Tax Barrister Attacks HMRC’s Approach to Loan Charge Rulings

A prominent tax barrister has issued a highly critical analysis of the ways in which HMRC is implementing rules relating to loans that are perceived to have been used by company directors and contractors as a method of tax avoidance.

Keith Gordon from Temple Tax Chambers has responded on Twitter to a factsheet issued by HMRC which outlines the reasoning behind loan charge rules that are now in place.

In a series of posts in response to the factsheet, Mr Gordon suggests that HMRC’s position on loan charges has been inconsistent and lacked clarity in important ways over the course of recent years.

He also accused HMRC of “trying to play the politics of envy” by stating that the average income of someone who has used loans as a form of disguised remuneration is almost twice as high as the average UK taxpayer.

A particular issue taken up by Mr Gordon in his response to HMRC’s guidance is that, as far as HMRC is concerned, company directors who take on loans effectively as payments to themselves for tax purposes are being conflated with contractors who may not have known what they were doing or why.

Indeed, the case made by Mr Gordon is that many contractors “were duped into using the schemes” but they are still regarded by HMRC as being involved in “egregious [tax] avoidance”.

Speaking while giving evidence to a parliamentary sub-committee in Westminster, the same barrister suggested that HMRC should look again at its approach that he claimed effectively “stigmatised” anyone who has been paid via loans and “condemned all participants as immoral”.

“As HMRC have dehumanised ALL participants they just cannot see why it is so unfair to apply it to contractors,” he said.

“Suicide, divorce and bankruptcy are all human tragedies. But HMRC will not be moved because, in their eyes, everyone affected has ceased to be entitled to be treated as a real person.”

Loan charge rules as they stand mean that HMRC has the power to look back over the last 20 years to find details of perceived wrongdoing and make demands for payments corresponding to charges that it believes should have been paid.

HMRC’s factsheet stresses the point that “tax avoidance takes money away from schools, hospitals and social care” and insists that “the loan charge rightly tackles avoidance and ensures people pay what they owe”.