Finance Bill

Written evidence submitted by a n individual who wishes to remain anonymous (FB14)

Dear Sir or Madam,

I am writing as somebody affected by the Loan Charge legislation and I'd like to point you to some information available in Freedom of Information Act requests, Hansard and on official government pages. I hope you will be able to take this into account when scrutinising Loan Charge legislation.

I feel there has been considerable rewriting of history by HMRC and the Treasury, particularly the message that they were "always clear" that arrangements did not work. To have this charge imposed upon me which removes my access to justice after years of inaction from HMRC combined with a media disinformation campaign just adds insult to injury.

I will likely be required to pay an extra IHT charge on trust contributions in future on top of any income tax due even though HMRC claim the payments were not loans but income.

The mental effect of my life being on hold for many years has taken its toll. This has meant many life decisions had to be delayed and long periods of being unable to work through anxiety and stress.

If legislation such as the Loan Charge - which removes my statutory rights - can be passed through Parliament with barely any scrutiny I fear what the future holds. I have simply lost trust in the honesty of HMRC, The Treasury and the supposedly independent professional institutes.

General Points

In terms of HMRC's ability to collect future tax revenues, the Loan Charge applies to loan balances on 5/4/2019 and has no direct effect on the future as can be seen from new schemes being promoted.

HMRC and the Treasury state they were "always clear" that the arrangements captured by the Loan Charge did not work. They refer to a ministerial statement in 2004 and a Spotlight article from 2009. To see these it would have required reading through the pages of Hansard on a regular basis or stumbling upon a Spotlight article on the pages. I don't believe either made anything clear to users of schemes.

HMRC should have directly informed users much earlier where I expect the vast majority of users would have immediately stopped using the arrangements. I have since found out that users of the same arrangements as me had enquiries many years later than I did which meant they carried on using arrangements with no awareness of HMRC’s view.

Arrangements before the 2010/2011 DR legislation

The Disguised Remuneration legislation was announced in December 2010 which partially became effective at that point and then from April 2011.

In the response to the Freedom of Information Act request detailed at the following address you will see that the notes provided to John Glen for a Westminster Halll debate state

" The DR legislation, introduced in 2011, brought an end to the most widespread use of DR schemes. However the legislation was prospective only. This meant that individuals who had used the DR schemes prior to 2011 were not caught by the legislation which made clear that the schemes did not work. "

HMRC has litigated the Rangers case (a pre-DR legislation arrangement) and the conclusion by the Supreme Court was that tax was due when money entered the trust. I believe this result caught HMRC out as they had not, in most cases, raised enquiries on the promoter/trust to enable the tax to be collected. If it was always clear, why didn’t HMRC foresee the Rangers result and raise the required enquiries at the time?

After the Rangers decision was announced the Loan Charge legislation was changed to give HMRC carte blanche to transfer that to liability to individuals without HMRC raising any enquiries on the promoters/trusts. If this is not retrospective/retroactive in the letter of the law I believe it is within the spirit of the law.

Loan Charge proposal to the Treasury

You may also be interested to know that a Freedom of Information Act confirms that HMRC proposed the loan charge to the Treasury in September 2015 and it's possible that more information about the reasoning of that proposal would be available to you upon request. .

Treating Taxpayers Fairly debate

In the debate of the Lords Economic Affairs Committee "Treating Taxpayers Fairly" report, Lord Davies of Oldham confirmed that the Opposition would support a change in the law for the Loan Charge.

Column 805

Lord Forsyth of Drumlean

... However, it is not to blame for implementing the loan charge, which was passed by Parliament-by the House of Commons. Dealing with this requires a change in the law. Do the Opposition support that?

Lord Davies of Oldham

The answer is categorically yes.

I believe this shows the Opposition have already confirmed that they would be open to changes in the Loan Charge legislation.

Pursuit of promoters

When justifying the Loan Charge, HMRC have claimed in the media and through the Treasury that they have been relentlessly pursuing promoters including prosecuting promoters. Presumably this is part of a campaign to justify the Loan Charge legislation and the transfer of liability to the users without question whilst simultaneously covering up HMRC failures.

The Freedom of Information Act request - - actually confirms that

"None of the convictions referred to in the statement above were therefore for offences directly related to arrangements that will be subject to the 2019 (DR) loan charge."

Number of enquiries.

The loan charge is often justified on the basis that 50,000+ open enquiries is too large a task for HMRC to tackle. I will not comment on the extent HMRC are culpable in allowing that number of cases to accumulate.

I believe litigation would actually be on an arrangement basis that use lead cases and would not require 50.000+ separate legal cases in the Courts. HMRC also have APN and Follower Notices in their arsenal to tackle tax avoidance. Follower Notices would allow them to reduce the number of arrangements in litigation even if the scope of the Loan Charge was curtailed.

I will leave it to tax experts to explain why Follower Notices were not issued to contractors following the Rangers decision even though the Rangers decision has been used to justify the Loan Charge legislation.

DOTAS reporting requirements

I would like to point out that the DOTAS legislation, introduced around 2004, changed over time and until 2014 there was no obligation on the user to do anything other than disclose a scheme reference provided by a promoter.

I have seen much misinformation around DOTAS but if the promoter did not register under DOTAS the individual using that scheme would have most likely been unaware of the existence of DOTAS.

To rewrite history and claim users should have known about DOTAS and their past obligations were those of the current DOTAS rules is, I believe, just another misinformation campaign to cover up the failure and the poor drafting and implementation of the DOTAS legislation.

HMRC guidance changes

If HMRC provide evidence to you, can you please ensure that you check dates of changes to their guidance at source.

I cannot comment on whether this was deliberate obfuscation before the release of the NC26 amendment report in early 2019 but see the webpage below for an example where the stated update date is years before the more recent changes which gives the impression that the clarification was in place much longer than indicated:

See the National Archive entry here for previous versions to compare, particularly if the guidance page is changed after my submission is sent:

Thank you

June 2020


Prepared 15th June 2020