'Legislation is the only way to get rid of dodgy and repellent DR schemes'

Dave Chaplin, the CEO of contracting authority ContractorCalculator, has called for action to shut down these schemes forever.

A parliamentary group has also said it is 'very concerned' about the disclosure that a senior official reported having 'very little success' in his attempts to gain legal analysis to understand the strength of HMRC s claim with regards to disguised remuneration schemes.

In a statement on Twitter, the Loan Charge All Party Parliamentary Group, said the latest revelations from internal correspondence between senior HMRC officials supports its claim that no court case has established the legal basis for the loan charge, a controversial policy which has left some taxpayers with unexpected and life-changing tax bills.

However, a HMRC spokesman downplayed the significance of the contents of the email trail, which emerged as part of a Freedom of Information (FOI) request, saying that it indicated that the official - Jim Harra - was providing a challenge to HMRC officials, which is one of the functions of his office.

In an internal email, sent in January 2019 after a hearing of the Treasury Select Committee, Mr Harra, who was then deputy CEO of HMRC, said he had been receiving tweets from loan charge campaigners following the hearing.

The email continues: "Setting aside all the insults, etc., the main substantive comments are: HMRC persistently claims that DR (disguised remuneration) schemes never worked but, despite allegedly challenging DR schemes for the last 20 years, we have not obtained tribunal/court decisions that back up this claim. In particular, we have not obtained decisions establishing that individuals are taxable on DR loans as income.

"(In recent months I have repeatedly tried to obtain legal analysis to understand the strength of our claim with very little success. For yesterday’s hearing we were initially given a summary of avoidance wins, some of which seemed to have nothing to do with DR.)".

Responding to the FOI disclosures, Mr Chaplin, said: “It’s staggering to see Jim Harra, the current CEO of HMRC, admitting in this set of emails that they have struggled to secure a legal opinion that supports the narrative they have been promoting for years.

"Legislation is the only way forward if we are to rid the industry of dodgy and repellent schemes that have been allowed to thrive and ruin the lives of hard-working contractors.

"Some simple fine tuning of the Finance Bill that is currently passing through Parliament could and should shut them down once and for all.”

Crawford Temple, CEO of Professional Passport, which assesses payment intermediaries for compliance said that HMRC already holds all the information it needs to stamp out disguised remuneration schemes and rid the industry of criminal activity but is not acting on it.

Mr Temple added: "As a result, the lack of activity has enabled more and more schemes to set up and more and more contractors duped into taking on significant personal financial risk as a result.

He continued: “Real Time Information (RTI) reporting that was introduced in 2013 along with the 2014 Intermediary Reporting provides HMRC with two sets of data that gives a unique insight into the market and the supply chain.

"Matching that data should set alarm bells ringing and help HMRC to identify a dubious provider and shut it down with immediate effect. The documents in this FOI suggest it is difficult to create a rule to identify workers duped into these arrangements.

"I would suggest that a time limit is set for HMRC to pursue workers and, after a certain time, HMRC must pursue the promoters of these schemes who currently get away scot free.

"Setting a time limit would identify quickly those that may have been duped into arrangements but any liabilities would not be life changing as we have seen happen with the loan charge, when lives have been destroyed. Moreover, the right people would be punished.

“HMRC needs to step up and proactively use the data it has, take swift action to enforce the law and stamp out these corrupt schemes before they do any more damage.”

With regards to the comments disclosed in the FOI, a HMRC spokesman told The Yorkshire Post: "There really is nothing in this to be honest. That email shows Jim providing challenge to HMRC officials which is one of the functions of his office.

"He relays social media criticisms and asks for legal analysis of the strength of statements made. It’s robust challenge to officials to ensure that there is appropriate legal analysis undertaken. He does this all the time and always wants to ensure that we’re being held to a high standard.

The spokesman added: "Jim obviously understands that HMRC won the Rangers case at the Supreme Court in 2017, the outcome of which held unanimously that contributions made by an employer into an offshore trust for the benefit of employees were subject to income tax and National Insurance Contributions at that point. The amounts were then provided to the employee by way of a loan. The decision affirmed HMRC’s clear and longstanding position that the schemes were tax avoidance and didn’t work."

The spokesman continued: "The number of avoidance promoters in the market has greatly reduced in recent years and it’s only a small and determined group who are still promoting schemes. They’re the ones which we are focusing on tackling."

"The RTI point and proactively using data is accurate but slightly misleading,'' the spokesman said. "We’re now using RTI information to write to taxpayers if their data shows that they may be in an avoidance scheme to inform them and advise to get out of there ASAP; so this is happening. RTI data can’t shut down an avoidance scheme though, it just tells us that a taxpayer might be in one."

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