In a letter to the Treasury Committee, Jim Harra, HMRC Chief Executive and First Permanent Secretary, has defended HMRC’s approach to the loan charge and disguised remuneration (DR) tax avoidance schemes more generally. In his conclusions, Harra put forward a robust rebuttal of criticism of the department, saying: ‘We do not recognise recent claims that HMRC operates without scrutiny, particularly on the Loan Charge. It is simply not the case that HMRC is unaccountable or operates without oversight.’
Harra noted that HMRC has seen off several judicial review challenges to the loan charge, having ‘successfully defended each one’, pointing out that, in the eight years since the loan charge was announced, HMRC has been subject to frequent scrutiny by various Parliamentary committees, a number of Financial Secretaries to the Treasury and, not least, Lord Morse’s Independent Loan Charge Review.
HMRC estimates, however, that around 40,000 individuals and 5,000 employers have not settled, and HMRC does not know how many DR scheme users entered into arrangements ‘unwittingly’. The median settlement for individuals has been £19,000, and for employers £205,000, according to HMRC.
Harra also set out some of the measures taken by government since 2010 to tackle disguised remuneration schemes (including the GAAR in 2013) noting that, despite several attempts to end the use of DR, scheme use continued and ‘became increasingly convoluted’. As Harra pointed out: ‘Resolving cases via compliance interventions and litigation is lengthy and costly, both for taxpayers and HMRC. This is particularly true where cases are appealed to the senior courts, where it can take many years before a final judgment is handed down.’
The loan charge was introduced ‘to try to draw a line under the historical use of DR schemes’, Harra said, suggesting that it was in effect a last resort with HMRC having already offered various settlement opportunities.
In a letter to the Treasury Committee, Jim Harra, HMRC Chief Executive and First Permanent Secretary, has defended HMRC’s approach to the loan charge and disguised remuneration (DR) tax avoidance schemes more generally. In his conclusions, Harra put forward a robust rebuttal of criticism of the department, saying: ‘We do not recognise recent claims that HMRC operates without scrutiny, particularly on the Loan Charge. It is simply not the case that HMRC is unaccountable or operates without oversight.’
Harra noted that HMRC has seen off several judicial review challenges to the loan charge, having ‘successfully defended each one’, pointing out that, in the eight years since the loan charge was announced, HMRC has been subject to frequent scrutiny by various Parliamentary committees, a number of Financial Secretaries to the Treasury and, not least, Lord Morse’s Independent Loan Charge Review.
HMRC estimates, however, that around 40,000 individuals and 5,000 employers have not settled, and HMRC does not know how many DR scheme users entered into arrangements ‘unwittingly’. The median settlement for individuals has been £19,000, and for employers £205,000, according to HMRC.
Harra also set out some of the measures taken by government since 2010 to tackle disguised remuneration schemes (including the GAAR in 2013) noting that, despite several attempts to end the use of DR, scheme use continued and ‘became increasingly convoluted’. As Harra pointed out: ‘Resolving cases via compliance interventions and litigation is lengthy and costly, both for taxpayers and HMRC. This is particularly true where cases are appealed to the senior courts, where it can take many years before a final judgment is handed down.’
The loan charge was introduced ‘to try to draw a line under the historical use of DR schemes’, Harra said, suggesting that it was in effect a last resort with HMRC having already offered various settlement opportunities.
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