Loan charge review - Government response is here

[RickG]

I would have to observe that the above is, in my opinion, unfair.

There is a lot of detail in the 83 pages of the report and the 19 pages of Government response.

Some of it is entirely on the "side" of taxpayers. Some of it is entirely on the "side" of HMRC.

He has however sought to find a balance and I for one think that once the noise and knee jerking settles down, most commentators would find that he has broadly achieved this.

Sir Amyas' report contains plenty of evidence of questionable or unfair treatment. A key one being the transfer of liability powers being extended:

3.11 The Loan Charge permits more straightforward transfers of liabilities. HMRC
has existing powers to transfer liabilities of certain tax debts from employers
to owner/managers of the employer. Employers’ Loan Charge liabilities are
capable of arising on individuals (typically the owner/managers of the
employer but, in certain circumstances, employees) in a way that goes
beyond other elements of the tax system which permit transfers of liabilities
in more limited circumstances. The Review received particular evidence
regarding employers’ liabilities arising on individuals when the employer had
been dissolved many years ago, particularly when no investigation into the
employer’s tax affairs had been opened at the time (and so arose from an
Unprotected Year).

Or that the outcome of the Rangers case wasn't established in ernest until 2015, and in fact HMRC changed their position post ruling, so could not have "always been clear" as they allege:

2.22 HMRC began to have success in their appeal in 2015 against the earlier
decisions in favour of Rangers Football Club. The Inner House of the Court of
Session (equivalent to the English Court of Appeal) found in HMRC’s favour
in 2015. The case was finally decided in HMRC’s favour by the Supreme
Court in 2017.9 The decision held unanimously that the contributions into
the trust were employment income, with a PAYE liability for both income tax
and NICs falling on the employer. This followed a change in HMRC’s
argument at the Court of Session, that PAYE was due upon payments by the
employer into an EBT – meaning that the circumstances in which the tax
liability could be transferred from the employer to individua scheme users
was narrower than under HMRC’s previous argument which had not been
accepted by the FTT or UT. The Supreme Court also held that two earlier
cases (Dextra and Sempra), had been wrongly decided by the lower
tribunals.

Or by HMRC's own evidence, there was no sudden clarity to taxpayers post 9th December 2010, justifying that all loans post this date should still be subject to the Loan Charge:

1.25 From 2009 onwards, HMRC also published its view in specialist Spotlight
articles, which reach a limited number of agents and tax professionals.
Evidence about the readership of relevant Spotlights from the time is not
available, but in 2015 (when data is available) the four articles published to
that point received an average of just 520 views each. The Review therefore
concludes that both individual scheme users, and those using schemes
through their employers, would likely have continued to be largely unaware
of HMRC’s position at this time.

And certainly HMRC were NOT "always clear" when it came to informing taxpayers:

2.26 Despite the mass market nature of the scheme usage, HMRC’s
communications until 2014 continued to be aimed at tax professionals
through the technical Spotlight articles.

They are mentioned in the report. They seem to be of critical importance to the fairness of the Loan Charge. Yet there are no follow up actions recommended off the back of these. They are simply ignored.

So I cannot agree with your observations on Sir Amyas' conclusions from this review.

[starstruck]

And I would agree that a loan from before 9/12/10 and where there is no valid open enquiry, is now beyond HMRC's reach.

However, your initial post neglected to mention the VITAL piece of information, that you had no enquiries.

My assumptions was that as you were discussing the "depreciation" elements, your years were all open.

I suggest that I cannot be blamed for making an assumption that if you mentioned a feature of a loan from pre 9/12/10, you had a real and pressing concern.

I can work only with facts and reasonable assumption. I cannot guess.

Yes, ok, but you joined in to an ongoing conversation between ILikeTax and I without looking at the context and made incorrect assumptions. For the record, the conversation was as follows:

Me (#2)

Woohoo

All my loans are pre-2010 closed years! No more LC -
Now that is a lovely Christmas present!

ILikeTax to Me (#9)

Woohoo

All my loans are pre-2010 closed years! No more LC -
Now that is a lovely Christmas present!

Unless you've already gone and got them released...

If you've done that you might need to do some more lobbying.

Me back to ILikeTax (#35)

Unless you've already gone and got them released...

If you've done that you might need to do some more lobbying.

They depreciated to close to zero and the remaining balance of a few hundred pounds as waived (actually it was not sterling that was waived but it was of that magnitude) in 2005-ish. For most loans the trust was also closed pre-2010 also. Where does that leave me? The loan charge was the only legislation that ignored currency devaluation as far as I’m aware - it magicked back my loans.

I was asking ILikeTax. Anyway, all cleared up now so all good

[dammit chloe]

Sir Amyas' report contains plenty of evidence of questionable or unfair treatment. A key one being the transfer of liability powers being extended:



Or that the outcome of the Rangers case wasn't established in ernest until 2015, and in fact HMRC changed their position post ruling, so could not have "always been clear" as they allege:



Or by HMRC's own evidence, there was no sudden clarity to taxpayers post 9th December 2010, justifying that all loans post this date should still be subject to the Loan Charge:



And certainly HMRC were NOT "always clear" when it came to informing taxpayers:



They are mentioned in the report. They seem to be of critical importance to the fairness of the Loan Charge. Yet there are no follow up actions recommended off the back of these. They are simply ignored.

So I cannot agree with your observations on Sir Amyas' conclusions from this review.

That is exactly what I mean about the repercussions. I think the comment is fair, the recommendations and repercussions are most definitely not.

[webberg]

So I cannot agree with your observations on Sir Amyas' conclusions from this review.

As is your prerogative.

I can point out places in which those he interviewed lamented the demise of an enquiry system in which it could be years before the "right" decision was reached and which was often one of the main selling points of the scheme.

Quite why anybody would still be clinging to the "form over substance" stance in defeating any enquiry into a tax avoidance scheme is beyond me, but it's clear that such views persist and SAM felt that this was "playing the system" and should not be permitted.

Further, he says that 6,000 instances of the use of schemes post March 2016 so clearly the loan charge is failing in those instances to meet one of its objectives and cannot therefore be wholly rolled back.

I see also comments about punishing HMRC for the way in which they go about enquiry and the like. I agree that they have been heavy handed and have gone beyond their remit. I've said so to Parliamentary enquiries and to MPs and to HMRC - every day. Do I think that individual officers should be singled out and punished? Yes, I do where it can be shown that they deliberately and wilfully exploited vulnerable people.

Do I think that the designers of the loan charge should be punished? Yes.

Do I think any of the above will happen? No.

Do I think that if this happened, contractors would be better off? No.

[RickG]

Just to be clear, I meant no offence to you personally webberg. I have the utmost respect for what you've done and continue to do - I just don't see the outcome of the report in the same way as you.

I think, perhaps, too much emphasis has been put on balancing the needs of hmrc to collect revenue vs the fairness to taxpayers, and not enough on the terrible harm which has been inflicted because of those unfairnesses. 7 suicides attributed to the Loan Charge legislation were glossed over, yet the publishing of hmrc officers' names was singled out as unacceptable.

[BrilloPad]

I would have to observe that the above is, in my opinion, unfair.

There is a lot of detail in the 83 pages of the report and the 19 pages of Government response.

Some of it is entirely on the "side" of taxpayers. Some of it is entirely on the "side" of HMRC.

He has however sought to find a balance and I for one think that once the noise and knee jerking settles down, most commentators would find that he has broadly achieved this.

I respect your opinion and concede you may be right.

However I disagree. Retrospection is entirely wrong. It has led to 7 suicides.

I want the retrospection to be removed. And HMRC to pay for those suicides.

I would not be so worried if HMRC had gone after scheme providers and large multinationals with the same vigour they came after the little guy.

I also think the language used in the report is vague and will lead to more litigation and more use of advisers.

To repeat though, you are entiltled to your opinion. And I might add you have done great work, but in terms of attacking the LC and helping those affected.

[wilks]

I have no idea what HMRC will do and I doubt if they will know yet.

It will probably be a lot easier now to find people with old loans because of the April 2019 loan charge disclosures that have been made concerning the individual directly (e.g. by the individual, the lender, the employer) or indirectly (because they now know the PAYE scheme reference number of the employer who used the schemes and so can identify all the other employees with the same employer).

In terms of time limits, extending the discovery from four years to six years would probably be quite easy where nothing was disclosed on the tax return. But 9 December 2010 is a lot more than six years ago. Extending the discovery period to 20 years may be too much of a challenge in most situations. But it will be a question of understanding the right facts. If, for example, HMRC came across an email chain where:

1. the individual was told by their adviser to include something on their tax return about the loans but decided that that would be way too risky and so chose to not even bother completing a tax return then despite their adviser saying that was wrong then HMRC may well want to take the point.

2. the individual was told by their adviser to include the loan benefit in kind on their tax return, and did, then absent anything other facts I can't see HMRC being able to go back, or wanting to go back, 20 years.

_____________

thanks ILT, yes indeed the bar for the 20 year discovery assessment is very high. May not stop HMRC from trying unfortunately but I think tribunals will prevent them been successful in most/all cases. HMRC know the bar is very high and this is why they have not done this previously i.e. they could have done this well before LC to open closed years and collect interest in addition to income tax in settlement / litigation but have not.

[Tiger22]

What goes in our SATR for 18/19?

So any loans pre-9th December 2010, even though we have had to disclose them to HMRC via the disclosure deadline, do not have to be included in our SATR for 2018/2019? Is that correct?

I am settling (still waiting on HMRC) for some earlier years and also have some closed earlier years but if I don't have to mention any of these on my SATR it will make things much easier.

[DealorNoDeal]

Further, he says that 6,000 instances of the use of schemes post March 2016 so clearly the loan charge is failing in those instances to meet one of its objectives and cannot therefore be wholly rolled back.

That is depressing.

Use of DR schemes should have ceased in Dec 2010 when primary anti-avoidance legislation was introduced to prohibit DR. The writing was on the wall then that any attempts to circumvent this legislation would be like red rag to a bull.

It's a pity that HMRC didn't do more, over the years, to stop charlatans flogging this dodgy crap.

[BrilloPad]

That is depressing.

Use of DR schemes should have ceased in Dec 2010 when primary anti-avoidance legislation was introduced to prohibit DR. The writing was on the wall then that any attempts to circumvent this legislation would be like red rag to a bull.

It's a pity that HMRC didn't do more, over the years, to stop charlatans flogging this dodgy crap.

If only HMRC spent as much time harrassing scheme providers and large multinationals the way they hassled the victims of LC.

However the writing was clearly on the wall in March 2008. When wholesale retrospection was used for the first time. I went limited then - many I knew went into loan schemes.

HMRC suffered a major blow with Arctic(2005?). Since then they are getting more and more dangerous each year. As "the future of contacting" forum demonstrates.

I am just not sure what can be done to clip their wings.

Having said that, it is hard to feel much sympathy for the 6000. Do they really do no research?