2019 Loan Charge update – this week’s developments in full
A busy week for 2019 Loan Charge developments kicked off with a Sunday Times investigation revealing that several Ryanair pilots supplied through agencies had used disguised remuneration schemes and are now facing tax bills of up to £170,000 under the Loan Charge. The pilots report that the resulting severe stress levels are in some cases affecting their ability to concentrate at work.
The Financial Times reported on Monday that HMRC had revealed to them the approximate tax yield that the Loan Charge is expected to recover from individuals: some £800 million. The total amount of tax expected to be recovered is £3.2 billion, with the remainder being owed to HMRC by employers, rather than individual taxpayers.
Wednesday saw the publication of a damning letter from leading tax barrister Keith Gordon of Temple Tax Chambers, who has thus far been one of the Loan Charge’s most vocal critics, to the Financial Secretary to the Treasury, Mel Stride MP. The letter, dated 22nd January, claims that HMRC has misled HM Treasury and urges the Minister and his Chancellor to consult with industry professional bodies such as the Chartered Institute of Taxation (CIOT) and the chartered accountancy institutes whilst conducting the Loan Charge review recently requested by Parliament.
The letter cites various occasions where ministers have erroneously claimed that disguised remuneration arrangements were illegal and/or tax evasion as “suggesting that the author … was hoping to justify the unjustifiable by using the emotive language of implied criminality”, HMRC’s reticence to confirm to Parliamentary Committees whether it has ever hired and paid contractors who were using DR schemes, and the failure of HMRC to launch enquiries into tax returns filed where the usage of DR schemes was clearly declared under the Disclosure of Tax Avoidance Schemes (DOTAS) regime.
The letter quotes the very HMRC inspector who introduced DOTAS responding to the Treasury Sub-Committee: “I find it quite irritating that HMRC seems on a number of occasions … not to have opened inquiries even when there has been a DOTAS number on the return. I feel a touch of personal embarrassment, in the sense that I put quite a lot of effort during 2004 and 2005 into emphasising that if you put a DOTAS number on your tax return, it was certain to get an HMRC inquiry. That is slightly personally disappointing.”
Mr Gordon later warns the Treasury not to trust HMRC: “it is my view (as unpalatable as it sounds) that no-one (taxpayer, minister, judge, journalist or indeed anyone else) can safely rely on the veracity or accuracy of any statement uttered by HMRC on the mere basis that the statement is being made by a public servant”, later making the assertion that “HMRC themselves cannot and should not be trusted, particularly on this topic”.
The 2019 Loan Charge All-Party Parliamentary Group (APPG) has commenced its enquiry and has been active on Twitter updating the public as to their progress. This week they have reported that:
- HMRC’s own contractors were indeed using loan schemes, some of whom disclosed the fact to HMRC via DOTAS and yet were continued to be paid by HMRC without any enquiry into their tax affairs – and HMRC has subsequently sought to cover up the fact
- HMRC are pursuing individuals who have no open tax years and who disclosed scheme use through DOTAS – the APPG say “if [HMRC] failed to challenge returns, they have no right to demand tax back now”
- Questions are being asked about HMRC’s counter-avoidance team director Mary Aiston’s recent statement to the Treasury committee that implied taxpayers with equity in their homes may need to remortgage to settle Loan Charge debts, after a report from an affected individual that his lender would not accept paying HMRC tax debt as a valid justification for extending their credit
It’s been another week rammed full of 2019 Loan Charge developments, as pressure and evidence against the controversial law continues to mount. The Treasury review is due at the end of March.
22nd February 2019.