Show some leadership over the loan charge 'debacle,' Boris Johnson urged

Boris Johnson was challenged last night to “show some leadership” over the Loan Charge, after the prime minister showed his willingness to speak up about the HMRC policy.

Responding to the PM’s surprise admission of sympathy for affected taxpayers, notably that they have “suffered” by being “misguided” into schemes, LCAG said he should go further.

Speaking just hours after a new taxpayer threatened to MPs to become the eighth person to commit suicide due to the loan charge, the group’s Steve Packham told ContractorUK:

“It is time that the prime minister -- and chancellor -- showed some leadership on this.

“Over a discredited policy that was not of their making, a policy that damages the reputation of the government…[and that is] pushing people to kill themselves.

'Time to come up with a resolution'

The co-founder of the Loan Charge Action Group (LCAG), Mr Packham added: “It’s time to come up with a resolution and we hope…pressure from MPs will lead to that.”

The LCAG boss was referring to a new letter to Mr Johnson and Rishi Sunak, seeking “fair resolution” from the loan charge “debacle” – a phrase HMRC’s boss has been caught using.

Signed by 76 MPs, the letter refers to other embarrassing revelations for HMRC, such as the fact that it was the tax office all along, not HM Treasury, which invented the loan charge.

Emails written by HMRC chief executive Jim Harra (and other officials) are the source of the revelations, dragged out into the light by campaigners using Freedom of Information rules.  

'Very little success on legal analysis'

Infuriating MPs, one of Mr Harra’s emails states: “In recent months I have repeatedly tried to obtain legal analysis to understand the strength of our claim with very little success.”

Tom Wallace of tax dispute advisory WTT Consulting has already assessed the implications of the statement for ContractorUK, and sounded some caution. But the 76 MPs want answers.

“This [statement by Mr Harra] undermines the claim that that the loan charge is based on the outcome of legal cases,” the MPs claim in their letter.

“The reality is that the Supreme Court judgment in the Glasgow Rangers’ case in 2017, often wrongly cited as legal precedent for the loan charge, deemed employers to be liable for any tax deemed to be avoided and did not give HMRC the right to directly pursue individuals.

“The admission by Mr Harra also fundamentally undermines the conclusion of the Morse report, which claimed ‘the law was always clear’ from December 2010, when HMRC themselves can’t prove that – and when in reality the law was far from clear, hence the decision to legislate in 2016.”

'HMRC clearly out of control'

The SNP’s John McNally has picked up on Mr Harra’s admission too and it was Mr McNally who asked the PM a question last week which forced Mr Johnson’s show of sympathy.

“HMRC, clearly out of control, accountable to no one, has managed to hoodwink and mislead his own Treasury ministers,” the MP for Falkirk began.

“And now, according to the head of HMRC, the retrospective loan charge appears to be without any legal basis or justification. Therefore, will the prime minister accept that this matter needs further and immediate investigation?”

“I am acutely aware as I think all…[MPs in attendance are] of the pain suffered by those who entered into loan charge schemes," Mr Johnson replied. And I think that alas, they were misguided to do so.

"But I think that the line taken by the Treasury, I’m afraid, is right on this."

'Hounding taxpayers'

The PM therefore declined to investigate the matter but, potentially significant, he did not challenge the characterisation of the loan charge as retrospective.

Mr Johnson also did not challenge an assertion from Mr McNally, in the earlier part of his question, that HMRC is “hounding” taxpayers.

But Conservative MP Esther McVey has had less success with a question in the House of Commons.   

Formally asking what discussions the chancellor has had with relevant parties about the effectiveness of the loan charge framework, “with reference” to the embarrassing Freedom of Information Act disclosures about HMRC, Treasury minister Jesse Norman replied:

“The chancellor…has not had any recent discussions nor made any recent assessment as referenced in these questions,” the minister claimed on Friday.

'Extraordinary revelations'

But LCAG says the revelations which the 76 MPs have now broached formally to both Mr Sunak and the PM are nothing short of “extraordinary.”

Last night, Mr Packham said: “[The Revenue’s] internal emails show clearly that HMRC have misled ministers and MPs, as well as showing that they know the whole thing has become a ‘debacle.’

“The fact that so many parliamentarians are signing this letter shows the strength of feeling in Westminster over what is now known to be a policy-making scandal and a disgraceful campaign of disinformation from HMRC and the Treasury.”

However the Loan Charge APPG, which coordinated the letter, is receiving correspondence of its own. In an ominous post, the cross-party MP group revealed: “We’ve received another email from someone facing the loan charge who is feeling suicidal. This is someone who has previously emailed [HMRC’s] Jim Harra several times, without any resolution. This is the appalling reality of the loan charge. Please listen, Boris Johnson and Rishi Sunak.”

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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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