HMRC and the Treasury ‘interfered’ with independent review

Her Majesty’s Revenue and Customs (HMRC) and the Treasury “directly interfered” with an independent review of tax policy that has been linked with a number of suicides, say a group of 233 MPs and peers.

In September 2019, Sajid Javid – who was Chancellor at the time – commissioned Sir Amyas Morse to lead an independent review into the disguised remuneration Loan Charge.

It came after HMRC attempted to claw back tax avoided through so-called disguised remuneration schemes, used by some locum doctors and nurses to make up the shortfall in the wages caused by the loss of self-employed status, through its Loan Charge policy, which has been linked with at least seven suicides.

HMRC has repeatedly denied claims the Loan Charge acts retrospectively, thus undermining the Rule of Law and tax certainty.

The Morse Review made a number of recommendations, but did not call for the Loan Charge policy to be scrapped, as many critics have called for.

Now, the Loan Charge APPG, one of the largest All-Party Parliamentray Groups, has said that Freedom of Information (FoI) responses “show that the Morse Review was not independent and HMRC and the Treasury interfered from start to finish”.

HMRC and the Treasury have been contacted for a response to the allegation.

In a statement, the Loan Charge APPG said: ” The evidence is some 376 pages of internal emails (link1link2) and 670 pages of the attachments to those emails (link3link4) that clearly shows direct interference in the review by HMRC and the Treasury as well as an inappropriately close relationship between the review team, made up of HMRC and Treasury staff and the two Governmental bodies whose policy the Morse Review was scrutinising.

“In one extraordinary exchange, the Review Team member of staff who is a senior Treasury official agrees to buy beers for the Chancellor’s press secretary.

“In this exchange, when offering to help deal with incoming press enquiries directed at the review, about the report, the Chancellor’s own press secretary was asked to find someone to help with this and tells the Loan Charge Review “Cool. Yes we can help. You owe us beers”.

“The reply from the supposedly independent Review Secretariat is “Great really appreciate it. And happy to line up the beers”.

“The Morse Review has been presented by the Government as independent. It was titled as the ‘Independent Loan Charge Review’ and has been used recently by the Government to justify making no further changes to the Loan Charge beyond those which the review recommended, despite there being thousands of people still facing huge bills for tax that has never been legally proven to be due from them and despite the ongoing risk of suicides, as well as bankruptcies.

“However, internal documentation revealed in a two Freedom of Information requests exposes a clear attempt by HMRC and the Treasury, including senior HMRC management, to direct the review from the outset.

“The Treasury sought to influence the choice of ‘independent experts’ used to advise the review and HMRC sought to change the report before publication.

“It had already been exposed that one of the experts appointed later admitted that she did not have any detailed understanding about self-employed schemes and therefore they were unable to comment on those schemes; an extraordinary admission for someone whose advice was being relied on.

“The Treasury queried whether any expert who had appeared before a Select Committee should be appointed as “it means they are slightly compromised”.

“The Loan Charge APPG make clear they are making no criticism of Sir Amyas Morse, nor for his delivery of this report in what was an unreasonably short timeframe considering the scale of the evidence and with a team made up entirely of HMRC and Treasury staff.

“Instead, the APPG make clear that it is the interference by HMRC and the Treasury that has rendered the already flawed report conclusions as unsound.

“Overall, the information revealed by the emails clearly shows that the review fails basic tests of what would constitute an independent review into a Government policy.”

The APPG also detailed key points from its findings based on evidence contained in emails disclosed through FoI requests.

The key points are as follows:

  • HMRC and the Treasury sought to influence the review from before the start of the review until the date that the final report was issued.
  • The Review secretariat team had an improperly close working relationship with HMRC and Treasury staff.
  • There was clear cooperation and collaboration between the Treasury/HMRC and the Review over dealing with the press. In at least one case, lines were provided for the review team/Sir Amyas to use. Extraordinarily, the Review secretariat discussed responses to press approaches with the Chancellor’s press secretary. They also received and used suggestions from the Treasury as to how to respond to the press.
  • The Treasury sought to influence the choice of experts appointed to advise the review, suggesting that those who have spoken before Select Committees should be avoided. Notably, experts appearing before Select Committees who have been critical of the Loan Charge and of HMRC. This can be seen to be an attempt to steer the review away from any experts who were known to be critical.
  • The Review secretariat team afforded HMRC and the Treasury privileged early access to the report’s conclusions. This early access was not extended to other interested parties who were not given any opportunity to raise concerns on its factual accuracy.

Previously, the Loan Charge APPG published a report that said the Treasury-commissioned Morse Review came to a flawed and unjustified conclusion.

The Morse Review claimed that the “law was clear” from 2010 when the APPG says that this is not the case, according to tax experts.

“The flawed conclusion now makes more sense considering the clear lack of genuine independence and the fact that HMRC interfered with which experts should be appointed to advise the review,” the APPG said.

“This appears to have prevented those experts who have been critical of the Loan Charge from being involved.

“On Wednesday, the Government is facing a challenge from many MPs, including members of the Loan Charge APPG, who have tabled amendments to go further than the flawed Morse Review.

“New Clause 31, tabled by a cross party group of MPs including APPG member David Davis and APPG officers and members seeks to remove the Loan Charge for everyone before 2016 apart from those who deliberately evaded tax.”

Sir Ed Davey, co-chair of the Loan Charge APPG and acting co-leader of the Liberal Democrats, said: “The information exposed by Freedom of Information responses clearly shows that the review commissioned by the Government and presented as independent was, in reality, nothing of the sort.

“There was a clear attempt by HMRC and the Treasury to interfere and to direct it from start to finish. We make clear we make no criticism of Sir Amyas Morse, but his review was set up in such a way so as to make an independent review impossible.

“There was clear and inappropriate interference from the two Governmental bodies which were being reviewed. The flawed conclusion of the review must be rejected and Parliament must seek to resolve the Loan Charge Scandal properly.”

Labour MP Ruth Cadbury, co-chair of the Loan Charge APPG, added: “We now know that the Chancellor’s own press secretary was involved in dealing with press enquiries to the review and that there was an inappropriately close relationship between the review Secretariat team, made up of Treasury and HMRC staff, and the Treasury and HMRC, whose policy the review was scrutinising.

“This shatters any illusion of genuine independence and the fact is that this review fails even basic tests of how an independent review should operate. Now it is clear that the conclusion of the Morse Review cannot be relied on, it is up to MPs to do the right thing and to remove the retrospective Loan Charge for everyone other than those for whom HMRC can prove they were deliberate tax evaders”.

Meanwhile, Conservative MP Sir Mike Penning, another co-chair of the Loan Charge APPG, said: “Colleagues from across the House of Commons have consistently expressed their opposition against retrospective legislation, but the now discredited Morse Review recommends that retrospection back to 2010 should remain.

“This recommendation is flawed and it doesn’t address the basic injustice of this clearly retrospective legislation. So we hope that finally Ministers will agree that the retrospective nature of the Loan Charge is wrong and accept the amendment to the Finance Bill to tackle this and allow thousands of people to have the chance to defend themselves in the normal way they are entitled to within our legal system”.

What is a disguised remuneration scheme

Sometime known as Employment Benefit Trusts, these schemes typically see wages paid into an offshore tax haven, then transferred to the contractor as a ‘loan’ that will never be repaid.

HM Treasury says: “The disguised remuneration Loan Charge was introduced to tackle contrived schemes where a person’s income is paid as a loan which does not have to be repaid.

“Disguised remuneration loan schemes were used by tens of thousands of people, and concerns have been raised about the use of the Loan Charge as a way of drawing a line under these schemes. The government is clear that disguised remuneration schemes do not work and that their use is unfair to the 99.8 per cent of taxpayers who do not use them.

Financial Secretary to the Treasury Jesse Norman said: “Everyone should pay their fair share of tax. These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the Loan Charge is the appropriate way of tackling them.”