It’s been a long old week for the government in general but HMRC has shouldered its fair share of difficult questions to answer.

Spring Statement received some mixed reviews while a profound silence on the subject of IR35 and the loan charge from the Chancellor of the Exchequer was noted. HMRC released a Spotlight warning against schemes claiming to avoid the loan charge (shame they’re a couple of decades too late) and a House of Commons PAC took the opportunity to quiz Jim Harra on why HRMC seems so uninterested in the BBC historically railroading its contractors into PSCs.

Let’s take a look at a cross-section of HMRC’s Q&As over the last seven days.

How many promoters of loan charge schemes have been prosecuted?

Andrea Jenkyns, Conservative, Morley and Outwood, asks:

To ask the Chancellor of the Exchequer, how many promoters of loan schemes relating to the loan charge 2019 have been prosecuted.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:

This Government is committed to tackling avoidance in all its guises. HM Revenue and Customs (HMRC) has a suite of powers to tackle and challenge those who promote or otherwise enable tax avoidance and HMRC is using its powers to challenge major promoters of avoidance schemes, including disguised remuneration (DR) avoidance schemes. In recent years, HMRC has been investigating over 100 promoters and others involved in avoidance, including disguised remuneration arrangements.

In the last couple of years, HMRC has also taken litigation action against 6 scheme promoters for failure to disclose under the Disclosure of Tax Avoidance Schemes (DOTAS) regime, with others deciding to disclose to avoid litigation. Further cases will be litigated in the year ahead.

HMRC has used its powers under the Promoters of Tax Avoidance Schemes (POTAS) legislation to challenge promoters and made three successful complaints to the Advertising Standards Authority about misleading advertising; two of which relate to disguised remuneration schemes.

HMRC considers criminal investigation and referrals to prosecuting authorities where appropriate. Since the formation of HMRC’s Fraud Investigation Service on 1 April 2016, more than 20 individuals have been convicted for offences relating to arrangements which have been promoted and marketed as tax avoidance schemes, resulting in over 100 years custodial and more than 7 years suspended sentences being ordered overall. Additional matters are the subject of ongoing enquiries.

What does it actually mean?

Very vague in details, with no one named in particular. Also no explicit ‘yes’ – this is one that’s begging for an FOI request.

It would be nice to have a direct comparison between the amount of scheme providers ‘prosecuted’ (or even investigated) and contractors and freelancer that have actually been slapped with a bill.

Even after BBC chiefs actively admitted to cornering freelancers into PSCs, they seem to have faced no repercussion other than their own agreement to help any contractors struggling with loan charge and IR35 bills thanks to their instruction.

How will HMRC objectively work out loan charge bills?

Paul Farrelly, Labour, Newcastle-under-Lyme, asks:

To ask the Chancellor of the Exchequer, what steps he is taking to ensure that HMRC uses the rule of law rather than an opinion of fairness to determine what is payable for the loan charge.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:

Parliament has legislated the charge on Disguised Remuneration (DR) loans following the normal Parliamentary process.

DR schemes are contrived arrangements that pay loans in place of ordinary remuneration, with the sole purpose of avoiding income tax and National Insurance contributions. The loans are provided on terms that mean they are not repaid in practice, so they are no different to normal income and are, and always have been, taxable.

The charge on DR loans, legislated in Finance Act 2017, is a charge on DR loan balances outstanding at 5 April 2019. Its announcement at Budget 2016 provided scheme users with a three-year period to repay their DR loans, or to agree a settlement with HM Revenue and Customs (HMRC) before the charge takes effect.

HMRC’s role is to tackle avoidance and evasion, making sure people pay their fair share of tax and securing funding for our vital public services. Parliament has given HMRC the powers it needs to challenge businesses and individuals who do not pay their fair share, and it uses them responsibly and subject to appropriate checks and balances.

What does it actually mean?

If HMRC are using their ‘Parliament-given powers’ as a fallback for subjective, unregulated and unstandardized loan charge decisions, then it’s important to remember the House of Lords report that condemned HMRC’s long leash and strongly advised it be shortened.

The emotionless process that arrives at a loan charge bill takes into consideration revenue only; if a tax bill has the potential to decimate an entire family’s life, there needs to be some humanity in that decision.

Can we investigate into why HMRC denied any suicides being connected with the loan charge?

Ruth Cadbury, Labour, Brentford and Isleworth, asks:

The retrospective loan charge deadline is causing unbelievable stress to tens of thousands of people who thought that they were doing the right thing in respect of their tax affairs, some for up to 20 years. The all-party loan charge group has evidence that Her Majesty’s Revenue and Customs knows of up to six related suicides, yet yesterday, the chief executive of HMRC denied that. May we have an investigation into this and an urgent debate?

Andrea Leadsom, Lord President of the Council and Leader of the House of Commons, responds:

The hon. Lady is right to raise this issue. I also have constituents who have come to me with concerns about the loan charge and I am seeing the Minister responsible shortly to discuss it further with him. She will appreciate that the issue here is one of tax avoidance which HMRC has concluded was not legitimate tax avoidance. It is absolutely vital that we do everything we can to ensure that people are paying the right taxes in this country.

What does it actually mean?

While this isn’t an HMRC Q&A, and is instead an exchange from Business of the House, it’s important that the loan charge is being recognised across parties and agendas as a thing that desperately needs to be addressed. One can hope that with the weight of the LCAG APPG pushing change through, contractors might see an end to this retrospective nightmare.

Takeaways for the week

It’s good to see that the MPs questioning the legislation have not slowed, despite the big B just around the corner.

In regards to the lack of IR35 or loan charge mentions in the Spring Statement (they were mentioned in the Written Ministerial Statement), one can assume that there are some huge issues clouding the government’s vision at the moment - but sooner or later those problems will begin to disperse. You can be sure that their attention will turn back to scraping back the extra £2bn tax gap when that happens.

Leave a Reply

Sorry, you must be logged in to post a comment.