HMRC CEO denies it is ‘deliberately misleading’ public over loan scheme promoter arrests

Controversy over loan scheme arrests

The individuals apprehended by HMRC’s officers last week are described as being arrested on suspicion of fraud in connection with promoting arrangements designed to get around paying the loan charge.

“Those that enable, promote or facilitate tax fraud are firmly in our sights and we currently have more than 200 such suspected enablers under criminal investigation,” said a spokesperson from HMRC’s fraud investigation service, in a statement.

“We are keen to protect the public from those who devise and market fraudulent schemes, which at best do not work and at worst mean that people could end up being involved in fraud.”

“People need to think carefully before they enter into any scheme that claims to significantly lower your tax bill. If something looks too good to be true, then it almost certainly is. HMRC’s advice is firmly to steer clear”

The statement went on to state: “People need to think carefully before they enter into any scheme that claims to significantly lower your tax bill. If something looks too good to be true, then it almost certainly is. HMRC’s advice is firmly to steer clear.”

However, the agency’s reporting of the arrests drew criticism from the Loan Charge APPG in a series of tweets, published in the wake of the arrest news.

In them, the Loan Charge APPG described HMRC’s press release as “wholly unacceptable” for “deliberately misleading” readers by “conflating arrests for alleged fraud with those who entered into loan schemes”.

This point is directly contested by Harra in his letter, seen by Computer Weekly, which is addressed to Loan Charge APPG co-chair, Sir Ed Davey, and dated 28 February 2020.

“The press notice does not suggest users of disguised remuneration schemes are also committing a fraud. It clearly states the promoters have been ‘arrested on suspicion of fraud in connection with promoting arrangements designed to get around the loan charge’,” Harra stated.

“It also warns people to steer clear of any schemes that make improbable claims to significantly lower their tax bill. I’m disappointed that instead of amplifying this important message, the APPG has chosen to criticise us unduly.

“In view of the seriousness of the latest allegations the APPG has made against us, I assume you will want to bring this response to the attention of APPG members and will arrange for it to be published on the APPG’s website,” the letter concluded.

Computer Weekly contacted the Loan Charge APPG for its response to the letter, and was told it was in the throes of penning a written response to Harra’s missive at the time of publication.

The problems with promoters

While HMRC maintains it has always been of the view that loan-based remuneration schemes do not work, it has faced criticism in the past for not doing enough to clamp down on the operators and promoters of these setups.

Particularly as many loan scheme users claim they were duped into participating by promoters who claimed their setups were “known and approved of” by HMRC.

Computer Weekly understands that HMRC’s efforts on this front have been hampered somewhat by the fact the schemes are typically operated in offshore locations, beyond the agency’s enforcement jurisdictions.

Furthermore, while loan schemes are contrived tax avoidance vehicles that are open to be challenged by HMRC, they are not illegal to operate or participate in, as previously confirmed by the financial secretary to the Treasury, Jesse Norman.

“It is important to be clear that although there are no criminal offences of promoting or marketing tax avoidance schemes specifically, HMRC may conduct criminal investigations and make referrals to prosecuting authorities where, for example, there is evidence that promoters have deliberately misrepresented the facts to it,” said Norman, as documented in Hansard in July 2019, in response to a question about what the government is doing to clamp down on loan scheme promoters.

In apparent reference to this, the Loan Charge APPG tweets separately accused HMRC of giving the “misleading impression” that the arrests have “anything to do with pursuing promotors of loan schemes, when it does not” before stating that “not a single loan scheme promotor has been prosecuted for this”.

On this point, it is worth noting the original HMRC press notice regarding the arrests does state that the individuals involved are connected to schemes designed to side-step the loan charge itself.

They are not, for example, necessarily involved with the creation and promotion of the original, offending loan remuneration schemes the loan charge policy was introduced to address.

Computer Weekly understands such schemes are being marketed to contractors who have received loan charge-related tax bills as a way of getting out of having to pay the monies HMRC claims they owe.

A contractor, speaking to Computer Weekly on condition of anonymity, said such schemes usually require participants to pay huge fees – “usually 10-20%” of the total amount HMRC claims they owe in order to get involved.

“I know some that have done it, and the very best they can hope for is another long battle with HMRC where they will be trying to prove that it ‘works’, and I doubt they do, although I’m no tax expert,” the contractor said.

In his letter, Harra described these “loan-busting schemes” as something HMRC is “hugely concerned” about.

“We believe we have a duty to warn the public about them. Those most at risk are the very customers the APPG was formed to support,” he added.