< Go Back Is HMRC's insistence that taxpayers take out commercial loans to settle liabilities a breach of FCA Regulations? Posted: Mar 2, 2019
MP's have recently queried why HM Revenue & Customs (HMRC) has asked thousands of self-employed workers to consider remortgaging their homes or take out loans to settle tax bills arising from the new, retrospective, 'loan charge'.
A cross-party group of MP's objected to letters that HMRC sent out to some 50,000 individuals facing the loan charge; a new law that will tax up to 20 years of income received via “disguised remuneration schemes” in one year.
Letters sent by HMRC state: “It is expected that you use every means to meet your obligations and pay the tax and interest liabilities that are due. This may include raising a loan or selling other assets.”
Mary Aiston, HMRC director of counter-avoidance, told the Treasury select committee in January: “For some people, HMRC may say you need to take a loan out if you have got equity in your property, if that’s the right answer and people can manage the repayments.”
The All-Party Parliamentary Group on the loan charge has written to Andrew Bailey, chief executive of the Financial Conduct Authority, and Philip Hammond, the chancellor, to query whether the advice given by HMRC was a potential breach of FCA regulations. Nicky Morgan, MP and chair of the Treasury select committee, has written separately to HMRC and Mel Stride, financial secretary to the Treasury, questioning how HMRC are able to justify pursuing debts going back 20 years, despite the loan charge legislation permitting such action.
The FCA has stated that "debt advice and the provision of personal loans or lending is a regulated activity" so is HMRC’s advice in breach of the FCA rules? HMRC are not on the FCA list of approved organisations to offer financial advice. On that basis it certainly seems that HMRC’s insistence on seeking commercial loans is inappropriate. Many people, facing up to 20 years worth of liabilities, would, understandably, struggle to pay the debt, especially as so many were self-employed, retired or nearing retirement.
It appears unlikely that many 'reputable' lenders would loan the amounts of money needed to pay the large tax demands many people are now facing.
MP's heard from the family of a contractor who committed suicide because of the tax bills he faced as a result of the loan charge.
MP's also heard evidence from social workers, doctors and government contractors who joined the loan schemes on the advice of accountants and recruitment agencies or the insistence of 'employers' and now face huge historical liabilities as a result.
At the end of an investigation, it is often the case that HMRC will apply pressure for any debt to be paid; often suggesting that the taxpayer takes out personal loans or mortgages to pay HMRC. This is not an occurance unique to cases involving the 'Loan Charge'. It would appear that HMRC are in no position to offer any advice regarding loans and mortgages but that does not prevent a taxpayer seeking such advice from an FCA regulated adviser.
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