Chancellor must call proper inquiry into loan charge after FOI revelations, say MPs

The MPs said, that in an FOI response, the minutes of a meeting in 2019 reveal that Ray McCann, who is conducting the current review into the loan charge, told Lord Morse, who was in charge of an earlier review: “The earlier settlement opportunity that had been open to large companies had included significant discounts, so that eventually the companies settled for somewhere in the region of 15 per cent in 2015.”

The letter, signed by the MPs Sammy Wilson, Greg Smith and Sarah Olney, says: “This is absolutely staggering considering the ruthless way that HMRC has treated individuals subject to the loan charge.

"This settlement deal in 2015 was concluded just the year before the Loan Charge was introduced to Parliament In the 2016 Budget. It is therefore now known that at the same time as HMRC were doing this sweetheart deal with multi-million pound companies, they were conceiving of a new law to retrospectively issue huge bills to individuals and convincing Ministers to implement this. This is despite the fact that HMRC failed in its duty to collect tax due from agencies and employers at the time and comments from both you and Exchequer Secretary James Murray conceding that there has been industrial mis-selling of schemes to contractors by promoters, umbrella companies and accountants, who continue to face no action.”

The MPs state that those caught up in the Loan Charge Scandal have been singled out and treated in a discriminatory way.

They add: “This revelation of the HMRC deal with large companies clearly has – and must have – a profound impact on the McCann Review into the settlement terms available to individuals.”

It continues: “The reality is that if HMRC had offered all contractors 15 per cent and fair payment terms (and of course ideally pursued the agencies/employers where possible, as HMRC failed in its duty to collect tax due from them at the time) then there would have been no need for the retrospective draconian Loan Charge, no Loan Charge Scandal and none of the huge costs HMRC has incurred in both administering the 50,000 plus cases and dealing with all the scrutiny and coverage and the many Freedom of Information requests that people have made, to expose the truth about the whole scandal.”

An HMRC spokesperson said: “We don’t recognise these claims. We’re absolutely committed to ensuring every taxpayer, regardless of size, pays the tax that’s legally due. Given an independent review is underway it would be inappropriate for us to comment further.”

The spokesman stressed that all settlements are agreed after considering the individual facts of each cases and made under published settlement terms. These apply to both corporates and individuals and clearly set out the basis under which HMRC settles, the statement added.

Between 2012 and 2015 HMRC offered employers with liabilities relating to certain disguised remuneration schemes the opportunity to settle their avoidance use through the Employee Benefit Trust Settlement Opportunity.

Since 2011, HMRC said it has also provided taxpayers with several formal opportunities to settle their use of DR (disguised remuneration) schemes and these can all be found on Gov.uk.

The Loan Charge, first announced in 2016, was designed to tackle historical use of contrived tax avoidance schemes that seek to avoid charges of income tax and National Insurance by disguising remuneration as a form of non-taxable payment, typically a loan.

There was an outcry after people on modest incomes were hit with life-changing tax bills after taking professional advice. The loan charge has also been linked with a number of suicides.

The Government has commissioned an independent review of the Loan Charge "to help bring the matter to a close for those affected whilst ensuring fairness for all taxpayers”. The review will report by this summer and the Government will respond by Autumn Budget 2025.

Mr McCann said he would not make any comment until the review is completed.