MPs call on financial secretary for new independent review into HMRC policy

Maria J. Danford

MPs are contacting on HM Revenue & Customs (HMRC) to suspend its enforcement of the Uk government’s controversial bank loan charge plan on the basis that there remains no “relevant or justified legal basis” for it.

The instruction is showcased in a letter to Lucy Frazer, financial secretary to the Treasury, signed by associates of the 245-robust All-Celebration Parliamentary Loan Cost and Taxpayer Fairness Group.

The letter claims: “The bank loan charge was not appropriately scrutinised by Parliament when launched, nor does it have any relevant or justified legal basis – it really should in no way have been passed and the federal government have to now rectify this by asserting a legislative change, as properly as instructing HMRC to pause any enforcement of the bank loan charge and related accelerated payment notices.”

The seven-web page missive also calls on Frazer to reply 10 “extensively researched” issues about the bank loan charge, which it promises neither the Treasury nor HMRC has totally resolved in their responses to date when quizzed about the interior workings of the controversial plan.

Declared in the 2017 Funds, the bank loan charge plan is made to aid HMRC claw back the revenue it promises contractors in several industries – together with IT – averted having to pay in the past by opting to have element of their income compensated to them in the variety of non-taxable financial loans or annuities.

These bank loan-based remuneration strategies ended up usually operate by offshore personnel rewards trusts, and ended up erroneously marketed as currently being an HMRC-compliant means for contractors to bolster their acquire-home shell out by artificially minimising their employment tax liabilities.

1000’s of IT contractors who took element in these strategies concerning December 2010 and 5 April 2019 have since been landed with six-determine tax expenditures from HMRC via the bank loan charge plan, reportedly ensuing in mass bankruptcies and at the very least 8 suicides.

The retroactive nature of the plan has viewed HMRC frequently criticised for pushing ahead with it, as properly as the point that its initiatives to clamp down on disguised remuneration strategies are disproportionately qualified at particular person participants rather than the organisations that operate them.

Incidentally, a person of the issues place to Frazer in the letter touches on this issue, although also looking for affirmation from her about the exact variety of bank loan plan promoters and operators who have been prosecuted, convicted, arrested or fined via HMRC’s bank loan charge enforcement pursuits.

There is mounting anecdotal proof that a lot of of the contractors who conclusion up enrolled in these strategies have performed so unwittingly, possessing been pressured by their conclusion-customers to present their services via a non-compliant umbrella corporation that acts as a entrance for the plan. 

Under the conditions of the bank loan charge plan, people have few avenues available to them to obstacle or appeal in opposition to the sanctions handed down by HMRC, which is one more space the letter calls on Frazer to deal with.

But the standout issues resolved to Frazer in the doc centre on the end result of the 2019 impartial critique into the bank loan charge plan by Lord Morse, which noticed the policy’s search-back period of time minimize by much more than 10 years.

“The most important summary of the Morse report was that the ‘loan charge really should not use to financial loans entered into before 9 December 2010, currently being the issue at which the law [on the use of disguised remuneration strategies] grew to become clear’,” the letter claims.

“That legislation, announced in December 2010, only affected personnel – there was almost nothing on the statute book for one more seven years suggesting they did not get the job done for the self-employed. The 2011 legislation only utilized to employer-personnel financial loans compensated from a third social gathering. It did not use to self-employed preparations or employed preparations wherever no third social gathering was concerned.”

As previously detailed by Personal computer Weekly, the Morse Review’s summary that the law on using disguised remuneration strategies has been very clear since 2010 has been frequently challenged by the cross-social gathering group of MPs that make up the Loan Cost APPG, as properly as stakeholders from throughout the contracting local community.

In the letter, the MPs assert that the law was “categorically not clear” on the use of bank loan-based remuneration strategies right until 2017, which is what prompted HMRC to propose the plan in the 1st location.

“As financial secretary to the Treasury and a QC, will you now make a public statement to the two obstacle and rectify that flawed and unsound summary, by confirming that the bank loan charge legislation will be amended to reflect the truth of the correct legal placement, which was obviously misunderstood by Lord Morse at the time of his critique,” the letter states.

The letter also requests that Frazer confirm the situation and requirements made use of to decide who would help Lord Morse with compiling the critique, following the disclosure of freedom of information and facts requests that advise this system may well have been motivated by HMRC and the Treasury.

The letter concludes with a get in touch with for a “fresh and totally impartial critique of the bank loan charge” to be carried out, in the confront of increasing cross-social gathering guidance throughout the Dwelling of Commons from MPs and friends who disagree with the plan.

“We hope that you can now see the bank loan charge is not only a deeply controversial plan that undermines the rule of law, but also that it is a flawed plan introduced in devoid of proper knowledge and with deceptive rationale,” claims the letter.

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