Why the 2019 Loan Charge Review warrants a review of its own

The announcement by Boris Johnson in last week’s Prime Minister’s Questions left those affected by Loan Charge 2019 awaiting further details  and clinging to the morsel of his promise that after many years of campaigning, a review of the punitive Loan Charge legislation would materialise.

Now clarification of the prime minister’s announcement has been issued by HM Treasury, many are wondering if it all was worth the wait, and pondering what it might mean for them. So let’s unpick HMT’s announcement and its practicalities, writes Tom Wallace, head of tax at HMRC dispute advisory WTT Consulting.

The details of this hard-fought Loan Charge Review are contained within two pages published on Gov.uk., accompanied by a statement which unfortunately can only be described as propaganda. This statement instantly undermines the review’s impartiality because it justifies the need for the loan charge -- in the same breath it ushers in the review.  Nevertheless, the review is here and it is now essential that it is carried out in a manner befitting of such a critical area of tax law.

Most tax professionals do not argue the need for legislation to counter tax avoidance and to stop innocent taxpayers being misled. What we do object to is this particular legislation which cuts across the taxpayer protections that have been fundamental to the self-assessment tax system since it was introduced in 1995-96. The hope has to be that this review might find balance, but what are its chances?

The review will be ‘independent.’ But will it?

Let’s not forget this will be the second review into the 2019 Loan Charge; the first being conducted by the Treasury at the beginning of this year.  On that occasion there was no suggestion of any independence, but here great play is made of exactly that – “independence.”

Sir Amyas Morse has been charged with leading the review.  For the unfamiliar, Sir Amyas, is a former civil servant who retired as chief executive and auditor-general of the National Audit Office earlier this year. So he can probably just about be considered no longer part of the machinery of government. However, a cursory ‘google search’ will show that in his previous role, Sir Amyas has been very vocal about tax avoidance, HMRC’s leniency on it, and the great need for funding of public services. 

Perhaps more concerning is that Sir Amyas will resource his review team with staff from HMRC and HMT. It is not a stretch to suggest that those staff will be drawn from a pool that have already been involved in the Loan Charge and are tainted by the previous three years of HMRC justification of why it was needed. 

Not only that, they will return once the review has concluded to work under their previous departmental line managers, who may not look too fondly on anyone who has helped expose any wrongdoing by officialdom. Previous high-flyers risk their career stalling should they stray from the party line. And during the review, these officials may have no incentive to uncover failings that lead to the need for the Loan Charge should those failings have happened on their watch.

Scope and Objectives  

The scope of the review is very simple and set out in two questions:

  • Whether the Loan Charge, as it applies to individuals who have directly entered into disguised remuneration schemes, is an appropriate response to the tax avoidance behaviour in question


  • Whether changes announced by the government in advance of, and since, the Loan Charge came into effect address any legitimate concerns that have been raised about the impact on individuals, including affordability for those affected.

Those questions are prescriptive in nature and may oversimplify a complex issue that has built up over 20 years. It pre-conceives the notion that a tax avoidance motive drove contractors into these arrangements, rather than what in fact happened -- a fallout from struggling to maintain compliance following government uncertainty thanks to IR35, and misleading advice from those in a position of authority.

The review looks set to fail to look at why existing enquiry powers and time limits have not been sufficient to remedy the use of such arrangements and why promoters have been allowed to liquidate and disappear, sometimes multiple times under different names, without HMRC even bringing a single civil or criminal case against them to court to pursue the missing tax.

Perhaps, this restriction is simply due to the time available for the review which arguably should have been conducted, without limit, before the legislation reached royal assent. Whatever the cause, the narrowness displayed, risks a surface-level assessment of considerable icebergs.

How could the review be improved?

To be truly independent, it can only be sensible to appoint a tax barrister or QC to lead the review who can be impartial and not beholden to any HMRC or HMT paymasters.

That review should be evidence-led with both written and oral submissions invited from all parties who have been involved over the last 20 years, including senior HMRC officers who oversaw years of inactions on enquires and allowed such a position to develop.

It is of course inevitable such a detailed review would take us past January 2020 when the loan charge becomes due and therefore an immediate suspension of the legislation should be announced to allow sufficient time to ensure it is comprehensive. This is an essential and practical step.

Final thought

The review is welcome and certainly a step in the right direction. But as the dust settles and the excitement dies down, people are starting to question what the review can realistically achieve in its short lifespan. So many times taxpayers have been let down by purported reviews on the matter only to see a lack of detail thwart true application of law and justice. This inevitably anticipates another instance of HMRC marking their own homework. 

We hope that Sir Amyas will not consider himself constrained by the closed questions posed of him, and that the civil servants seconded to his review team remember their obligation to be impartial in performing their duties. We will of course seek to input our own experiences, understanding and analysis into the review where we are able and look forward to the review’s conclusions being published in November.

Additionally, we encourage the government to widen the review team and terms to remove the doubt highlighted and give those affected the confidence they need that the review reaches its conclusion -- without prejudice. 

We will continue to monitor the situation and represent our 2,000-plus clients in a manner befitting the nature of the situation and, as always, we invite collaboration from other advisers in this industry who may wish to reach out and collectively tackle this issue.

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Written by Thomas Wallace

Tom is a former HMRC Senior Inspector of Taxes who has worked in and led teams in all taxpayer segments dealing with large multinationals to small businesses.  Tom was appointed Head of Tax at WTT Consulting in 2017, where he is currently responsible for developing strategies for dealing with HMRC enquiries and client litigation.
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