Former Tory leader slams 'appalling behaviour' of HMRC over loan charge

The Government has no plans to extend the deadline for people facing the loan charge, despite claims by MPs that it could lead to scores of bankruptcies.
Sir Iain Duncan SmithSir Iain Duncan Smith
Sir Iain Duncan Smith

Jesse Norman, the Financial Secretary to the Treasury, indicated there would be no U-turn over the issue in a written response to a question tabled by Owen Thompson, MP, the SNP Whip.

Iain Duncan Smith, the former leader of the Conservative Party, told the House of Commons that HMRC historically had behaved “appallingly” with regard to the loan charge.

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He said people facing the loan charge can’t possibly finalise settlements by September 30. He called for a six month delay and a Government debate.

Mr Thompson had asked Chancellor of the Exchequer Rishi Sunak, if he would extend the loan charge declaration deadline from the end of September 2020 to the end of January 2021 to provide time for delays due to the Covid-19 outbreak.

In his written reply, Mr Norman said HMRC had announced in December 2019 that it would extend the deadline from January 31 2020 to September 30 2020, for individuals due to pay the loan charge to submit their 2018/19 Self Assessment returns and pay the tax due or agree a time to pay arrangement.

Mr Norman said: “This deadline has long been established and the extension has given taxpayers an additional eight months to file their returns and decide whether to make an election to spread their loan charge liability over three years.

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“Loan charge taxpayers are able to file a full and accurate 2018/19 self assessment return by the September 30 2020 deadline.

“The Government has no plans to extend the deadline beyond 30 September 2020,’’ Mr Norman added.

“HMRC will keep the situation under review and will take a proportionate and reasonable approach to anyone who is unable to file their tax return and pay the tax due or agree a time to pay arrangement by the 30 September 2020 deadline as a direct result of Covid-19.”

Members of the Loan Charge All Party Parliamentary Group have written to Mr Sunak proposing what they describe as a fair and affordable settlement opportunity that taxpayers could enter into without admitting wrongdoing.

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Liberal Democrat MP Munira Wilson claimed the loan charge has left some of her constituents facing bankruptcy at a time when the country is suffering the economic impact of Covid-19.

Ms Wilson is calling on Mr Sunak to make the “punitive loan charge” fairer for her constituents who have been hit with significant retrospective charges.

Conservative MP Matthew Offord has also written to Mr Sunak to express concerns about the loan charge, and stated on Twitter:

"I have written to the Chancellor of the Exchequer, urging him to review and accept the reasonable proposals put forward by the Loan Charge APPG which would allow many people to reach affordable settlements.

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“At a time when many of my constituents are facing financial pressures due to the impact of Covid-19, they should not have to face bankruptcy, especially as the vast majority acted in good faith – many times on the advice of qualified accountants and financial professionals. “

“I also stressed that we need a delay of the loan charge declaration from the end of September 2020 to the end of January 2021, to allow a reasonable period of time for settlements to be agreed. “

The Loan Charge, announced by Government in 2016, was designed to tackle tax avoidance schemes where individuals receive income in the form of loans that are not repaid to avoid income tax.

Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office, was commissioned to undertake a review into the loan charge in September 2019 by the then Chancellor Sajid Javid, following a long-running campaign from MPs and affected individuals.

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While the review concluded that there was a clear public interest in preventing the use of loan schemes to avoid tax and in maintaining the principle of taxpayers being responsible for their tax affairs, it concluded that the loan charge went too far.

The review found that it overrode taxpayers’ statutory protections by applying an unprecedented 20 year look back period and failing to adequately consider the serious distress it would cause some of those affected.

The review also identified failings in the approach HMRC took to enforcing the policy, which in some cases, fell short of the standards the public has a right to expect; particularly in cases where life changing sums of money are at stake.

The Government said it recognised the concerns raised in the Review about the impact on individuals and fairness of some aspects of the Loan Charge. To address them, all but one of the recommendations have been accepted.

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