Tax firm Forbes Dawson demands Government meeting over 'unreasonable' settlements

In its letter to Mr Norman, Forbes Dawson said it had welcomed the review into the loan charge conducted last year by Sir Amyas Morse, which it said was the first time these issues had been properly and independently scrutinised.

Despite the criticisms levelled by the Morse review about HMRC’s approach, Forbes Dawson said it was continuing to experience difficulties when trying to settle cases.

In one example cited in its letter, the firm highlights a taxpayer being asked to pay a settlement that they believe results in an effective 97 per cent charge on the original loan.

Tom Minnikin, a tax partner at Forbes Dawson, told The Yorkshire Post: “This case involves a loan scheme dating back to around 2001. HMRC actually enquired into the arrangement and denied the company tax relief, but didn’t tax the loans.

“Our client has offered to voluntarily settle to have their loans taxed but HMRC is refusing to offset the tax already paid by the company. It is particularly unfair when you compare this to more aggressive schemes that proliferated later which have been treated less harshly.”

Forbes Dawson has also claimed that HMRC is insisting that taxpayers pay penalties or they will not settle.

Mr Minnikin added: “For a penalty to be chargeable the onus is upon HMRC to prove that the taxpayers acted carelessly. In the cases we have seen, the employer was usually relying upon advice from trusted advisers, backed up by formal barristers’ opinions.

“Most people would consider this to be taking reasonable care. It is wrong of HMRC to use the settlement opportunity as a tool to bypass the normal appeals process. This has echoes of the whole loan charge controversy once more.”

“We await the Minister’s response to our letter with hope,’’ said Mr Minnikin. “The frustrating thing is that we have a number of clients willing to settle with HMRC, at a time when the Government must badly need revenue, but are prevented from doing so due to the unreasonable stance being adopted by HMRC”.

A spokesman for the Treasury said the letter had been received and the Minister will respond in due course.

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 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.

Sir Amyas’s review into the loan charge was published last year. The review said there is a clear public interest in preventing the use of loan schemes to avoid tax. It maintained the principle of taxpayers being responsible for their tax affairs.

It also concluded that the loan charge went too far – overriding 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. In some cases, it 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 review said.

To address these issues, Sir Amyas recommended a package of practical reforms to both the design and implementation of the loan charge, which included ending the unprecedented 20 year look back period.

Last year, 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 report's recommendations were accepted.

The package of measures were estimated to reduce bills for more than 30,000 people subject to the loan charge, which is more than 60 per cent of the total number of users. according to the Treasury.

This includes an estimated 11,000 who would be taken out of it altogether, the Treasury said.

Speaking in December last year, Mr Norman said: "We welcome this careful and considered report, and I thank Sir Amyas and his team for their work.

“There have been important public concerns about this policy, and that is why we commissioned this report and have responded so quickly to it.

“The changes we are making go to the heart of Sir Amyas’ concerns about the fairness and application of the loan charge, which he accepts in principle.

“We also have plans under way to crack down further on the promoters of these avoidance schemes.”

Support The Yorkshire Post and become a subscriber today.

Your subscription will help us to continue to bring quality news to the people of Yorkshire. In return, you'll see fewer ads on site, get free access to our app and receive exclusive members-only offers.

So, please - if you can - pay for our work. Just £5 per month is the starting point. If you think that which we are trying to achieve is worth more, you can pay us what you think we are worth. By doing so, you will be investing in something that is becoming increasingly rare. Independent journalism that cares less about right and left and more about right and wrong. Journalism you can trust.

Thank you

James Mitchinson