HMRC described as ‘out of control’ over handling of loan charge by MPs

MPs have demanded that HM Revenue & Customs (HMRC) suspend loan charges by six months to allow an independent inquiry to investigate the tax campaign.

Both sides of the house were due to support a motion tabled by Conservative backbencher Ross Thomson this month, which was put on hold after a water pipe burst in the House of Commons.

The delay means that the controversial charge came into effect on 5 April but it is understood that the All-Party Parliamentary Loan Charge Group (Loan Charge APPG) has petitioned financial secretary to the Treasury Mel Stride to seek an urgent suspension of the new law.

Before the debate was postponed by the leak MPs, including the likes of former Brexit Secretary David Davis, stood up to critique the new tax charge, saying that it was “destroying families, homes, mental health and even lives.”

The debate in the Commons came after the Loan Charge APPG released a report on the consequences of the loan charges and HMRC’s poor conduct in the matter.

More than 900 people affected by the loan charge provided testimony to the parliamentary group, who concluded that:

  • There is a clear risk to the mental welfare of people facing the loan charge, including known suicide risks and a number of suicides linked to the charge.
  • There will be many bankruptcies as a result of the loan charge.
  • The original impact assessment published by the Treasury was flawed and inadequate, to the point of being negligent.
  • The ‘disguised remuneration’ arrangements were not entered as “aggressive tax avoidance” and were often a condition of employment, especially in the public sector.
  • The Loan Charge is retrospective, overrides taxpayer protections and undermines the rule of law.
  • The real reason for the introduction of the loan charge was to bypass the normal legal processes and to allow HMRC to collect tax where they were ‘out of time’ under existing legislation.
  • There has been a cynical campaign of misinformation waged by HMRC and the Treasury.

If the tabled motion is passed then it could lead to an immediate six-month suspension of the charge and an independent review led by an experienced tax judge.

Other recommendations include reviewing the use of behavioural psychology and behavioural insights when considering HMRC’s behaviour, “the knowing use of which should be suspended in the light of the suicide risk and the known suicides of individuals facing the loan charge”.

“HMRC’s conduct with regard to the loan charge indicates that it is an organisation out of control, urgently needing better and proper scrutiny and genuine accountability,” the report added.

Reacting to the debate and report, a Treasury spokesperson was reported to have said : “As announced at Budget 2016 and in accordance with the legislation, the loan charge takes effect from April 5. Anyone who contacts HMRC by midnight April 5 with the genuine intention to settle their tax affairs and provides the required information will almost certainly end up paying less.

“We remain committed to ensuring that people impacted by the loan charge receive the support they need, and that individual cases are treated sympathetically in the light of individual circumstances.”