Why Sir Amyas Morse’s Review of Loan Charge 2019 is a fudge

The run-up to Christmas is often a stressful time for many families, but the close of a 2019 was a time of huge anxiety for many thousands facing the controversial 2019 Loan Charge, due to the delayed publication of the Loan Charge Review, writes Steve Packham, co-founder of the Loan Charge Action Group.

The review, conducted by Sir Amyas Morse, was supposed to report in mid-November but the announcement of the election saw it delayed until after the election result. Just when it seemed as though we might not see it at all in 2019, suddenly, on the final day of parliament before Christmas, the report -- and the government’s response -- were both published.

What’s been announced

The report -- and the response -- were greeted with a very mixed response.

For some, those with loans only prior to 2010, it meant they no longer faced the Loan Charge.

For the rest, however, the majority, the retrospective charge remains in place and with the same life-changing and life-ruining sums, with no reduction -- and no suggestion that promoters or HMRC should pay a proportion, despite their roles in selling or recommending these schemes and failing to warn those being sold them as legal and compliant.   

Sir Morse also recommended those with closed years, where they gave “reasonable” disclosure, should also no longer face the Loan Charge.

But in an ominous tweak, the government changed this to “full disclosure” which suggests that HMRC will now demand more than was required, by law, at the time, which isn’t what Sir Morse surely intended.  

So, for some a huge early Christmas present. But for many, little change other than a longer period to pay tax that it still has never been legally proven was due -- or that they can actually afford, regardless of the longer time frame.

The January deadline moved to September 2020

Thankfully, the January 31st 2020 deadline has now finally been shifted and affected taxpayers will have until September 2020 to declare arrangements on their tax return.

Crucially, there will have to be changes to the legislation and this then allows the many supportive MPs to seek to amend the Loan Charge more fundamentally -- and more satisfactorily and even more justifiably. They could even seek an end to all and any retrospective application.  

Looking at his review document, the biggest disappointment is that Sir Amyas Morse failed to address the fundamental criticism (of many MPs and others) that the Loan Charge undermines the rule of law. Tinkering with historic dates doesn’t do that and he provided no credible justification of taking away the basic rights of those facing the Loan Charge from 2010 to 2017. 

Confirmation: the 2019 Loan Charge is retrospective  

One related, significant and welcome inclusion however, is that the Morse report has confirmed what was obvious all along. The Loan Charge is retrospective. The dishonest attempts of HMRC and Treasury ministers to claim otherwise has now been exposed. The Lords told them it is retrospective and now an independent reviewer has told them too. It is just that now, it is going to be less retrospective -- but retrospective it still will be.   

If retrospection taxation is wrong (and the clear view in the previous parliament was that it was wrong), then the Loan Charge still cannot be justified before the Loan Charge came into law, so we -- the Loan Charge Action Group -- will continue to push for this. And we know many MPs will do the same as many of them (both re-elected and newly elected) signed the Loan Charge commitment during the general election campaign, which explicitly committed them to oppose any retrospective application of the Loan Charge.   

Wrong, unjustifiable, odd

Where the Morse Review got it wrong, was in the conclusion that it was legally clear that loan arrangements were not acceptable from 2010, when this was not clear either legally or to those who entered into schemes in this period following professional advice and in good faith.

HMRC most certainly had not made it clear to people. The Revenue’s publication Spotlight 33 in 2016 was the first indication that the department gave that the schemes ‘may not work.’ Even then individuals would have to ‘Google’ for it. So, on this point and in allowing HMRC to continue to bully and bankrupt thousands of people without the basic civil right of defending oneself in court, the conclusions are wrong and unjustifiable.  

What is odd about this conclusion is that if it was clear that the schemes were illegal, then HMRC could and should have challenged them within the statutory time limits and following due process. The crux question remains that if the schemes were not lawful and were challengeable by HMRC, then why is the Loan Charge needed at all?

This is the question that the Morse Review ducks and others in officialdom refuse to answer because the fact is that as the Loan Charge APPG Review concluded, the Loan Charge is a convenient way for HMRC to circumvent the law, covering  up their own failures to act and collecting tax without bothering to prove it is due in court. That is simply not acceptable, regardless of whether the arbitrary retrospective period picked is the outrageous original 20 years, or the still shocking ten-year period HMRC will be permitted to go back and ruin people.

The fudge

It is of course right, that those with closed years, should not face any further action (as always should have been the case), but those with open years should still be allowed their basic rights and due process and to defend themselves against HMRC claims. 

The logical conclusion of the review should actually have been no Loan Charge pre-the Loan Charge legislation, restoring basic taxpayer protections. And Sir Amyas’ conclusion on this is a fudge, designed presumably to find a middle ground, rather than to really finalise the issue. He, the Treasury and HMRC must realise that it doesn’t bring finality and is a fudge, meaning the campaigning by us and others on behalf of the affected will go on.  

It is also important to realise that Sir Amyas, while he clearly conducted a professional review, did so within the restrictive terms set down by the Treasury, to assess whether or not the Loan Charge was an appropriate response to ‘disguised renumeration’. 

Sir Amyas was confined by the conditions, so let’s continue

What is particularly notable is that the review merely dipped into the appalling behaviour of HMRC and it failed to address the constant and deliberate misinformation. Sir Amyas failed to uncover how and why HMRC sought to introduce the Loan Charge in the first place; something that still remains key to understanding the whole scandal. The misconduct of HMRC and the disinformation from its officials and HMT (as the Loan Charge APPG enquiry lays bare) must be subject to further scrutiny, even a wider report -- and it is time for a wider campaign for the kind of reform urgently needed at HMRC to prevent this and other scandals from occurring again.       

Fortunately, MPs and peers have indicated that they intend to recommence the vigorous Loan Charge All Party Parliamentary Group (APPG) this week. Indeed, it might now be 2020 but already MPs have tabled questions on the 2019 Loan Charge. So, the campaign goes on and we will continue to fight for real justice -- until we get it.

Profile picture for user Steve Packham

Written by Steve Packham

Steve Packham is a contractor, and founder member, executive committee member and spokesperson for Loan Charge Action Group (LCAG).
Printer Friendly, PDF & Email

Contractor's Question

If you have a question about contracting please feel free to ask us!

Ask a question

Sign up to our newsletter

Receive weekly contractor news, advice and updates.

Every sign up will be entered into a draw to WIN £100 Amazon Vouchers.

* indicates required