HMRC and the Treasury have claimed that the loan payments were “always income” and always taxable, when this is simply not true. They also continue to misrepresent the Rangers case by suggesting that this case, and others, gives the basis for the Loan Charge. This is utterly false, as that case determined that loans were loans and not taxable – it was the payments from Rangers to the Employment Benefit Trust (EBT) that were taxable and employers, not employees, were liable.
On the 8th January, the Government was forced to concede to a cross-party amendment to the Finance Bill regarding the Loan Charge because it was clear they would lose a vote if they continued to oppose it. Sir Ed Davey’s successful amendment called for the Government to conduct a review of the policy and to do so before the end of March. However, it is already clear that the Government is refusing to conduct a genuine review and is set to proceed with the Loan Charge and accept the inevitable bankruptcies it will cause. The Loan Charge All Party Parliamentary Group has been formed to bring together MPs and peers from all parties, to seek proper scrutiny of the Loan Charge.
Opposition to the retrospective Loan Charge has already attracted widespread political support. A total of 122 cross-party MPs, including prominent Conservative and DUP MPs, have signed an Early Day Motion calling on the Government to ‘revise the legislation to avoid significant damage to independent contractors and freelancers in the UK’. HMRC’s unfair and aggressive pursuit of the retrospective Loan Charge tax has also been condemned in a powerful report published by the House of Lords Economic Affairs Committee on 4th December 2018, which said there is “disturbing evidence” and “reports of increasingly aggressive behaviour towards taxpayers”. The report calls on the Government to reform the Loan Charge, which the Lords Committee declared is “clearly retrospective” and “undermines basic principles of tax fairness and certainty.”
Steve Packham, Spokesperson for LCAG said:
“In increasingly desperate attempts to justify the Loan Charge, HMRC have now been exposed as issuing what is so clearly a deliberately misleading statement to journalists.
“The truth, as they know full well, is that no promoters of payroll loan arrangements have been prosecuted for promoting these arrangements. This is because they can’t be, because these arrangements were legal at the time. Yet they continue to try to pull the wool over the eyes of journalists, MPs and the public whilst aggressively pursuing ordinary taxpayers who merely followed professional advice”.
“We believe this is now a matter of serious misconduct on the part of HMRC, who appear to be out of control and they need to be held to account. Thankfully journalists and MPs are seeing through the cynical and misleading statements, but HMRC has gone so far beyond what is acceptable and those responsible must have breached the Civil Service Code, so this must be investigated and appropriate action taken”.
Notes to Editors
Media Contact: Mark Sebright – email@example.com / 07988 680796
1. About the Loan Charge Action Group: The Loan Charge Action Group seeks to raise awareness and reform of the retrospective IR35 tax charge introduced by HM Treasury in the 2017 Budget and build a community where affected individuals can find information and support. The Group does not provide any form of chargeable service or professional advice. Visit hmrcloancharge.info
2. LCAG members’ survey: In summer 2018, LCAG surveyed 500 of its members about the impact of the Loan Charge and the following were the responses as to how it was affecting people:
|Depression / Anxiety / Mental health impact:||68%|
|Loss of residence / home:||49%|
|Divorce / Relationship breakdown:||31%|
|Loss of career:||30%|
|Suicidal thoughts / self-harm:||39%|
3. House of Commons Early Day Motion 1239: That this House expresses its concern at the 2019 Loan Charge; notes that it is retrospective applying back to 1999; further notes that as a result of the introduction of IR35, umbrella companies were set up and recommended by professional advisers and employment agencies; recognises that the Charge will affect contractors, freelancers and agency workers, including social workers, supply teachers and bank and locum nurses and doctors; notes that employment was not an option and in some cases the company or organisation insisted on those arrangements, including to avoid paying National Insurance; notes that these individuals did not receive sick or holiday pay; believes it is unfair that HM Revenue and Customs (HMRC) are pursuing people who acted in good faith rather than the client organisations, agencies or umbrella companies all of whom benefited significantly; notes that HMRC are aggressively pursuing individuals through Advanced Payment Notices with no independent right of appeal; further believes that the Charge is likely to cause financial distress and bankruptcies, impeding HMRC’s ability to recover these tax liabilities and causing a devastating impact on people; believes that retrospectively taxing something that was technically allowed at the time, is unfair; calls on the Government to revise the legislation to avoid significant damage to independent contractors and freelancers in the UK; and calls for the Charge to apply only to disguised remuneration loans entered into after the Finance Act 2017 received Royal Assent. For full register of MPs supporting Parliamentary motion see https://www.parliament.uk/edm/2017-19/1239
4. Suicide Risk: – HMRC and HMT are aware of the suicide risk being created by the Loan Charge (as reported in the Evening Standard https://www.standard.co.uk/business/suicide-watch-the-preventable-tax-timebomb-looming-for-freelancers-a3861916.html, yet so far have refused to set up a 24 hour helpline for people needing urgent counselling, see https://www.hmrcloancharge.info/news/hmrc_please_be_suicidal_during_office_hours/ .