The High Court considered a judicial review where a taxpayer repaid loans which were due to be within the scope of the Loan Charge, and the repayment was complete before 5 April 2019.
The taxpayer had received loans from an Employee Benefit Trust between 2003 and 2005, and the in the run up to the loan charge policy was given two choices: repay the loans or face the loan charge.
However, the sting in the tale is that the goalposts of the Loan Charge policy were moved, and the repaid EBT subsequently fell outside the scope of the updated policy. This means that the repayment wasn’t actually necessary.
The taxpayer brought a case seeking to effectively undo the repayment and return his tax position to how it would have been prior to the erroneous repayment. HMRC argued that they could not ignore the tax consequences of such a transaction, and the Judge accepted their view.
In essence this means that the repayment cannot be undone, despite the fact that it is no longer applicable solely due to the government’s change of policy scope. So despite the moral justification for undoing the repayment, it cannot be achieved in practice.
This is fundamentally unfair given that HMRC have the ability, through the Loan Charge, for retrospective action against taxpayers. However, should taxpayers seek a similar retrospective action they are denied.
Thanks to Tom Wallace from WTT Consulting for highlighting the case via LinkedIn.