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Loan charge in limbo as Prime Minister announces review

Boris Johnson has announced a review into the government’s controversial loan charge following sustained pressure from campaigners, MPs and the House of Lords.

5th Sep 2019
Editor AccountingWEB
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While the news was welcomed by campaigners, details of the review are scant leaving an estimated 50,000 users of loan-based avoidance schemes in the dark. Meanwhile, a leading tax expert has branded the saga “a salutary lesson on how not to enact new tax legislation”.

In a short statement at the dispatch box yesterday, the embattled Prime Minister told the House that the loan charge was something his own constituents had raised and was a “very difficult issue”. Johnson then declared that he would undertake a “thoroughgoing review of the matter”.

As with much of Parliament’s business of late, details of the review are somewhat lacking. A Treasury spokesperson told AccountingWEB: “As the PM has announced, the government will undertake a thorough review of the loan charge and will set out further details in due course.”

The statement followed a large demonstration outside Parliament from loan charge protesters, who also held a candlelit vigil for two individuals who had reportedly taken their own lives after facing the charge.

Urgent clarification needed

Inside Parliament, the All-Party Parliamentary Loan Charge Group (APPLCG), a cross-party group of MPs formed to investigate constituents’ concerns about the charge, welcomed the news.

However, in a letter to the Prime Minister shortly after his statement, the group stated that Johnson needed to act urgently to clarify a number of key issues surrounding the contentious measure.

Among the group’s chief concerns was that Johnson had not clarified if the review was to be independent – something he had previously committed to while campaigning to become Prime Minister back in June.

The group, led by former environment secretary Ed Davey, also called for the immediate suspension of all settlements and APNs associated with the charge until the review had been enacted.

Back in January this year the APPLCG secured an amendment to the Finance Bill forcing the Treasury to review the effects of its 2019 loan charge measure.

However, when the Treasury published its report in March its reiteration of the government’s previous position was described by the All-Party Parliamentary Group as a "whitewash".

Revisit the legislation

Commenting on the review announcement, George Bull, senior tax partner at RSM stated that he found the timing “bizarre” considering that the 31 August deadline for the finalisation of voluntary settlements has already passed and two further deadlines are imminent.

By 30 September, loans affected by the loan charge must be disclosed via the online portal, and by 31 January 2020, these must be all be disclosed as part of the tax return.

“Whatever the outcome of this new review, if it means MPs will need to revisit the legislation, then it is imperative that they do so this time with a complete understanding of the consequences of their decisions,” said Bull. “This whole sorry saga has been a salutary lesson on how not to enact new tax legislation.”

What is the loan charge and why is it so controversial?

The loan charge was created to collect tax in respect of the numerous loan-instead-of-salary schemes (known as disguised remuneration) that appeared following the government’s clampdown on contractors in the early 2000s.

Workers were paid via loans to avoid tax and NI contributions, and although they paid tax on the benefit of having an interest-free loan, in many cases they did not expect to ever repay the loans. HMRC claims that such arrangements could never avoid tax, although specific rules against disguised remuneration did not come into effect until December 2010.

The Revenue’s solution to collect tax on the huge number of disguised remuneration loans in existence was the loan charge, which adds together all outstanding loans, over the course of up to 20 years, and taxes them as income in one year. Those hit by the loan charge originally had to pay by the end of January 2020, but HMRC claims it has a range of solutions for those affected to settle and spread the cost with them.

Around 50,000 individuals with a range of backgrounds will be affected by the loan charge, and accounting institutes and bodies, along with MPs and peers, have condemned the government for failing to properly assess its impact.

It has long been feared that the loan charge could lead to mass bankruptcies, and there have been reports of suicides directly linked to the charge.

A separate House of Lords inquiry conducted last year labelled the charge “unfair” and “pernicious”, and found that those affected included low-paid NHS and social workers who claim to have unaware they were even part of such schemes, having been forced to operate through umbrella companies by their employment agencies.

The charge has also come under fire for its retrospective nature, although the Treasury has taken the view that it is not technically retrospective.

Replies (39)

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By Justin Bryant
06th Sep 2019 17:11

Ed Davey should be sainted. If only all other MPs were like him.

"The group also revealed that an HMRC official has already informed one taxpayer that they will be taking ‘no further action’ while they wait for further advice on how to proceed."

https://www.accountancydaily.co/calls-suspend-loan-charge-following-pms-...

"However, many of the 50,000 people caught up in the issue are low paid, such as nurses and social workers, and were persuaded by their employers to join the schemes. Many of them are facing bankruptcy. Yet, at the time the schemes were set up, HMRC did not question their legitimacy.

The impact of the charge has been so serious that a number of suicides have been reported in connection with the tax. HMRC reported itself to a police watchdog over one case in March."

https://economia.icaew.com/news/september-2019/pm-johnson-agrees-to-loan...

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By enanen
06th Sep 2019 10:03

If the decision is to let people off with illegally avoiding tax, it sets a very bad example and precedent for the future.

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By meadowsaw227
06th Sep 2019 10:04

Have never nor would ever have a client who had a loan arrangement and they would have been ex clients if they wanted to use the scheme, so no sympathy at all here

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By VIOLA55
06th Sep 2019 10:30

The draft legislation / proposals for the loan charge were first announced in 2017 and there has been ample time since then to properly review / address concerns. In the meantime it has become law, and in view of the loan charge applying on 6 April 2019, many users of DR schemes (although the impact of the loan charge is not limited to DR schemes) have settled with HMRC and paid up, either in full, or on a payment plan basis with forward interest being charged. Those who have not settled probably fall into 2 categories (a) the hardship cases where the 'users' cannot afford to settle or pay the loan charge and (b) the die hards who could pay but never intend to pay anything until they are absolutely forced to. If the loan charge review produces an outcome that relaxes the position, many of those who have already settled in good faith may feel penalised for having done so. The review has been left far too late as there is no longer a level playing field. Therefore, I very much doubt anything will come of the review because it would result in taxpayers being treated differently / inconsistently.

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By Donald MacKenzie
06th Sep 2019 10:36

Why should someone who avoided tax by a contrived scheme, that was outlawed once identified, get away without paying the tax due?
The only aspect that should be reviewed is the lumping all into one tax year. The taxpayer should be allowed to allocate the income to the relevant past tax years and pay tax (and interest etc) based on what they should have paid.

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By richards1
06th Sep 2019 10:39

Like all crimes its only a crime if you get found out. Much as none of us like paying too much tax, it is an essential way that our society can function.
People who know and earn enough to use these schemes knew what they were doing and now they have been found out must deal with the consequences.
If however if an employer "forced" them to use this kind of scheme by all means get them involved in paying some/all of the back tax.

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By jon watkin
06th Sep 2019 10:41

I previously worked for a small construction firm and well recall one of these promoters trying to sell us such a scheme. I gave them short shrift and strongly advised the directors not to take this up, as it was blatant tax avoidance and seemed too good to be true. I have every sympathy for those workers who were forced into the scheme by their employers, and none for those who understood the risks and had the option to say no. I think the original promoters and their advisors should be targeted by HMRC too, to recoup every penny of lost revenue, with interest.

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By justsotax
06th Sep 2019 10:50

will they also be holding a candlelight vigil for all others who commit suicide relating to financial difficulties? After all isn't spending money via a credit card essentially the same as spending money you have loaned knowing it will be repayable....

I was however shocked to read in the details of 'what is the loan charge' that in many cases the loans were never expected to be repaid....dictionary anybody.....

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By dgilmour51
06th Sep 2019 11:30

Serves them right for heeding the advice of accountants . . .

It may have all been dubious, and, in the opinion of the self appointed righteous, both immoral and/or sailing close to the wind - but it was not 'illegal' per se "at the time".

Given the general duplicitous and pernicious mendacity continuously exhibited by HMRC the holier-than-thou brigade should hardly be surprised if the worm chooses to try to turn.

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By Joe Alderson
06th Sep 2019 11:44

The most controversial thing about the loan charge IMO is the way HMRC have handled it. The loans themselves aren't technically illegal, but the retrospective action of shutting down the loophole as far back as 1999 was extreme. It's very easy to say "if it sounds too good to be true it is" but you also have to remember that a lot of people who took up these schemes were advised to use them by accountants and scheme promoters who used phrases such as "this scheme is approved by HMRC" etc. While I totally disagree with the schemes and think these people should be paying tax on their income I can understand why some people were taken in and caught up in them. I have a number of clients I have helped to settle their affairs who used these schemes who realise that they were miss-sold/made a mistake with the scheme. But there are still companies selling similar schemes and companies telling people caught by the Loan Charge to use another type of scheme to get out of it. The cowboys need to be targeted.

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Replying to Joe Alderson:
By Glenn Martin
06th Sep 2019 11:56

I totally agree, i have a client who was in one and I got to leave straight away and have now disclosed it to HMRC.

The scheme promoter still emails my client offering him referral fees for anyone he could recommend to join the scheme. All passed onto to HMRC who no interest at all it seems in doing too much about it as easier just picking up those gullible enough to join the schemes.

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By DTB27
06th Sep 2019 12:05

When I first started in Tax I was told by a lecturer that the difference between tax avoidance and tax evasion is the thickness of a prison wall, i.e. tax avoidance is legal but tax evasion is not.

On this basis, and maybe I am the only one, I do not see that these people have actually done anything wrong. Whilst some of these schemes were contrived and aggressive tax avoidance, they were just that TAX AVOIDANCE. They took advantage of poorly drafted legislation to minimise the amount of tax an individual paid. This is something almost every accountant or tax advisor has done over the years. How many of us have told client's to take a small salary and bigger dividends to save tax and NI, is that not "tax avoidance"?

If they continued to use these schemes once the legislation was changed then I have no sympathy, but all those who used it when it was perfectly valid tax avoidance and are now being hit with significant tax bills on a retrospective nature, I do have sympathy with.

As I said, I may be the only one but that is my honest opinion.

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Replying to DTB27:
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By Duhamel
10th Sep 2019 13:51

Whilst I have some sympathy with your view and the retrospective (or retroactive) nature of the loan charge, these people didn't take advantage of poorly drafted legislation. They used (in some cases at least) utterly contrived arrangements to claim a tax advantage which was not due on any sane reading of the facts.

I also appreciate that these schemes were basically missold (particularly after changes in 2011 in my view) and that some people were forced into them. I don't think this was a failing in the law, only that HMRC didn't have the resources to prosecute all the claims.

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By unclejoe
06th Sep 2019 12:09

If a company payment to a contractor is a genuine loan it would be recorded in the company's books as a receivable, so looking there would prove the payment status. If it is disguised remuneration and not intended to be repaid, how would the company record it? If they recorded it as a loan it would have inflated profits so HMRC would have had corporation tax on it. If they had recorded it as an expense that would expose the lie. If the company had recorded it as a receivable but then written it off as unrecoverable in a later period, HMRC could look at actions taken to effect recovery - if none had been taken that would expose the lie.

We are told that some contractors had been forced into the arrangement by employers. What had employers got to gain by such an arrangement - it makes no sense to me, unless companies were deliberately trying to inflate profits, for example, to mislead potential investors. In any event, contractors could have refused the job if they did not want to take part in the scam. Companies and contractors have had long enough to get themselves compliant, so no sympathy here. And if there is sufficient evidence of false accounting the companies involved should be prosecuted.

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By sculptureofman
06th Sep 2019 12:49

The providers of these schemes (who I have first hand experience of) happily treated the whole thing as a game of cat and mouse with HMRC.

They always said that they played by the rules and it was up to the government to change the rules if they did not like them.

Well, the government did change the rules, but not in a way that the promoters expected or liked.

If anyone went along to the roadshows hosted by one of the 'more famous' providers of loan schemes, then you will know that they were a bunch of snake oil salesmen who you wouldn't trust to hold your pint. Unfortunately some advisers and their clients got blindsided by their bullsh*t and saw a way to make an easy buck.

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By justsotax
06th Sep 2019 14:14

the schemes are completely legal....as long as the loan is actually repayable....in a situation where the loan is not repayable...then erm its not a loan.

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Replying to justsotax:
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By Donald MacKenzie
06th Sep 2019 14:31

Agreed.
In other aspects of tax HMRC can go behind the claimed facts to the actual position. Just because you SAY you are self-employed does not mean you ARE self-employed. When a promoter describes monies passed to you as a loan, but where there is no expectation of interest being charged or the monies advanced being returned it is not a loan.
Inexplicable that advising people to go into these sorts of schemes is legal.

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Replying to Donald MacKenzie:
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By VIOLA55
06th Sep 2019 15:28

What if it was a loan with an interest charge, security and expectation of repayment, albeit the loan was not repaid by 6 April 2019? Still caught by the loan charge rules I'm afraid.

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By Marlinman
06th Sep 2019 17:49

So they've avoided tax by treating their income from the company as a loan that will never be repaid. I have no sympathy whatsoever for them and the dodgy accountants that advised them to do this should be disciplined.

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By Adam12345
07th Sep 2019 10:21

In my opinion, the tax is due, it is the settlement terms that could be improved. They could charge the whole loan at the basic rate rather than higher/additional rates. HMRC are being unrealistic with the amount they are trying to recover from some individuals.

In hindsight, I bet the majority that used these schemes would never touch them again. Getting paid in loans would seem to be fairly naive if you had some sort of financial/tax knowledge or even just common sense.

We had one client affected with a very small 'loan' (one years bonus) which the employer settled any additional tax due.

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By Trethi Teg
07th Sep 2019 11:59

I make a point of not commenting on things I know little about. Quite clear that many who commented do not understand the law or the background to this issue.

The arrangements made were never illegal i.e. proved to be illegal in a court of law. The Rangers case ruled that the employer should pay the tax and not the employee. There has never been one ruling where the employee was required to pay the tax.

Therefore Loan Charge retrospective, grossly unfair and arguably illegal.

Those that are on thier moral high horses should be very careful. If HMRC get away with this then what is next?

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Replying to Trethi Teg:
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By VIOLA55
09th Sep 2019 08:56

Its Parliament that makes the law, not HMRC. I agree entirely that the loan charge is retrospective and grossly unfair. I doubt anyone is minded to test its legality even if Parliament isn't doing itself any credit these days.

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Replying to Trethi Teg:
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By AnnAccountant
09th Sep 2019 14:02

Pretty sure you have been told a thousand times that no one is saying that your scheme was "illegal" and that regardless of legality or not, that is not what determines whether an arrangement is assessed to tax in the way that your advisers purported or in a different way.

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By petestar1969
09th Sep 2019 16:19

Bit late, I've just settled with HMRC for my only client who was caught up in this crap.

It does wind me up that the scumbag firm who got him involved are somehow still trading as are others who have promoted these dodgy schemes in the past, though.

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By gordo
10th Sep 2019 12:20

The tax authority should be bound by the decision of the Supreme Court in the same way that the taxpayers are, and not be given free reign to suggest ways around it & then mislead MPs into voting for it. One MP has said that Parliament was ‘duped’.

The Loancharge was said by Jon Thompson, HMRC CEO, to be expedient in that it saved the trouble of litigation (otherwise commonly known as right to fair trial).

I’m surprised at Accountants so keen to encourage HMRC in such wide ranging use of powers so as to circumvent a decision of the Supreme Court and remove people’s rights to trial. I wonder if they will be so keen to agree with HMRC regarding the application of IR35 or perhaps a future attack on historic dividend planning.

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Replying to gordo:
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By VIOLA55
10th Sep 2019 13:39

Which decision of the Supreme Court are you referring to that has been circumvented in relation to the loan charge?

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By gordo
10th Sep 2019 14:24

The Glasgow Rangers decision.

Following that decision it was found that the employer should have withheld PAYE. However, HMRC had spent the previous years pursuing individuals for tax on loans, and losing based upon this argument at the FTT in 2012 and the UTT in 2014. HMRC switched their argument in 2015 at the Court of Session but realised that their new argument meant they were out of time to pursue individuals with regulation 80 and reg 81’s. So they proposed a new ‘loan charge’ retrospective in its effect.

No Court has ever deemed loans taxable.

The Supreme Court decision in Rangers is referred to as an inconvenient victory because it meant individuals were not liable. More than that it actually rendered the Loan charge toothless because if the amounts were already taxable before going into the trust then they could not be taxed a second time when they cane out of the trust.

So on 22nd November 2017 HMRC/Govt arranged for a retrospective change to the retrospective loancharge and MPs feel misled as to the reason why. Check Hansard and you will see why.

The retrospective change on 22nd November to the retrospective loan charge meant that HMRC could circumvent the decision of the highest Court in the land.

On 23rd November the facility to buy a certificate of tax deposit was withdrawn, removing the taxpayer ability to make a payment to account to halt interest, without having it allocated to an APN or towards settlement. HMRC deviousness ?

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Replying to gordo:
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By justsotax
10th Sep 2019 16:50

Given the devious nature of these schemes I do find it rather bizarre that AWEB members are know suddenly supposed to align behind said contractors because the Revenue are playing fast and loose with the law. The same fast and loose approach to the law that the scheme providers used.....

no one on here has suggested a loan is taxable - well technically that is not true - there is a BIK....but I always thought it was repayable....

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Replying to justsotax:
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By gordo
10th Sep 2019 17:34

Nobody is asking you to align behind said contractors or loan strategies, I fully understand you don’t like them, but I do think you should align behind the law and perhaps be a little more worried about HMRC playing fast and loose?

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Replying to gordo:
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By whitevanman
11th Sep 2019 01:39

I do think a number of your comments mis-state the position.
The 'Tax authorities', I assume you mean HMRC, are indeed bound by law (and that means the decisions of the courts).
They are also a government department with an obligation to parliament (not some personal vendetta or axe to grind).
So, if a case is decided in the Supreme Court that might significantly affect the tax collected, it is their duty to advise ministers of the likely amounts involved and of possible "remedies". It is then for parliament to decide whether and what action to take and to enact legislation.
To describe the actions undertaken in fulfilling their obligations as circumventing the decision or "playing fast and loose" etc , is therefore inaccurate.
As to whether parliament has been misled, I cannot say. I very much doubt it however. I certainly cannot see anything wrong with the comments attributed to Thomson about "litigation". The fact is that introducing a loan charge may very well avoid having to take a large number of cases through the courts. Again that is not about denying those entities their rights. It is simply acknowledging that the law following Rangers may have a certain result and if parliament chooses therefore to change the law, one of the effects may be a reduction in the number of cases litigated.
Of course we will each have a view about the fairness of the legislation, the approach being taken or indeed the existence of these schemes, but we should at least be clear about who is doing what and why.

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Replying to whitevanman:
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By gordo
11th Sep 2019 11:08

I wish I could begin to agree with your post as you have stated the way it should work, but unfortunately I do not think it’s I who mistakes the position.

If you examine the initial 2016 ‘consultation’ where HMRC themselves summarised the responses by saying that over 90% disagree with the fundamental policy objectives.

If you look that the ICAEW responses to that consultation, which were ignored, you will find they said :

1. We are very concerned about the proposals in the consultation document as they contravene generally accepted notions of fairness and break the constitutional convention against retrospective legislation, imposing tax charges in cases where taxpayers already had legal certainty that none were due.

2. The proposed 2019 loan charge also seems at variance with HMRC’s arguments in many cases (successful to date) that monies paid via employee benefit trusts (EBTs) and employer funded retirement benefit schemes (EFRBS) were actually earnings that should have been subject to PAYE and NIC. It makes it unclear whether the loans are loans or earnings, which offends against the second – Certainty – of our Ten Tenets for a Better Tax System, summarised in Appendix 1.

3. The proposals are aggressively retroactive against taxpayers who have not done anything that would under current rules leave themselves open to a 20 year assessing window which currently requires HMRC to demonstrate that there has been a deliberate inaccuracy in a return. Where there is an enquiry into tax suspected to have been evaded or deliberately misstated, then going back to 1999 is permissible under the 20 years rule. However it is not acceptable for HMRC to create a retrospective tax liability where none currently exists, especially as HMRC has been aware of loans to employees (referred to in the consultation document – and adopted here for convenience only – as disguised remuneration (DR) schemes) since at least 1999 and has failed to open inquiries or raise assessments before the expiry of statutory deadlines. Using retrospective legislation to remedy lacunae in HMRC’s procedures is unreasonable.

4. Under the legislation as it presently stands, Parliament allows HMRC to assess six years in cases of careless (as opposed to deliberate) error, provided HMRC takes action within that six year window. Few, if any, of those taxpayers involved in DR schemes will have filed inaccurate returns, either carelessly or deliberately, so HMRC should arguably be limited to assessing events only in the last four years. The proposed legislation will extend this in 2019 to 20 years including years that are 'closed'. To introduce legislation which affects transactions which were entered into up to 17 years ago (measured from the current year) where HMRC has taken no timeous action despite knowledge of the alleged avoidance is likely to lay the proposed legislation open to challenges under the Human Rights Act.

5. Given that those involved in DR arrangements will have disclosed the transactions that they entered into, we are also surprised at the contrast between the favourable terms given to so- called tax evaders under the former Liechtenstein Disclosure Facility and what is proposed for DR in the consultation document.

https://www.icaew.com/-/media/corporate/archive/files/technical/icaew-re...

Government and HMRC have continually argued that this measure is not retrospective, yet the Loan Charge is used as a big club to force people to volunteer settlement for earlier years. HMRC have run several webinars since 2017 all of which explain why clients should settle as the Loan Charge is deliberately designed to be penal, by adding all loans together and calculating tax at the highest marginal rate.

Furthermore the Loan charge itself is not a full and final settlement. So HMRC will charge the loan charge, then issue closure notices possibly for a higher amount and then come back for the difference, where higher, with no refund if the loan charge is the higher..

HMRC are also encouraging people to volunteer to settle, based upon their argument that these amounts were not a loan, (which actually has been proved otherwise in Court), but then HMRC argue that the fact they wish for income tax does not change the nature of the LOAN, and therefore you still have a legal obligation to repay the loan but if you can arrange for it to be written-off then HMRC will seek Inheritance Tax on the loan write-off.

HMRC have designed settlement to get more than they would otherwise have received even if they won in Courts to prove loans were subject to income tax (which they didn’t).

- HMRC want tax for closed years as well as open years on basis you would just be charged the loan charge otherwise for the closed years

- HMRC want interest at statutory rates on open years, though they haven’t proved any tax is due, they argue the law insists they charge interest (but the law doesn’t insist they charge income tax on which they want interest!).

- HMRC have designed settlement in such a way as to punish those who made full disclosure throughout and therefore received enquires, more harshly than those who may have hid matters from HMRC or by pure fluke or by HMRC incompetence not received an enquiry, because only open enquires get charged interest. Interest can add 60% to the settlement figures (20 years at 3%)

- HMRC then seek Inheritance Tax on Loan write-off, if that can be arranged, which only comes about as a consequence of the forced settlement.

- If time to pay is requested then HMRC add an extra 1% to the forward interest rate for THEIR risk that you won’t pay the amount they haven’t shown to be due.

At every turn HMRC have sought to maximise revenues in settlement (as per their published objectives), whereas HMRC could have designed settlements differently so as to collect the tax and be done with it.

As a consequence, per HMRC figures, only 7,000 people have settled in the 5 years since the DR settlement policy started (out of an estimated 50,000). Many others will be forced into bankruptcy partly because of the settlement terms. I have clients who registered for settlement with HMRC in March 2018 and have written several times since but with no reply from HMRC. I have others who have offered to pay the income tax but can’t pay the interest and IHT and forward interest requested, but HMRC reject their offers. So forcing bankruptcy, whilst telling MPs that HMRC won’t ‘make’ anyone bankrupt.

Meantime Jon Thomson's letter to MP on 27th June 2018 sought to mislead the MP that the consequence of the decision in Rangers meant that everyone was due tax. (Simply not true).

We also need to be clear that the Rangers ruling does not affect any structures post-2011 and cannot be said to apply. HMRC have agreed in writing that no Tribunal has yet ruled on any post-DR cases.

Since then there have been one televised Lords enquiry where HMRC gave ‘evidence’ and one Treasury Committee enquiry where HMRC gave ‘evidence’. If you watch the recording or read the transcripts then it’s bit difficult to see that HMRC would understand the question being asked by their Lordships or by MPs, yet choose not to give a full and complete answer that would have clarified the matter.

The CIOT President has said “there are some within HMRC who prefer a punishment strategy and that is naive and lacks humility..” (not the words I would have used). The same CIOT President has said that in his view the settlement terms are unfair.

HMRC advise the Government every step of the way. If you followed this saga in full and still think that HMRC are only doing what Government ask them to do then we will need to disagree on “who is doing what and why.”

Hence why I think we should be concerned by HMRC approach, regardless of how strongly you feel about loan strategies.

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Replying to gordo:
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By whitevanman
11th Sep 2019 16:15

Sorry but we will have to agree to differ. HMRC does not legislate. Yes, they advise ministers and such advice will no doubt cover very many areas and possible scenarios. Yes, they will also give their opinion ( no doubt supported by legal opinion) of measures that might succeed in producing the result ministers want (clearly they don't want loan schemes to work!).
As to settlement, they are obliged to act according to law and if someone feels they are not doing so there is a statutory route they can follow. That said, the loan charge is now on the books and HMRC is obliged to apply it. It does not alter the fact that other legislation remains unaltered and they are obliged to explain how matters may be affected and to reflect such in their settlement proposals.
There is nothing wrong with saying that (in effect) the loan charge now represents the minimum and that further taxes may be due depending on facts. As they have apparently said, the measure is intended to be penal.
Bear in mind that there are tens of thousands of these cases and £billions of tax at stake. HMRC and the government have a vested interest in getting matters resolved. As you note, this has all been going on for many years (too many?). It has cost the tax paying majority a huge amount to pursue the cases and little sight of an end. It is perhaps not surprising that some in government ( and possibly in HMRC) decided "enough is enough" and chose a somewhat blunt instrument in an attempt to achieve the end.
Be that as it may, it is parliament that has passed the legislation.
If one MP (or many) feels (s)he was misled, perhaps (s)he should have sought more information or asked more questions. If MP's questions were answered in a way they themselves answer questions, I have no sympathy with them! I am not suggesting it is right for anyone to tell lies or to mislead. It is simply that MPs have set the bar in political "no-speak" and they should not be surprised if that rubs off on those drawn into political matters. I would bet a large sum of money that there will not be a clear example of anyone misleading parliament.
Many of the points you make are simply opinions and I do not doubt they are accurately stated. That does not mean they are correct. You seem to accept that those opinions were put forward (in 2016 say) and that HMRC reported that 90% (of respondents) disagreed with the policy objective. Despite that, parliament chose to proceed. That should tell you more about the position of parliament. It does not mean the opinions of ICAEW etc were ignored, simply that they did not convince MP's.
As I have said, it is accepted that people will have different views of these matters. We have probably all figured out by now that, just because someone disagrees with one's own position does not necessarily make them wrong.
All I would ask is that, when making a point, one correctly acknowledges the roles played by the various parties.

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Replying to whitevanman:
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By gordo
11th Sep 2019 21:40

I agree that it is very important to acknowledge the roles played.

One wag comments regularly on Twitter that MPs are asking what clowns voted for this legislation (or words to that effect).

Nonetheless I’m surprised that you think MPs were fully informed of the ICAEW response to the so called ‘consultation’ by HMRC. Hansard clearly reports that Mel Stride, Financial Secretary to the Treasury, rejected a request for professional input and it is also recorded that submissions by professionals were not made available until the late evening before the Finance Bill debate, with no time given to read them.

I would be pleased if, as you say the opinions did not impress MPs, would you please explain why over 200 MPs have now written asking for an independent review and a halt to the loan charge? Seems to me to be an indication from MPs that they only now understand what they were induced to vote for?
http://www.loanchargeappg.co.uk/publications/

The APPG have also written to question the head of HMRC as to what is sees as attempts to mislead MPs: https://www.accountancydaily.co/hmrc-head-challenged-over-loan-charge-mi...

So perhaps I’m not alone in my ‘opinions’?

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Replying to gordo:
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By justsotax
11th Sep 2019 09:09

so are we in agreement that the said schemes also overstepped the mark.....

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Replying to justsotax:
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By VIOLA55
11th Sep 2019 12:05

I don't think we agree with that at all. The Government has overstepped the mark by introducing the 2019 loan charge legislation which has a retrospective effect.
The law is the law and many of the schemes have not been tested in the Courts; rather the Government's armoury to defeat these schemes has not been by testing the law, but rather by other methods of combat such as introducing the concepts of APNs, Follower Notices, GAAR Advisory Panel and the final nail in the coffin, the outrageous 2019 loan charge and its retrospective nature. Anything to avoid actually testing the efficacy of the tax schemes in the Courts. Arguably the Glasgow Rangers case was a 'legal fudge' as the FTT and UTT both ruled in the taxpayers favour before the Court of Public Opinion (Margaret Hodge et al) intervened and started to take an active interest in tax avoidance via the Public Accounts Committee.

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Replying to VIOLA55:
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By whitevanman
11th Sep 2019 18:29

Once again I find I do not agree with quite a lot of what someone posts.
It is necessary to put some perspective on issues that have affected how these schemes have been handled / how the law has developed.
We (probably) all know in general terms how the schemes operate and how they are claimed to avoid tax and NIC.
Central to this is the idea of a loan.
As many have already said, the "loans" in these schemes are not truly loans. The problem with that is that in many cases, the schemes have been designed in such a way that they are in fact viewed as loans "legally". So not only do the users avoid IT and NIC but there is the nice bonus of IHT saving and no tax will ever be paid when the money passes to the surviving family.
But that is not all. Under the law as it stands, tax is not payable until formally determined by the appeal process (for these purposes). And when it is payable, interest at the appropriate rate is charged. I say "appropriate" rate in a neutral sense. Arguably it is not appropriate because many of the businesses / individuals could never get a commercial loan at such low rates and certainly not for the amounts involved.
So, there is no downside for the user and every encouragement for them to delay settlement as long as possible (as evidenced by the age of cases referred to elsewhere in this thread). One might feel this is all unfairly weighted in the avoiders favour.
There is one other very significant factor.
Long ago, in the earlier days of such schemes, HMRC in trying to manage the increasingly large number of cases, pinned all it's hopes on Dextra. If that was decided against the company, all the other cases would follow and that would resolve many of the problems. After perhaps 5 or more years the case was decided by the HoL in favour of HMRC. But as anyone could have predicted, everyone else (or at least a very large proportion) refused to settle and argued that their fact pattern was different.
That in turn brought to light a new problem. As others have said, there are more than 50,000 users of loan schemes. The total number of avoidance scheme users is probably much higher. But that is only the users. Some have used numerous schemes over many years each having it's own particular issues.
In a typical year, the FTT hears about 2,000 cases most of which are not avoidance cases.
So, if pushed, it could take 30 years of the tribunal hearing only these avoidance cases, to deal with this backlog (and of course, ongoing and new schemes would extend that.
How do you respond to that if you are the government?
Well, APNs and Follower Notices were some of the measures designed to address only the specific cases without impacting the wider tax system. I am sure most reasonable people would consider these to be very reasonable responses though not all will agree. That's life.
As to the loan charge, given what I have said above, it is hardly surprising that a way to tax the money in these schemes was thought out. The charge is not in a strict legal sense, retrospective (in the same way that these are really loans). It simply says that if things haven't changed by date xxxx a charge will be made on the full amount as income at that date (in simple terms). Advance notice was given so users had the chance to get out before the charge. Those who chose not to must have understood that when the charge came into effect, there would be tax to pay.
I am trying to avoid giving an opinion of the arrangements or the remedies. What has happened has happened. I just think it is important to understand the wider picture when discussing such matters and to do something a bit more than point the finger of blame.

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Replying to whitevanman:
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By gordo
11th Sep 2019 22:01

If HMRC has won in Dextra they way they claim then there would not be any need for this discussion. HMRC lost eleven of the thirteen points I believe but succeeded in regard to the corporation tax deduction. HMRC did not succeed with the PAYE argument and did not pursue it.

Indeed in 2012 and 2014 HMRC argued that loans were taxable and the Courts clearly told HMRC that this was not the case. Who is the taxpayer supposed to listen to for he law, the courts or HMRC?

In 2012, shortly after having lost in the FTT (and shortly after Prime Minister David Cameron commented), HMRC hired expensive behavioural psychologists to conduct a covert experiment on users of that strategy to try to get them to withdraw from their legitimate dispute with the tax authority. In 2014 HMRC got the power to raise APNs and Lin Homer told Parliament that HMRC would only issue APNs in rare circumstances where HNRC had won a previous similar case. Once they had the powers to issue APNs HMRC then set about doing so on an industrial scale. There is no facility to appeal an APN but one can make representations. I can introduce you to the ex-HMRC office in charge of the templates responses to these representations which he says were pre-written to deny all points. APNs were issued on the basis of ToAA which is a different argument again and which was argued in July 2019 at the FTT with the judge concluding that the amount assessable under ToAA should be £0.

In the 7 years since the behavioural psychology exercise HMRC have resisted going to court to litigate that scheme. I can give you a witness statement as to how HMRC pressurised lead cases by denying them the same terms as everyone else if they did not concede. Effectively blackmailed into giving up their position as lead case. With no lead cases litigation cannot continue. I could introduce you to the tax advisor of the FTT case finally heard in July who will explain all the tactics employed by HMRC to avoid going to court and how much it cost the taxpayers to drag HMRC ‘kicking and screaming’ to Tribunal.

I’m afraid that you make the mistake of believing HMRC rhetoric. Today a leading independent tax Barrister Keith Gordon said “If anything has already been learned from the past 24 months, it is that HMRC and HMT officials are able and willing to manipulate facts in order to justify their actions in respect of the loan charge. Accordingly, external evidence is essential.”

I absolutely agree that everyone, especially tax advisers, need to be shown the bigger picture to understand the roles played by those who can control the narrative.

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Replying to gordo:
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By whitevanman
12th Sep 2019 10:50

Very interesting comments but again, I do not believe they alter what I said in my post of 11/9 @18.29 which was intended to indicate a whole range of other issues that played into this over the years.
For example, I didn't comment on Dextra as such, merely how HMRC had held off progressing many cases pending the outcome and how that backfired and why Follower Notices were a response to that.
Equally my comments on APNs seek to explain (in part) why they were thought a good idea. I don't know whether they have been used inappropriately since being brought in. As with every aspect of tax, I am sure each side has its arguments.
Again my post was not concerned with such matters. It was an attempt to put some context in areas raised in the earlier post to which it was a reply.
Finally, I would not be surprised if what you say about behavioural psychologists etc is true. It seems to be part of our every day life and certainly reflects how government and big business operate. Indeed, one might criticise departments that failed to use such techniques. Of course we would all expect the actions to be wholly within the law but again there are many grey areas at the boundaries which inevitably is where these cases fall.
Do you believe there are not very expensive lawyers etc on the other side working out how they can achieve their (clients) ends? Do you think those people have never attended sessions with behavioural psychologists at conferences etc, telling them about how to influence conversations and behaviour? Sauce for the goose??

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