HMRC is using “aggressive and unreasonable” behaviour to collect the loan charge, say MPs

Sir Ed Davey  Photo: Danny Lawson/PA Wire
Sir Ed Davey Photo: Danny Lawson/PA Wire
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The chairman of an influential Parliamentary group has claimed that HMRC is using “aggressive and unreasonable” behaviour in connection with the implementation of a controversial Government policy.

Sir Ed Davey, the chairman of the All Party Parliamentary Loan Charge Group (APPG), has accused HMRC of telling people affected by the loan charge that they may have to sell their homes, despite Government assurances to the contrary.

In a letter to Sir Jonathan Thompson, the chief executive of HMRC, the APPG also raises concerns about the use of behavioural psychology, behavioural insights “and so-called ‘nudge’ techniques’.

The letter says: “These have been used to push people into settling tax demands rather than exercise their rights to dispute them. “

The loan charge was introduced in response to the Treasury’s concerns about “disguised remuneration schemes” which involved individuals being paid through loans, usually via an offshore trust in a low or no tax jurisdiction, which they did not have to repay.

According to the Treasury, the loan charge means people paying themselves through loans will have to contribute their “fair share” to pay for our public services.

Workers from a wide range of professions - including locum doctors and nurses - have been hit with unexpected tax bills of up to tens of thousands of pounds dating back to 1999.

The APPG argues that the charge is retrospective and overrides taxpayer protections - claims which have been disputed by the Treasury.

The letter, which is signed by Sir Ed and APPG vice-chairs Ruth Cadbury and Ross Thomson, says: “We are writing to express our serious concerns about the reality of how people facing the loan charge are being treated by HMRC, and also about the ‘DR (disguised remuneration) Project’ and its tone.

“Firstly, in terms of HMRC conduct towards people facing the loan charge and the reality of settlement offers, the APPG has been sent a considerable volume of evidence on this.

The letter adds; “This evidence shows that the reality is starkly different from the assurances given by Ministers as to the way HMRC will treat people. At our most recent APPG meeting we held a special session on HMRC’s conduct over the loan charge.

“We were alarmed to hear tax professionals describe HMRC behaviour as including ‘threats, delays, aggressive communication, bullying and incompetence”.

“The evidence shows, for example, that ‘settlement’ is not voluntary: HMRC uses the threat of the loan charge to coerce people into settling. Taxpayers are charged exorbitant interest rates and receive no beneficial terms. The evidence demonstrates the aggressive and unreasonable nature of HMRC’s behaviour.

“We have been given examples of people waiting for months to receive replies to queries from HMRC, and then being given a matter of days to settle disputed tax or be threatened with the loan charge.”

“Other themes from the evidence include: frequent irregularities with calculations, intimidating treatment of people known to be vulnerable and a refusal to engage in discussions over client positions...It was reported this had led many clients to be in a constant state of anxiety, depression and severe worry, with no ability to regain certainty over their tax affairs.”

In the letter, the APPG says it is deeply concerned at the fact that, despite public assurances from HMRC and Ministers, HMRC are telling people they may have to sell their home.

It adds: “In cases we have seen, HMRC are threatening people with bankruptcy. The phrase used regularly - that HMRC “don’t want to make anyone bankrupt” - is disingenuous and misleading.

“The reality, as we have seen from the evidence, is that HMRC pass people’s disputed tax debts to third party debt collection services, who then aggressively pursue the individuals. These third-party services may well push people into bankruptcy.

“In many cases, people have stated they feel victimised, hounded and bullied by HMRC. The evidence we have seen is different from the message from HMRC and the Treasury. This is deeply troubling and unacceptable.”

The letter also raises concern about the phrase ‘Make it Real’, the image of a “threatening” tiger roaring, and the phrase ‘Tiger’s Roar’, which have been used in internal HMRC material related to the DR project.

“We hope and expect you will now fully and properly answer these questions and deal with our concerns about the use of aggressive slogans and imagery with regard to the pursuit of people, including vulnerable people.”

Mel Stride, the former Financial Secretary to the Treasury, always maintained that the loan charge was not retrospective.

Earlier this year, he said: “HMRC very, very rarely has a situation where somebody is placed in bankruptcy. HMRC has publicly stated that nobody will lose their primary residence as a consequence of settling their loan charge liability.”

An HMRC spokesman said: “We have received the APPG’s letter and will consider our response”.

A HMRC spokesman said previously: “We have committed to giving people as long as they need to pay the loan charge as we completely understand that facing a large tax bill can be difficult and stressful.

“Our teams are trained to identify customers who are anxious, worried or need extra support and ensure they get the help they need.

”If people are worried about being able to pay the loan charge, they should get in touch with HMRC as soon as possible by calling the dedicated HMRC helpline on 03000 599110.”

The Government has said that the rationale for the charge is “clear and robust”.

Read more:

The Yorkshire Post calls for an end to the loan charge hell.

Greg Wright: Why the will of Parliament must be honoured over the loan charge
Greg Wright: A loan charge suspension would provide new Prime Minister with a clean break
Greg Wright: Why it’s time to scrap the ‘draconian’ loan charge