HMRC admits to processing just 3% of Loan Charge refunds

The overly complex process of getting a loan charge refund from HMRC -- which experts warned on last year-- has showed up in the latest official figures.

Released to a national newspaper under freedom of information rules, the figures show that of the 1,850 taxpayers to pay the charge but apply for a refund, HMRC has processed just 50.

Shown the figures, LCAG’s Steve Packham told ContractorUK that they prove “HMRC will do all it can to hold onto people’s money, regardless of what Sir Amyas Morse instructed.”

'Not abiding by Morse in spirit'

Packham was referring to the ex-NAO head using his December 2019 review of the charge to nullify it on schemes pre-December 2010 (with caveats), resulting in refunds for many.

A co-founder of the Loan Charge Action Group, Mr Packham further reflected of the figures: “It’s clear that HMRC are not abiding by the spirit of the Morse Review.

“Some 11,000 people [were] supposedly taken out of the reach of the Loan Charge, yet so far [there have been only] 1,800 applications for refunds…[with] just 50 processed.”

'I've paid; I should let it go'

As to the small number of applications, the House of Lords Economic Affairs Finance Bill Sub-Committee was served a half-warning on the issue in December last year.

“The fact that people have to make an application rather than the refund being automatic means that a lot of people are going to take the view: ‘I’ve paid it. I should let it go’.”

Elaborating on her implied criticism of the refunds process; Merdeith McCammond, technical officer at The Low Incomes Tax Reform Group also told peers at the time:

'Very long-winded'

“The process will put…[others] off. It is very long-winded. There are about seven stages. It is conceivable that a number of taxpayers are just going to put it in the ‘too hard’ basket.”

Even for those who do approach HMRC, a rapid turnaround looks unlikely, as officials must distinguish between repayment and waiver elements within the often complex settlements.

But advisers to affected contractors say that the refund delays are down to both “obfuscation” by some tax staff, and their seconding onto HMRC’s covid-related programmes.

'HMRC are overwhelmed'

Mr Packham said: “[It’s] apparent that HMRC are overwhelmed by the administrative burden – [the burden] of what HMRC boss Jim Harra himself called the ‘Loan Charge debacle’”.

According to the department’s figures, released to the Telegraph, £3.6m has been refunded, or waived, by HMRC to 50 loan charge taxpayers, equating to an average of £72,000 each.

The paper then cited advisers RSM saying that, assuming that 900 of the remaining refund applicants are eligible, HMRC could end up with a loan charge refunds bill of £65million.

'Administrative shambles'

“MPs will need to challenge this unfair situation and ensure that all those who are due refunds actually receive them,” LCAG said last night.

“They also need to make ministers finally see sense that the Loan Charge has been a disastrous mistake and an administrative shambles, as well as an injustice, and it needs to be scrapped and the rule of law restored.”

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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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