Lords committee to probe Loan Charge in wake of Morse Review

A committee of Lords commended to ContractorUK as “really knowing their stuff” will today take evidence on the Loan Charge, in wake of changes since the Morse Review.

In recognition of the review’s one-year anniversary, the Finance Bill Sub-Committee will speak to IPSE, the Chartered Institute of Taxation, and the Loan Charge Action Group.

Questions to such expert witnesses will revolve around HMRC’s changed approach to the charge; challenges for taxpayers and efforts to tackle avoidance promoters, the peers say.

'Minister mislead the Commons'

But those efforts are already in dispute, after a Treasury minister used his appearance to answer three questions on the charge to claim “very vigorous action” had been taken against promoters.

In a letter of complaint against Jesse Norman, sent last week, LCAG states that his claim to Stephen Hammond MP was “not true” and “thus you mislead the House of Commons.”

But telling Mr Norman of his second ‘factual error,’ the group said the minister then falsely claimed to Gareth Bacon MP that the settlement deadline was extended because of covid-19.

“The reality is that the decision to delay the settlement deadline was taken on 20th December 2019, in the government’s response to the Morse Review,” LCAG writes.

'Stitch-up'

Last night, contractors took to Twitter to welcome the Lords moving to probe changes to the charge introduced since the review – “a stitch-up,” one accused of Sir Amyas Morse’s work.

Another taxpayer with concerns about the review, which has also been called “a fudge” and “a halfway house,” appeared to reach out to the peers directly, asking them:

“Will the committee seek to understand the apparent collusion between HMRC, the review secretariat and Morse?

“This review was not independent and was not conducted fairly. Please shine a light on this and seek answers.”

'How Contracting Should Work'

In his own answers, Mr Norman told MPs that an example of the “very vigorous action” taken against promoters was a new tie-up between HMRC and the ASA, the ads watchdog.

But ahead of a Dec.18th deadline for written submissions on How Contracting Should Work, MPs on the Loan Charge APPG sound content that HMT’s claims are going to be scrutinised.

"[We are] very pleased that…the Finance Bill Sub-Committee is taking evidence on the Loan Charge," the APPG tweeted.

"As well as looking at the current situation, we hope they will look at the fundamental flaw of the Morse Review…. – a lack of independence."

'Taxman preparing a report'

However, some of the issues set to be raised in today’s ‘Loan Charge follow-up' session, via Zoom from 3-5pm, may already be addressed in a yet-to-be published HMRC report.

In disclosing to MPs that 11,000 employers and individuals settled their use of ‘Disguised Remuneration’ (DR) schemes between Budget 2016 and March 2020, Mr Norman also said:

“HMRC is currently preparing a report to parliament on the implementation of the recommendations of the independent loan charge review, and that is due imminently.

“The report will include figures up to the 30th September 2020 deadline for taxpayers who settled their use of disguised remuneration tax avoidance schemes.”

'Fifteen DR contractors worked at HMRC '

Further pressed on DR by the DUP’s Sammy Wilson, Mr Norman revealed that a total of 15 contractors used schemes while on-contract with HMRC or its Digital Technology Services unit. 

The minister added: “It is possible for a contractor providing services to HMRC to use a disguised scheme without the department’s knowledge or by participation through a third party.”

Taken aback, Mr Wilson reflected: “I am amazed at the minister’s answer -- that firms can use methods of payment that HMRC then declares to be illegal and that no checks have been done by HMRC on those contractors.”

'Careful steps'

Mr Norman replied: “HMRC takes careful steps to ensure that the people whom it deals with as agencies employ on a proper and appropriate basis.

“When, in very rare cases among hundreds and hundreds of contractors in a fast-moving market, it may become clear that someone has in fact been hired under such a scheme, it takes immediate steps to end that relationship and then to follow up, of course, and to pursue as may be required under law.”