Why the Treasury must listen to the 200 Parliamentarians who still have concerns about the loan charge - Greg Wright

The Loan Charge APPG now has 200 members. Picture: PAThe Loan Charge APPG now has 200 members. Picture: PA
The Loan Charge APPG now has 200 members. Picture: PA
When Sir Amyas Morse delivered the findings of his review into the loan charge in December, it was widely hoped that the curtain was coming down on a saga that had caused “serious distress” to many taxpayers.

However, the latest letter from the Loan Charge All Party Parliamentary Group (APPG) leaves no doubt that many MPs believe this issue is far from settled. 

The APPG fears that “there will remain a risk of mental breakdown and..further suicides” because it claims that the Government’s draft legislative changes to the loan charge do not deal with the fundamental injustice of the original legislation.

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The letter, which is signed by Sir Ed Davey, Ruth Cadbury and Sir Mike Penning, who are co-chairs of the APPG, says: “This follows the documented tragic deaths of seven people facing the loan charge.”

Sir Amyas, the former head of the National Audit Office, concluded the schemes were a form of tax avoidance but he also made a series of recommendations about the design of the charge and its impact on those in its scope.

The review was commissioned to look at the impact of the charge, which was introduced to tackle what the Treasury described as disguised remuneration schemes.

Sir Amyas said the design and delivery of the loan charge didn’t get the balance right between tackling tax avoidance and protecting the rights of taxpayers and, in some cases, has caused serious distress to the individuals affected.

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At the time, 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 were accepted by the Government. 

The Treasury pledged to make changes so that the loan charge will only apply to loans taken out on or after December 9, 2010. The review found that legislation announced in 2010 removed any doubt that tax was due.

The Government also said it would not apply the loan charge to users of loan schemes between December 9, 2010 and April 5, 2016 who fully disclosed their schemes on their tax return and where HMRC failed to take action.

The Treasury also said it would allow users to defer filing their returns and paying their loan charge liability until September 2020. It also pledged to allow taxpayers to split the loan balance over three tax years to make bills more affordable.

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In its submission to the HMRC consultation, the APPG lists a number of concerns. In particular, it believes that the date from which the loan charge is applied should be changed from December 2010 to the date of Royal Assent of the Finance Bill in November 2017. 

It also believes the Government should accept the recommendation from the Morse Review that unprotected and closed tax years should now remain closed on the basis of ‘reasonable’ and not ‘full’ disclosure. 
In this case, reasonable is defined as what the law was understood to require at the time of disclosure, the MPs said.

The letter also states: “HMRC and the Government continue to ignore the issue that some people facing the loan charge are now facing loans being recalled by parties who claim to have been assigned the rights to those loans. 

“In some cases loan books appear to have been sold on. With people now facing having to repay the loans and yet also remaining subject to the loan charge, this is clearly grossly unfair as well as making bankruptcy inevitable for  many.”

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The APPG states that a simple but fundamental principle must be included in legislation; people cannot be forced to repay a loan and still have to pay the loan charge.

In response to the letter, a Treasury spokesperson said: “We recognised the concerns raised by the loan charge review and responded decisively by accepting all but one of its recommendations. More than 30,000 people are estimated to benefit from these changes, around 11,000 of whom will be taken out of scope of the charge altogether.”

The Treasury has also stressed that the review found that the loan charge should remain in place, that disguised remuneration schemes are a form of tax avoidance and that it was right for the Government to try to tackle them, as they were unfair to the vast majority of taxpayers who pay the correct tax.

The Government is currently consulting on draft legislation and will legislate for the changes in the forthcoming Finance Bill.

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The Government published draft legislation in January, followed by a four week consultation period.

All consultation responses received are being considered ahead of the publication of the upcoming Finance Bill, the spokesman added.

Sir Amyas Morse, in an article for The House in January 2020, said 2010 “is not… an “arbitrary” date.

“It is the date from which Finance Act 2011 ensured that tax was charged on income paid through loan schemes. The evidence I consistently received from tax experts was that this made loan schemes clearly taxable.

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“This meets the test that I applied in determining the earliest date from which income tax was clearly payable on loan schemes – either as a result of legislation or a court ruling. The 2011 legislation was earlier than the definitive court ruling in 2017 and so tax should have been understood as being due from that point.”

The opinions of the APPG must carry some weight because the group now has 200 members, including some of the most respected  figures in Parliament.

At the heart of the loan charge saga has been the need for the workings of our tax system to be scrutinised and shaped with the support of MPs.


For this reason, it is important that the Treasury engages with the APPG and takes on board its carefully considered objections to this controversial policy.