Loan Charge: FOI Suggests No Legal Basis for HMRC’s Policy

A freedom of information (FOI) request has revealed and email in which HMRC’s CEO, Jim Harra, queries the legal basis of the controversial loan charge policy.  The email acknowledges HMRC’s position that these arrangements do not work but “in recent months I have repeatedly tried to obtain legal analysis to understand the strength of our claim with very little success”

In other words, the email shows that senior HMRC personnel with legal advice were finding it difficult to reach the conclusion that disguised remuneration arrangements don’t work.  It seems incredulous that the email was sent on 31 January 2019, almost two years after the loan charge was introduced in the Finance Bill 2017.  This means that the policy was deliberately implemented without sufficient legal backing as to HMRC’s often stated view that “the rule was always clear”.

HMRC doggedly stick to their stated position, and indeed when questioned by Ruth Cadbury MP on Tuesday last week, Jesse Norman MP, the Financial Secretary to the Treasury, repeated the rhetoric everyone would have known that these arrangements did not work.

The more that comes to light in relation to the Loan Charge, the more fundamentally wrong and immoral the policy is.  The simple fact is that HMRC failed to take the right action at the right time to ensure that they received the tax that they felt was due to them, so they invented a brand new policy to retrospectively receive the tax that they previously missed.

People are being unfairly and retrospectively taxed on the assumption that they should have known something was wrong, notwithstanding the fact that HMRC themselves are unclear on this very point.  The fact that this policy has resulted in severe financial and mental distress, and very sadly some suicides, is unforgiveable.  To have caused this without obtaining sufficient legal advice is abhorrent.

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