However, it has reiterated its commitment to not making anyone sell their main home and stresses that it does not want to make anyone bankrupt.
In a letter to Sir Ed Davey, chairman of the Loan Charge All-Party Parliamentary Group (LCAPPG), HMRC director general customer strategy and tax design Ruth Stanier said that the department was aware that the charge would have a significant financial impact on some users. Equally though, it was unfair to the vast majority of taxpayers who had paid the right amount of tax in time, to allow anyone “to benefit from contrived tax avoidance of this sort”.
“We recognise that there are people who are now facing large tax bills, and are fearful of what this may mean for them,” she wrote. “HMRC has committed not to make anyone sell their main home to pay their DR tax bills.
“Fears that people will be made homeless because of HMRC debt enforcement activity in relation to the charge on DR loans are unfounded. It is also the case that HMRC does not want to make anyone bankrupt. Bankruptcy is only ever reached as an absolute last resort, and very few cases ever reach that stage.
“We would welcome your support in reassuring people on these points and addressing any inaccurate messages.”
She also added that HMRC was bending over backwards to help scheme users, including offering simplified settlement terms such as payment plans spread across five or seven years.
Stanier also revealed that an estimated 50,000 scheme users were affected by the loan charge and that settlements with employers and individuals had so far netted the exchequer more than £1bn.
HMRC’s fairness arguments are likely to fall on unsympathetic ears. Stories of self-employed contractors, council workers, nurses and social workers facing tax demands amounting to thousands of pounds dating back to the late 1990s and early 2000s when they were advised by accountancy firms, employers or recruitment companies to use the schemes, have led to public outrage and heavy criticism of HMRC’s tactics from both MPs and Lords.
Evidence given by individuals caught up in the controversy to a House of Lords economic affairs committee investigation last Autumn prompted the peers to comment that the consequential impact of the loan charge and HMRC’s handling of it for taxpayers had been “devastating”.
In their report, published last December, they wrote, “Ruth Stanier commented, ‘We will deal with cases appropriately and sympathetically’ but this was not the experience of many witnesses. Suicidal feelings were reported. One witness called their situation ‘a living hell’.”
In January, Sir Ed forced the government to agree to review the situation through his amendment to the Finance Bill (now s 95, Finance Act 2019). This was followed up by a letter from 55 Conservative MPs to the chancellor calling for an immediate delay to the loan charge.
The outcome of Sir Ed’s review is due out later this month but earlier this week the Treasury caused more anger when its officials told the LCAPPG that it would not amount to more than a report, rather than recommendations to change the law.
This was confirmed in the Stanier letter to Sir Ed. She said the report would review the effect of changes made to the time limits for recovery or assessment where tax loss arises in relation to offshore tax, and compare these with other legislation including the charge on DR loans.
Aberdeen South MP Ross Thomson, who is a vice chair of the LCAPPG, accused the Treasury of “acting in bad faith” and called on prime minister Theresa May to personally intervene to delay the loan charge “before more lives are damaged”.
Speaking at Prime Minister’s Questions yesterday he said, “Last week, MPs heard harrowing testimony from family members of a man who tragically committed suicide because he faced the loan charge – a 20-year retrospective tax facing thousands of families in my constituency and across the UK.
“The prime minister said on 9 January that the government accepted the review into the loan charge, yet the Loan Charge APPG was only advised this week by the Treasury that there is no such review.”
Thomson added that May needed “to realise that the loan charge is going to be a disaster for many families and something that will cause a crisis for the government if they don’t listen”.
He urged her to scrap the 5 April deadline and all for a “genuine, independent review”, not a Treasury and HMRC “whitewash”.
May responded by committing the Treasury to write to him “setting out exactly what is being done in the review that is taking place”.