Lord Forsyth likens HMRC CEO Jim Harra to 'Pontius Pilate,' in testy IR35, loan charge exchange

A testy exchange between Lord Forsyth and HMRC CEO Jim Harra climaxed when the peer accused the taxman -- to his face -- of being “a bit of a Pontius Pilate.”

Historically documented as a tax collector from the 1st century disliked for being stubborn, inflexible and cruel, Pilate was referenced by the veteran Tory, but more for his infamous washing of hands.

It is an act Lord Forsyth charged Mr Harra’s HMRC with in relation to the recent selling on by promoters of their loan books.

'You are doing a Pontius Pilate'

“First of all I’m not doing a Pontius Pilate,” rejected a shocked-sounding Mr Harra. “We did not…[he gets cut off by the interrogating Lord].”

“You are [doing a Pontius Pilate]. You're saying they [affected contractors] need advice and it’s not a matter for us,” said Lord Forsyth, paraphrasing Mr Harra who twice said HMRC was not party to the loans.

“The fact is you took money from people in tax, on the loan, on the basis that it wasn’t a loan. And now if the loan is actually subsequently repaid, why should they not get the tax back?”

'That's not the point'

Trying to gather himself to defend the peer’s broadside, launched towards the end of a Lords Economic Affairs Committee session on Thursday, Mr Harra resorted to stating the obvious:

“HMRC did not invite or encourage anyone to take part in these schemes.”

But his non-answer was cut off. “That’s not the point,” stated Lord Forsyth, shaking his head.

'When the loan charge crystalised'

Visibly ruffled and increasingly red-faced Mr Harra continued: “Having done so, they [contractors] are now facing this issue. Which they have to deal with.

“It is the case, if you take the loan charge, that it did envisage that if loans were not repaid by a certain date then that is when the loan charge crystalised. And, you know, there is no provision that if something then happens after that date, that anything changes.”

The Tory peer fired back: “But it was your action [as HMRC], that has created that difficulty.”

The statement sums up the respected peer’s entire set of questions.

'Growth in umbrellas a direct result of HMRC's changes'

In fact, the Revenue not taking responsibility for issues it is widely perceived to be responsible for is the theme which permeated the comments of Lord Forsyth, who chairs the committee which has been credited as ‘really knowing its stuff.’

“The growth of [bad] umbrella companies…arises as a direct result of the changes you [HMRC] have made,” Lord Forsyth told Mr Harra.

“And [you] turning around and saying ‘well, we hope the government will come forward with legislation to deal with this…[is not acceptable].’”

“We just get the impression that the little people who get smashed by it are incidental [to HMRC],” continued Lord Forsyth, referring to IR35 reform. “And that you are not taking any responsibility for the consequences of your own actions.”

'Umbrella industry now on a scale never before seen'

Baroness Kramer, the Liberal Democrat peer later enforced to Mr Harra: “HMRC’s steps in the off-payroll arena have led to…the creation of a whole new umbrella company industry, on a scale that has never been known before.”

The baroness asked HMRC’s boss: “Do you recognise that the off-payroll consequences essentially [are] firing up the [umbrella] industry? [And that they’re] essentially quite perilous for contractors? And I’m trying to work out what protections are in place to deal with that.”

But then, Mr Harra appears to smirk at being able to duck the former transport minister’s tough question, as he passed it to Mary Aiston, HMRC director of counter avoidance, who was also giving evidence to the committee.

'Contractors for the high jump, amid no other way to put food on the table'

Two other well-placed questions by Baroness Kramer are winning her new fans on social media. The first came from her outline of IR35 reform’s impact.

“If they get it wrong,” she said, referring to taxpayers trying to understand HMRC guidance on umbrella working and IR35, “they’re for the high jump.

“I guess I was hoping to hear something much more aggressive [from you and HMRC] in terms of providing protection from contractors, who are finding themselves in this position because thanks to the change in off-payroll working, there really is no other practical way in which they can put food on the table.”

'No single overarching opinion for loan charge's validity'

The baroness’s other big moment was to force Mr Harra to admit that neither HM Treasury nor HMRC is in receipt of a single overarching legal opinion on the validity of the Loan Charge.

“I don’t believe there is a single overarching opinion,” began HMRC’s permanent secretary, when asked about his email admission that he had ‘repeatedly failed to obtain’ one.

“There are a multiplicity of schemes; a multiplicity of fact patterns and a multiplicity of tax years [for] which different pieces of legislation were in force. So there isn’t a single overarching opinion, and I don’t think there can be.”

'No-holds-barred campaign'

Other previously released email claims of Mr Harra’s were scrutinised by peers and put to him, such as his ‘debacle’ comment, and that ‘HMRC could never accept a narrative that taxpayers were innocent or naïve victims’ (even though he admitted in Thursday’s session that the law on disguised remuneration had not always been clear).

In answer to both areas, HMRC’s boss gave prepared answers.

For example, it was  a ‘debacle’ because the charge was “difficult for HMRC to deal with,” and saw a “no-holds-barred campaign” mounted against HMRC which saw one tax officer’s home photographed and uploaded to social media.

'I was frustrated'

But throughout the 90-minute Q&A session, Mr Harra suggested the release of his “internal” emails as he kept pointing out, was unfair (I use “colourful language” to rally my team; I have a “leadership style” and am known for “candour” on email’).

And more than that because despite the senior civil servant admitting to being “frustrated” when he wrote the now-released emails, his comments were being “overplayed,” he said, pointing his finger at campaigners, but also at the lords and baronesses.

In particular, a questioning Lord King of Lothbury got told by the HMRC chief executive:

“What you are…what the committee is doing, and what campaigners are doing, is taking one internal email that I sent, probably in frustration to my people really urging them to do better in cutting through on our line. And [you are] really overplaying its meaning and its significance.”

'Lack of credible response'

Unflapped, the former governor of the Bank of England replied: “Having worked in a large bureaucracy in the government field myself… I understand that expression of concern and frustration on your part.

“But my experience would suggest that it also reflects a genuine lack of credible response of the organisation [HMRC]. And that it [the legal basis for the loan charge] wasn’t quite as clear as you might have wished it to be.”

Last night, Steve Packham of the Loan Charge Action Group reflected to ContractorUK: “The members of the committee were right to press Jim Harra on his email where he clearly admits that he couldn’t find legal analysis to back up HMRC’s strategy of pursuing individuals. It was clear that HMRC are acutely embarrassed at the latest revelations from their internal emails.

“And Baroness Kramer forced an admission that HMRC have no such opinion. Committee members were right to point that out that if the law was not clear even to HMRC, it was not clear for ordinary people and certainly not clear enough to justify pursuing individuals in this life-ruining way.”

'Staggering'

Mr Packham described HMRC being unable at Thursday’s session to put a figure on how much the Loan Charge (as a single policy) raises for the exchequer as “staggering.”

“Five years after the policy was first introduced to parliament, HMRC cannot or will not give a straight answer as to how much money the loan charge is projected to raise,” he said.

“Instead, [the Revenue] have deliberately conflated this with other activity and revenue to give the false impression that the Loan Charge will raise [£3.2billion].”

'Sticking to £3.2bn will make my life easier'

Online, the ‘£3.2billion yield of the loan charge’ (criticised back in March 2019 as “unproven”) is generating the most reaction to Thursday’s session.

And that reaction is snowballing as another internal HMRC email released under freedom of information rules, purporting to be written by Ms Aiston to her tax department colleagues, states:

“I’ve learnt £3.2bn as a figure so if [we] can stick to that for TSC [Treasury Select Committee] it will make my life easier.”

'Extraordinary'

MPs on the Loan Charge APPG say it is “extraordinary” that both Mr Harra and Ms Aiston only gave the £.3.2billion figure on Thursday when asked about the charge’s yield.

“I do not think the £3.2bn [figure] was ever meant to relate to the loan charge,” tweeted tax barrister Keith Gordon.

“All along, the LC was described as ‘part of a package designed to bring in £3.2bn’. That figure was used to make MPs feel there was a huge hole to fill and scare them away from objecting to the LC as a policy.”

On Ms Aiston’s purported email in particular, the QC also said: “If anyone had suggested to me that a senior civil servant would give statistical data to a parliamentary committee on the basis of a figure that was easy to remember rather than one that was accurate, I would have said that that was going too far.”

'Misinformation, disinformation'

However, it is Loan Charge APPG MPs who are the latest to go to great lengths.

Clearly disappointed that Mr Harra used Thursday’s session to take long-held charges of “misinformation” against the Revenue and redirect them against the MPs and other loan charge critics, the parliamentary group has made available some 13 letters and reports it had already logged to show “disinformation” by the tax authority.

The most recent entry of the 13 is dated June and relates to when the MPs asked the prime minister Boris Johnson to intervene.

But the group’s full catalogue of loan charge misinformation by HMRC goes as far back as almost two-and-a-half years.

'Looking for new angles all the time'

“Campaigners against our work on Disguised Remuneration are looking for new angles all the time,” accused Mr Harra. “We’ve had a campaign of misinformation [run against HMRC]. We’ve had false allegations being made about the honesty of senior officials including myself. And false evidence given about our actions.”

At LCAG, the thinking is that the best thing now is for an independent body to be brought in to decide who is being economical with the truth.

The Loan Charge APPG agrees, calling via Twitter since the misinformation tit-for-tat for “an independent investigation.”

'Elephant in the room'

Yet with Mr Harra claiming to peers on Thursday that he did not know where the phrase “the elephant in the room” had been used internally about the loan charge (he was the recipient of an HMRC staff email containing it), Mr Packham suggested the taxman was off to a bad start.

“It is odd that Mr Harra claimed he didn’t recognise the phrase ‘the elephant in the room’ from internal emails about HMRC’s own use of contractors using loan arrangements, considering that HMRC have refused to clarify what this means when replying to Freedom of Information requests,” he said. "So the matter has been now referred to the Information Commissioner’s Office."

Mr Packham added: “It’s high time that there is a proper investigation into the chronic disinformation peddled by HMRC over the loan charge, something that the Loan Charge and Taxpayer Fairness APPG have consequently called for and something that is a stain on the UK civil service.”

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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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