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Members of Parliament are clearly running out of patience, while tens of thousands of taxpayers are running out of time.

The All Party Parliamentary Group for Loan Charges, (APPG), set up to review the notorious Loan Charge (Finance Act (No 2) 2017 Schs 11 & 12), issued its Final Report yesterday.  The Loan Charge is triggered on any amounts still outstanding on 5 April 2019, and is payable on 19 April 2019 (although some taxpayers may be eligible to agree a repayment schedule - commonly referred to as "Time to  Pay", for a longer period).

The report is almost 100 pages long. The Members of Parliament who head up that APPG have clearly put in a huge amount of work in a relatively short space of time, to consider the Loan Charge and its effects.

Some of the report’s key conclusions may be summarised as follows:

• Such is the severity of the Loan Charge, there have already been a number of suicides – even before it has begun to bite. “HMRC has contributed to levels of stress and anxiety that are literally ruining the lives of individuals affected by the Loan Charge. This is exacerbated further by the tactics the department has taken to push individuals towards settlement.”
• Bankruptcies will be commonplace; there have already been family breakdowns and – again, this is before the Loan Charge has been triggered – people have been forced to sell their homes, despite HMRC’s protestations to the contrary. HMRC have failed to deal with the threat to vulnerable individuals and, in some cases, have breached their own vulnerable customer guidelines.
• The original Impact Assessment of how the Loan Charge would affect people was flawed and inadequate “to the point of negligence”
• The arrangements targeted by the Loan Charge were NOT “aggressive tax avoidance” but often a condition of taking on a new job.
• The Loan Charge is retrospective, overrides taxpayer protections and undermines the rule of law, having been introduced so that HMRC could collect tax it could not otherwise have done legally
• HMRC and the Treasury have embarked on a cynical campaign of misinformation –  HMRC has failed to answer questions honestly and openly and HMRC officials’ lack of integrity is in breach of the Civil Service Code; the Financial Secretary to the Treasury may also have broken the Ministerial Code

The APPG is clearly horrified at HMRC’s use of behavioural psychology to try to “nudge” taxpayers - to manipulate the thought processes and behaviours of taxpayers – without their knowledge. The APPG considers that HMRC is itself responsible for increasing the stress experienced by taxpayers through the use of Behavioural Insights methodology or “nudge theory”, as it is commonly referred to.

 With regard to HMRC’s culture, leadership and powers, the APPG found that HMRC “is an organisation out of control and urgently needs a new manner of Parliamentary scrutiny”, and the APPG backs the House of Lords’ Economic Affairs Committee’s recommendation of a new Powers Review, and to make HMRC more accountable.

Elsewhere the APPG report says:

"The way HMRC has conducted itself over the Loan Charge from start to finish, including with regard to the wilful and chronic campaign of misinformation, to Parliamentarians and the wider audience, is disgraceful. HMRC has shown a determination to push through a deeply questionable policy based in part on an evidenced need to cover up their own failings with regards to these arrangements. There must be an independent investigation into this, with the possibility of taking appropriate disciplinary action against any and all HMRC staff who have knowingly been involved. Such behaviour also suggests at a wider level an organisation that has lost its way, is lacking fundamental underlying values and is devoid of proper leadership."

There is nothing in this report that will surprise veteran tax practitioners who have dealt with HMRC over the last several years. It is nevertheless useful in that it encapsulates so much, in just one small area of tax work.  It is also interesting to see how those who are not used to being on the receiving end of HMRC and HMT machinations and doublespeak (Making Tax Digital, the renewals basis, NRCGT returns, reasonable excuse - I could go on) react to what most tax advisers would now consider to be “business as usual”.

It is perhaps worth noting in particular that HMRC initially denied being able to make a link between individuals who had suicided and the Loan Charge, despite making serious and sustained efforts to do so, and actually said that “spreading unconfirmed rumours, risks creating additional concern for vulnerable customers” until someone – apparently an HMRC whistleblower – said that actually, HMRC was aware of at least 6 suicides [LS1] linked to the Loan Charge. HMRC has apparently now reported itself to the Independent Office for Police Conduct in relation to one such death[LS2] , leaving the Financial Secretary “deeply upset and disturbed” – although the cynic in me would point out that it is not entirely clear whether he was now upset at the suicide itself, or the fact that HMRC has now had to raise a report to the police, given that no mention was made of the 5 other suicides that HMRC is supposed already to have been aware of, for some time.

I have previously suggested that 2019/20 would be a pivotal year for HMRC, given the measures it hopes to introduce over the next 12 months or so. There must be at least a few people at HMRC who are crossing their fingers and hoping that the Brexit debacle continues to provide covering fire, for at least until Making Tax Digital for Business is a distant memory.