Indefensible to claim law was clear from 2010, loan charge reviewer Lord Morse told

Five revelations that undo the Morse Review’s “the law was clear from 2010” tenet – which led to new rules for loan charge contractors, have been put to its author for himself to review.

Sir Amyas Morse, now Lord Morse, is told that on top of the five signalling the law was not clear, two other “issues” relating to his review require him to ‘look again’ for “resolution.”

'Not being implemented'

Firstly, that HMRC interfered in the allocation of ‘independent’ advisers to his December 2019 review, colouring the advice given, says the Loan Charge Action Group. 

Secondly, and effectively enticing the former head of the National Audit Office to return to his inquisitor role, that his recommendations for HMRC “are not being implemented”.

All three relate to developments since the review’s 2019 publication, but the law’s clarity (as then-Sir Amyas insisted) occupies the bulk of LCAG’s 12 pages.

'Five revelations'

It is informed by the five “revelations”.

First, that in Jan 2019, HMRC’s CEO Jim Harra admitted he was having “very little success” obtaining legal analysis to understand the strength of HMRC’s ability to pursue individuals. (Perhaps even more damning, an under pressure Mr Harra admitted to the House of Lords Economic Affairs Committee this year, “ I am not claiming that the law was always clear.”)

Second, that the details of legal cases supposedly publicly justifying the charge, and the legal right to pursue individuals, has been kept under wraps by HMRC and redacted when released.

Third, that HMRC came up with the charge because they had failed to win court cases allowing them to pursue people on the basis that the loans were income, and wanted to “stop people having the right to defend themselves in court,” LCAG says.

'Must be revisited'

Fourth, HMRC knows that agencies were liable for the tax in many cases, and it was left to a 2021 court case (Hoey) to decide HMRC could not instead chase contractors retrospectively.

For the fifth ground undermining his the ‘law was always clear’ conclusion, LCAG tells Lord Morse that HMRC itself hired contractors using schemes -- and signed off their tax returns.

“With these five key revelations – none of which were publicly known at the time you conducted your review – it is apparent that the primary conclusion of your report must be revisited,” write LCAG’s founders Andrew Earnshaw and Steve Packham.

“The law was clear for some arrangements, but was demonstrably neither clear nor established for these self-employed arrangements. This is precisely why some advisers (including chartered accountants) continued to recommend that people use (and in some cases transfer to) arrangements that were not covered by the 2011 legislation.

'Parliament changed the law to catch self-employed'

In their letter, the LCAG founders continue: “It is also why the government and HMRC sought to legislate and announced that they would do so in 2016, because they knew full well that the law was still NOT clear for those types of arrangements that were not covered by the 2011 legislation.

“In fact, it was only in 2017 that parliament changed the law to ensure that the self-employed would be caught by the use of loan-based schemes. Thus, the law was manifestly (and more importantly, legally) not clear – and only finally became clear and established by the Supreme Court in 2017 [at Rangers].”

Keith Gordon QC, who is quoted in the letter by LCAG to support its five-point case to Lord Morse, said on Twitter that he expects the former civil servant to respond proportionately.

'Lord Morse will take the LCAG letter seriously'

“When I met Sir Amyas, as he then was, I believed he was a man of integrity,” the barrister began in a Tweet.

“So, when his report was published, I believed he had been misadvised on the Dec 2010 point. If I'm correct on these two points, I'm sure he'll take the LCAG letter seriously and reconsider his position.”

In the letter, Lord Morse is asked to clarify any criteria he gave for appointing officials to his review, in light of an email showing a government source expressing reservations about using prior Select Committee witnesses. 

'Spirit, and more suicides'

Lord Morse is further told that the “spirit” of his recommendations has been disregarded; notably by HMRC on ‘reasonable disclosure,’ ‘voluntary restitution,’ the three-year election, and by a catch which prohibits repayment application from any party not party to the original settlement.

In a section of the letter calling for a “fair resolution”, LCAG reflects: “All the evidence presented in this letter and taken together means that regrettably, your review has failed to deliver what you intended and has most certainly not resolved the loan charge issue and the scandal associated with it.

“Based on the disclosure of all this evidence, some of which was clearly withheld at the time of the review, your key conclusion - that ‘the law was clear from 9 December 2010’ cannot now be reasonably justified or defended.”

The group’s Mr Earnshaw and Mr Packham conclude by telling Lord Morse: “We therefore urge you to now make a public call to revisit this issue - knowing how many lives depend on it, knowing how many people are on the verge of mental breakdown and knowing that it is likely there will be more suicides if HMRC enforce the loan charge as it stands.”

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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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