Launch new loan charge probe to make up for 'flawed' Morse Review, chancellor urged

A truly impartial probe of the Loan Charge – further to the “flawed” Morse Review – should be carried out, the chancellor is being demanded by a 245-strong group of MPs.

In a letter to Rishi Sunak, three MPs on behalf of 242 others in the Loan Charge & Taxpayer Fairness APPG say that on top of HMRC setting up a 24-hour suicide helpline, he should set up an “independent review.” 

The Loan Charge Action Group has called prime minister Boris Johnson to commission exactly the same review, in a potential sign that campaigners and politicians are working together.

“New evidence has now shown that the conclusions of this review [by Sir Amyas Morse] are unsound, and so a further review is essential,” LCAG told the PM in a letter dated Nov 5th -- the same day as the APPG’s letter to Mr Sunak.

'Fair resolution'

The two letters emerge after an APPG meeting yesterday, which saw tax advisers, loan charge contractors and MPs from five political parties explore ways to achieve the “fair resolution” which both No 10 and No 11 Downing Street are being pressed to offer.

“Yet more evidence today that the Loan Charge has wholly failed to do what it was purportedly introduced to do,” MPs on the LCTF APPG reflected after their meeting.

“[That was] to stop the promotion and operation of disguised remuneration schemes. [But] schemes are openly being mis-sold and often targeted at lower income workers including NHS workers.”

'Discredited HMRC mouthpiece'

Daisy Cooper MP asked the chancellor about schemes last week, but LCAG says the answer she received was “contradictory” and appeared to show the Treasury as a ‘discredited HMRC mouthpiece.’

On behalf of HMT, and responding to the Lib Dem MP, Treasury minister Lucy Frazer said: “There have been no prosecutions of individuals related to schemes subject to the loan charge, [but]… HMRC are committed to continuing to tackle promoters and operators of tax avoidance schemes. This includes challenging the entities and individuals who promote disguised remuneration loan schemes.”

Another MP, Duncan Baker for the Conservatives, indicated last week that aside to mis-selling, mis-direction has also gone on, much to the disadvantage of taxpayers.

'Spirit of Morse'

Quizzing HM Treasury, Mr Baker said: “My constituent Peter Phillips fell victim to the loan charge in 2019 and settled before 30th September 2020. HMRC advised him, like many others, that that was the right thing to do.

“[But] in effect, those who settled before the Morse review did not get the benefit of the changes that were implemented: my constituent paid more than someone who disclosed nothing to HMRC. Does [the chancellor] think that was in the spirit of the Morse Review? Has HMRC got it wrong?”

Despite saying he could not comment on Mr Phillips' circumstances, the chancellor replied by saying HMT would “look at the case,” should a request to do so be put in writing to Ms Fraser.

'Independent review'

“Lord Morse [was asked] to conduct an independent review,” the chancellor added in his reply to Mr Baker. “The government accepted and implemented the vast majority of its recommendations.”

Since Mr Sunak's comments, the 245 MPs have now ‘implored’ him to “look at the evidence that has emerged since the Morse Review and accept that the conclusions of that review were therefore flawed.”

“A further independent review is needed,” write the MPs. “Most of all, what is needed and as a matter of some urgency, is for the government to admit that enforcing the loan charge as it stands will have devastating, predictable consequences and that a fair resolution is needed to resolve the issue once and for all.”

'Unclear, unjust'

Yesterday’s meeting appeared to embolden their view.

“The clear conclusion…[was] that the situation for people facing the loan charge is unclear and unjust and an ongoing nightmare,” the LCTF APPG tweeted.

 “Many people are terrified of what will happen next, because enforcing it will have devastating consequences including many bankruptcies.”

'Couldn't advise against future legislation'

Taking to LinkedIn before the meeting, HMRC dispute expert Jesminara Rahman, of Tax Resolute UK reflected: “We can all agree that everyone should pay the right tax, but this should be done in a honest and fair way. The loan charge just feels inherently unfair.

“I am sure a lot of our clients would not have entered any of these tax schemes had HMRC or even their accountants advised caution and not to participate. But unfortunately, no one did -- because they could not advise against a future legislation.”

WTT Consulting, which attended the APPG’s meeting, last night described the loan charge as “a difficult and complex situation.”

'Cover-up'

But the firm’s Graham Webber posted a damning summary: “Evidence is available showing how HMRC failed to investigate schemes at all for a decade; then had an inconsistent approach; allowed the real culprits to collect literally tens of millions of profits tax free; chased the wrong people; had no legal analysis to support their view; misled themselves wilfully over the Rangers decision, and eventually admitted that the loan charge was an attempt to cover-up all of the above.”

Writing on behalf of their 243 fellow LCTF APPG members, the DUP’s Sammy Wilson MP, Labour’s Mohammad Yasin MP and the Conservatives’ Greg Smith MP, tell the chancellor: “It is time to end the nightmare for the thousands of affected UK families and to stop this controversial issue continuing to be a significant problem for HMRC and the government. A fair resolution is in everyone’s interests.”