The report from the recent Loan Charge inquiry conducted by the APPG has now been published with the findings casting a very dark shadow over HMRC. Along with the Treasury, HMRC have been found to have acted inappropriately and well below the expected standards in their pursuit of liabilities payable.
The key findings of the inquiry were as follows: –
- A clear risk to the mental state of people facing a loan charge. Cases of suicide have been discovered with HMRC accepting knowledge of at least one case.
- Loan Charges will result in a vast number of bankruptcies, individuals being forced to sell their homes under the pressure of HMRC’s demands.
- Family stability has also been affected with the financial pressures resulting in families breaking up. This is despite the impact assessment by HMRC claiming there would be no effect.
- It was determined that the original consultation findings in 2016 were ignored. Consequently, the original impact assessment published by the Treasury has been found to be flawed and inadequate, to the point of being negligent.
- Most arrangements were not entered as an “aggressive tax avoidance” tactic by individuals. The majority took professional advice and were assured they were legal and approved.
- The Loan Charge overrides taxpayer protections and undermines the rule of law by being retrospective. HMRC were pursuing tax liabilities in relation to tax years which were closed, with inadequate notice provided.
- The Loan Charge was introduced to allow HMRC to collect tax where they were out of time under existing legislation. This meant the real reason it was introduced was to bypass normal legal processes.
- The Loan Charge inquiry has concluded that the lack of integrity shown by HMRC officials constitutes a breach of the Civil Service Code, and the Financial Secretary to the Treasury may have broken the Ministerial Code. A cynical campaign of misinformation waged by HMRC and the Treasury.
As stated above, both HMRC and the Treasury have acted in a manner that is not acceptable in their position according to the APPG. The effect of their behaviour has, in some cases, caused devastation with a case of suicide being attributed to their actions, as well as the breakdown of families.
Following the results of the inquiry the following recommendations have been put forward by the Loan Charge APPG.
- The Loan Charge to be given an urgent 6-month delay and suspension.
- An independent review into the Loan Charge.
- Immediate policy change to remove closed years from the scope entirely.
- A return of taxpayer’s rights to defend against HMRC’s enquiries into open years.
- Treasury ministers to off the option of a 10% full and final settlement rate. This will be aimed for those who simply wish to draw a line under the past.
- Automatic 10-year time-to-pay for all taxpayers.
- The urgent provision of a 24-hour counselling helpline.
- A new ‘Powers Review’ into HMRC to make HMRC more accountable.
- There must be an independent review into the conduct of HMRC with appropriate disciplinary action.
- A proper independent assessment of HMRC’s use of behavioural psychology and behavioural insights, the intentional use of which should be suspended in the light of the suicide risk and the known suicides of individuals facing the Loan Charge.