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A cross-party group of MPs has described HM Revenue & Customs’ (HMRC) reporting of its loan charge enforcement activities as unfair, irresponsible and dangerous, in a response letter to the tax collection agency’s CEO, Jim Harra.
The letter, seen by Computer Weekly, is signed by the three co-chairs of the Loan Charge All Party Parliamentary Group (APPG), and expands on criticisms levelled at the tax collection agency on social media for how it opted to report on a series of “loan charge fraud” arrests it made last week.
As previously reported by Computer Weekly, five individuals were arrested by HMRC for fraud on 27 February 2020, in connection with operating schemes designed to side-step the government’s controversial loan charge policy.
The Loan Charge APPG responded to the news by picking holes in HMRC’s press release on social media about the arrests, and accusing the organisation of “deliberately misleading” the public that it had apprehended individuals involved in the promotion of loan schemes, which is not the case at all.
“In reality, there have so far been no arrests, prosecutions, or convictions of anyone or any company that promoted loan schemes now subject to the loan charge,” the Loan Charge APPG letter states.
“The reality remains that those who promoted, sold and recommended loan schemes now subject to the loan charge have not been asked to pay a penny for doing so; whereas those they promoted, sold and recommended the schemes to are facing huge, and in many cases, life-ruining bills.”
The aforementioned bills have been issued to thousands of IT contractors, following the introduction of the government’s controversial loan charge policy in 2017.
The policy is specifically designed to enable HMRC to recoup employment-related taxes it claims people avoided paying by opting to be paid for work they do in the form of non-taxable loans, rather than a conventional salary, between 9 December 2010 and 5 April 2019.
The APPG letter also airs concerns about how the wording of the press release may exacerbate negative feelings among those facing loan charge-related tax bills, particularly when it comes to feeling unduly criminalised by their past involvement in loan remuneration schemes.
As the letter reiterates, loan schemes users have committed no criminal offences, as the schemes they joined were legal because they made use of legacy tax avoidance loopholes.
“The APPG has heard from the family of a man who committed suicide while facing the Loan Charge who wrote in his suicide note that he feared going to prison, and many others have reported that they feel criminalised by HMRC over the loan charge, where there is no question of any criminal offence,” the letter continues.
It also expands on its accusation that HMRC has treaded too fine a line in its release by making associations between the tax fraud arrests and the people who previously used loan schemes, as well as those who might find themselves targeted by promoters in future.
“The reality of the situation is that vulnerable people, having been recommended loan schemes, are now facing such scams where they are being asked to hand over even more money to get out of their loan charge liabilities, yet now HMRC in their language are deliberately linking the two and further increasing the sense of loan charge victims feeling criminalised. This is both unfair and irresponsible on the part of HMRC,” the letter states.
The APPG is also further claims this is not the first time HMRC has conflated the two groups when reporting on its loan charge enforcement activities, referring back to six similar arrests, across two criminal investigations, made in May 2019 relating to arrangements designed to side-step the loan charge.
“HMRC and the Treasury here too gave the misleading impression that this represented them cracking down on promoters of schemes subject to the loan charge, for promoting and selling such schemes, when it was nothing of the sort,” the letter states.
“It is not acceptable, and in our view is another example of the misinformation (and indeed deliberate disinformation) from HMRC over the loan charge.
“While the APPG welcomes any and all action against any illegal activity, we must demand that HMRC be clear in their future press releases that arrests are for fraud or tax evasion offences and not for promoting/selling loan schemes or for the usage of such schemes by people who took professional advice to use them.”
HMRC has previously gone on record to “strongly reject” the Loan Charge APPG’s accusations, with its CEO penning a letter of his own to the group, while its press office also published a fierce rebuttal of its own on social media site Twitter.
Computer Weekly contacted HMRC to see if it had any follow up comments to make in response to the Loan Charge APPG’s letter, and it said its previous comments still stand.
Read more about the loan charge
- Thousands of IT contractors are at risk of financial ruin as HMRC pursues them for tax it claims they owe on work they did up to two decades ago and were reimbursed for via loan remuneration schemes.
- The IT contractor community shares its verdict on the UK government’s plans to revamp its controversial loan charge policy, which has left thousands of people facing life-changing tax bills and financial ruin.
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