Loan charge: A fair resolution is neededby
Twelve senior tax experts have asked the Chancellor to consider a new settlement opportunity for taxpayers facing the loan charge, and those who have already settled with HMRC.
Sarah Gabbai, a corporate tax lawyer at McDermott Will & Emery, has co-ordinated a proposal for a new settlement opportunity.
I spoke to the solicitor and CIOT member about the loan charge, HMRC’s failures and how the proposal will give taxpayers finality and closure.
Why have you decided to make this proposal at this time?
The current situation is patently unjust. Loan scheme users, through no fault of their own, are being asked to pay HMRC amounts that many simply cannot pay, or can only pay by selling their home, re-mortgaging, or raiding their pension. In some cases, the taxpayer has no choice but to declare themselves bankrupt.
This has resulted in serious financial hardship, often with devastating consequences for affected taxpayers’ lives and livelihoods. Sadly, this has led to a number of suicides, and there are frequent reports of others who are suicidal.
We believe that fair and final resolution would acknowledge that the whole situation was a mess and fault should not be attributed – nor tax bills charged - only to those who used these loan schemes and in good faith, principally because they were mis-sold the scheme, or had little choice but to use it.
What evidence is there that loans schemes were mis-sold to taxpayers?
The widespread nature of the mis-selling is evidenced by an APPG survey reported in May 2021, which demonstrated that scheme promoters either made claims along the lines of ‘tax law compliant’ ‘QC approved’ that turned out to be hollow or false, or otherwise failed to mention or adequately draw the taxpayer’s attention to the potential risk of challenge by HMRC.
What should HMRC have done in the past to prevent the loans schemes from being implemented, and if they were implemented, to collect the tax due?
HMRC has failed to protect both the Exchequer and taxpayers from loan scheme promoters and operators by not taking action to:
- collect PAYE from employers (or deemed employers) on the amounts of the loans, specifically under the agency provisions of ITEPA 2003 s 44;
- address the taxpayer’s use of the scheme when it had the opportunity to do so pre-Loan Charge, and within the applicable statutory time limits; or
- adequately warn people not to use the loan schemes at a time when such a warning was needed, rather than after the fact.
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