Over 100 MPs have signed an open letter to the Prime Minister and Chancellor urging a ‘fair resolution’ to the ‘Loan Charge debacle’ as HMRC’s own staff call it, following damning revelations from Freedom of Information requests.
The information revealed by FOI has exposed three significant and serious things, that deepens the controversy around what has become known as the ‘Loan Charge Scandal’ and that further strengthens the case for the Government to change course, to avoid many bankruptcies and risking further suicides.
- That HMRC tried and failed to find legal precedent for them being permitted to pursue individuals, rather than employers
- It was HMRC who came up with the idea of the Loan Charge, not the Treasury
- Even HMRC realise that the Loan Charge is a “debacle”
In an internal email, HMRC’s CEO Jim Harra admitted that there was no legal basis for the loan charge. This undermines the claim that that the Loan Charge is based on the outcome of legal cases. The reality is that the Supreme Court judgment in the Glasgow Rangers’ case in 2017, often wrongly cited as legal precedent for the Loan Charge, deemed employers to be liable for any tax deemed to be avoided and did not give HMRC the right to directly pursue individuals.
Also, as has long been suspected, it HMRC, not the Treasury, who came up with the idea of the loan charge. HMRC, who had at that stage lost several related court cases and were out of time to pursue many taxpayers, proposed the Loan Charge to Treasury ministers in September 2015. The Loan Charge was then introduced on the back of a seriously inadequate impact assessment, which failed to predict the inevitable disastrous impact for many people and families. This suggests that HMRC misled the Treasury over the whole policy, its legal basis and the reality of the impact it would have, none of which was understood when it was taken through Parliament.
The letter calls on the Prime Minister and the Chancellor, in the light of these revelations, to come up with a fair resolution to the whole issue, that avoids the many bankruptcies that will otherwise follow. The letter also urges the Government to now accept that the vast majority of people facing the Loan Charge are clearly victims of mis-selling and that there needs therefore be a different approach, that reflects this.
The need for intervention from the top of Government is critically important, with HMRC expected to demand payment this year. If enforced, the Loan Charge will inevitably lead to thousands of bankruptcies, which in many cases will prevent those affected from working again or paying any taxes. Seven people facing the loan charge are confirmed to have committed suicide.