“Question tax officials under oath about loan fees”

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British tax officials are set to be questioned under oath as part of a new independent review into the crackdown on historic tax avoidance, known as borrowing charges, MPs from across the political spectrum have said.

The borrowing fees, which took effect in 2019, were intended to crack down on the historic use of loan-based tax avoidance schemes. However, the measure has become one of the most controversial tax policies adopted in the UK in decades and has been linked to the suicides of at least 10 people. In January, MPs lined up to attack the policy, with some saying it echoed the Post Office scandal.

In opposition, Rachel Reeves, who is now chancellor, promised an independent review of the policy following criticism from campaigners that a previous government review was limited in scope and influenced by HM Revenue & Customs.

Documents released with last month’s Budget confirmed “a further independent review of borrowing charges, to help bring closure to those affected while ensuring fairness for all taxpayers”.

The announcement was welcomed by campaigners and MPs from the All-Party Parliamentary Group (APPG) on Borrowing Charges and Taxpayer Fairness, a cross-party body with more than 100 MPs. But MPs said tough measures were needed to ensure the new review was effective, such as being able to question officials under oath – an unusual requirement for HMRC staff – and being equipped with outside staff in government.

Karl Turner, Labor deputy chair of the APPG, said that “unlike the 2019 review commissioned by the previous Conservative government”, there was a need for “a real review or inquiry, properly set up and clearly independent of HMRC and of the Treasury”. “.

He added: “It is essential that public officials are forced to give evidence on the record and under oath this time, including former ministers who rushed the loan bill through Parliament, failed to challenge HMRC and refused to change course even when 10 people took action. their own life.

Since around 2000, tens of thousands of people in various sectors have resorted to schemes that involved being repaid in the form of loans via offshore trusts. These were often recommended by professional advisers, agencies or employers, with many unaware that these arrangements were considered a means of tax avoidance by HMRC.

The introduction of borrowing charges in 2019 initially required those affected to pay tax on up to 20 years of income in a single financial year, creating unaffordable demands for some. But after a public outcry over the dismay caused by this policy and after a review commissioned by the government, concessions were made. This included making it easier to repay the amounts by spreading out payments and roughly halving the period during which borrowing charges applied.

Steve Packham, of the Loan Charge Action Group, a campaign body, added: “As has been well documented, the 2019 review commissioned by the last government was neither independent nor truly a review of the whole of the issue, with a mandate and structure set by the Treasury and HMRC, both of whom have been revealed to be involved throughout the affair.

“We now need a comprehensive review or inquiry that would examine the entire loan fee scandal and do so in an appropriate and open manner. »

The APPG plans to present its demands to Treasury ministers in a letter due to be sent next week.

Dawn Register, tax dispute resolution partner at BDO, said that despite the review being announced, there was currently no clarity on its scope or timing.

In the meantime, his firm had seen an increase in HMRC activity relating to historic tax avoidance cases.

“The government’s message is that the borrowing fee legislation remains in force and those who have agreed payment plans should continue to pay the agreed amounts,” Register said. “We do not expect the announcement of this new review to change HMRC’s current approach.”

The government said: “We recognize that concerns continue to be raised about borrowing charges.

“The Government will honor its commitment to carry out an independent review of borrowing charges to help bring closure to those affected while ensuring fairness for all taxpayers. »