HMRC boss ‘presiding over loan charge misinformation campaign’

The top taxman has been accused by the Loan Charge APPG of overseeing a misinformation campaign which could see MPs hoodwinked into not delaying this Friday’s charge.

Sir John Thompson, Revenue CEO, is presented in a letter with six areas of the imminent tax where “out of context” information was given by HMRC, says its author the APPG.

MPs on the cross-party group say they have written to Mr Thompson amid “increasing concern” about “accuracy and honesty” of statements by both HMRC and HM Treasury.

Evidencing their claim, the group said the Treasury’s Mel Stride refused on three occasions to say how many criminal convictions HMRC has secured against loan scheme promoters.

'Deliberately false'

“The truth is that there have been none relating to loan arrangements,” the Loan Charge APPG said, alluding to the minister avoiding giving a straight answer on BBC Radio 4.

“HMRC and Treasury Ministers are consistently issuing misleading [loan charge] information…[and] in many cases it seems clear deliberately so, to give a false impression regarding the policy, it’s legality and impact.”

And the impact that HMRC is having on loan promoters, one expert hinted last night, in light of a HMRC press release hailing a ‘£40million victory over tax avoidance promoters.’

'Complete misnomer'

“To headline the press release ‘HMRC wins £40m battle…’ is a complete misnomer,” tax dispute specialists WTT Consulting told ContractorUK last night.

“What HMRC has won is a case that the scheme should have been disclosed. That is a very long way from going to a tribunal over the substance of the arrangement and proving it is, or is not, avoidance.”

So the Revenue is ‘counting its chickens before they hatch,’ according to WTT Consulting’s tax director Graham Webber.

'Spun by HMRC'

“Whilst I have no doubt that this will be spun by HMRC as proof of action against promoters or employers, the reality is that it is – at very best – an excuse to issue an APN in due course,” he said.  

But HMRC says the court’s backing that scheme promoter Hyrax should have disclosed under DOTAS means the firm must share the details of its 1,180 users, or face massive fines.

That’s because where HMRC proves a scheme should have been DOTAS-reported, it provides HMRC with powers to not only charge the tax and NI due, but also a tax penalty of at least 100% of tax avoided against all users of the scheme.

'Smoke and Mirrors'

“Hyrax actually told users that the scheme will last about four years before HMRC legislates against it, so they closed and ‘phoenixed’ a number of times to ‘protect’ users,” reflected Carolyn Walsh, a former tax inspector, pointing to the judgment.

“That was obviously a challenge that could not be ignored, so HMRC swooped inside two years and secured an agreement from the tribunal, to treat all previous incarnations as being linked to the current scheme. 

“For Hyrax and its previous corporate incarnations, it was all ‘smoke and mirrors’ but in the end HMRC, looked straight through them all.”

'Blow for avoidance'

Another former Revenue official, Chris Leslie is also sympathetic to HMRC’s win. “[This] blow for tax avoidance… [saw] those responsible for the K2 and Hyrax schemes ensure users of K2 were transferred as seamlessly as possible into Hyrax.

“The judge found [that] emails sent to users reassured them that nothing was really changing other than the legal entity which employed them.:

He added: “This is within the general anti-avoidance provision and dealing with what parliament intended in an equitable and constitutional way would be a significant step to tackling avoidance effectively.”

Of the judgment, the Treasury’s Mr Stride tweeted: “Very positive that HMRC has won a case against loan scheme avoidance promoter, Hyrax. We are cracking down on unscrupulous loan scheme promoters, and we’re warning against new offshore schemes in Cyprus and Malta, too.”

'Hollow victory'

WTT’s Mr Webber remains unconvinced – even of the Revenue’s claim that it will now move to secure the particulars of those who used the arrangements.

“By now, HMRC will [already] have all the details and documents from the scheme,” he said. “This ‘victory’, hollow as it is, has more value as a PR claim than anything else.”

Speaking after co-signing the letter to the Revenue’s Mr Thompson, Labour MP Ruth Cadbury said yesterday: “HMRC and the Treasury repeat the same discredited arguments over and over again but worse than that, there appears to be a deliberate attempt to mislead.

“It is disgraceful the way HMRC and the Treasury have sought to give a false impression of actions taken against promoters by referring to convictions that have nothing to do with the Loan Charge. So we are now challenging HMRC to give honest answers and to stop issuing misleading statements which is not acceptable for a public body”.

'Regurgitate the same'

Striking a more appealing than attacking tone, the letter to Mr Thompson states: “We trust that you will address each of the questions…[in the six areas] with pertinent and relevant answers and will not attempt to do what HMRC and the Treasury have done consistently with regards to the Loan Charge, which is to regurgitate the same arguments in response to all challenges.

“That is not acceptable and would be a clear refusal  to answer these important questions, each and every one requiring a factual answer.”

The letter to the Revenue CEO concludes: “We remind you of the Civil Service Code to which you and all HMRC officers are bound, which includes that you must not ‘deceive or knowingly mislead ministers, Parliament or others’, and must not ‘ignore inconvenient facts or relevant considerations when providing advice or making decisions'."             

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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