The agreement between HMRC and a number of multinational companies only came to light after a Freedom of Information request by Greg Smith MP, co-chair of the Loan Charge and Taxpayer Fairness All Party Parliamentary Group was revealed in parliament during Treasury Questions, and it shows that the sweetheart deal was known about among senior tax advisers, and members of the professional institutes.

The FOI response revealed that HMRC did a secret settlement deal with multinational companies in 2015 allowing them to settle the use of payroll loan schemes for just 15% - giving them a huge 85% discount - while at the same time persuading the Treasury to introduce the loan charge just a year later.

At the time, Lyn Homer was chief executive of HMRC, where she oversaw the tax authority from 2012 to 2016, before being replaced by Sir Jon Thompson, of which more later.

Minutes of a meeting during the 2019 Morse Review between Sir Amyas Morse, the then reviewer and Ray McCann, who is conducting the current review into settlement terms, have been released, showed that awareness of the 15% deal went much wider than the government and a few select tax professionals.

McCann himself was president of the Chartered Institute of Taxation (CIOT) from 2018 to 2019, for example, the biggest representative body for tax advisers and tax professionals.

The minutes report Ray McCann as stating: ‘The earlier settlement opportunity that had been open to large companies had included significant discounts, so that eventually the companies settled for somewhere in the region of 15% in 2015…’.

This was only one year before the Loan Charge was introduced to parliament in the 2016 Budget by Conservative chancellor George Osborne.

‘This means that at the same time as doing this sweetheart deal with multi-million pound companies, they were coming up with a law to retrospectively hit individual workers with huge bills,’ the Loan Charge APGG said, ‘despite the fact that some of the tax HMRC is demanding should itself have been collected by HMRC from agencies and employers too, under the agency rules.

‘HMRC failed to do this, hence conceiving of a retrospective law to allow them to issue demands regardless of their own failures.’ 

In parliament earlier this week, MP Greg Smith asked the current chancellor, Rachel Reeves: ‘A recent freedom of information request has revealed that, for a number of schemes, HMRC has settled with large corporations for just 15% of what was owed.

‘With the loan charge review ongoing, does the chancellor agree with me that individuals should be treated no differently from the large corporations for which this precedent has been set?’

An Early Day Motion has now also been tabled by APPG member, Angus Macdonald MP. EDM 1579 on Loan Charge and settlement terms offered to large companies and individuals expresses ‘astonishment at the 15% deal and the fact parliament has never been told about it’, and calls for the same terms for individuals affected by the Loan Charge as those offered to multi-million pound companies. 

The minutes of the meeting also reveals comments by McCann criticising the fact that contractors had not been the same terms and no discounts.

The minutes state:

‘The contractors weren’t offered these terms.

‘Settlement opportunities have always had a discount, and contractor one is the only one that didn’t. Even Ingenious who are battling away with HMRC still had a 25% discount offered.’

In the minutes McCann makes clear that he regards this as discriminatory: ‘RM thinks that contractor arrangements discriminate against contractors for reasons that aren’t apparent.’ 

The revelation about the secret ‘sweetheart’ deal with large companies comes at the same time as McCann is concluding his review into settlement terms for individuals, yet despite knowing about the 15% settlement figure, there has been no mention of this by him or by the Treasury, the APPG said.

MPs from the Loan Charge and Taxpayer Fairness APPG are now demanding that individuals must be offered the same discounts as large companies and ‘that they should be asked to pay less, because the Treasury ministers have acknowledged that they are victims of mis-selling’.

The APPG has written to the chancellor and McCann, saying that these individuals cannot now be asked to pay more than multimillion pound companies. 

Yet despite this, the current government commissioned a very restricted review into individual settlement terms, conducted by a former assistant director of HMRC, which leaves the Loan Charge in place and only pursues the individuals affected.

The FOI also revealed a conversation referencing one-time HMRC boss Sir Jon Thomson who was CEO at HMRC from 2016 to 2019.

McCann is recorded as saying, with regard to the then permanent secretary and chief executive of HMRC, Sir Jon Thompson:

‘Last year’s statement – you could say it was lies. Jon Thompson said that HMRC had won case after case, and it wasn’t wrong but it wasn’t right either. HMRC had one on corporate tax deductions, but they lost on PAYE. No case on record where they’ve won a loan scheme.’

Following the revelations, the Loan Charge and Taxpayer Fairness APPG is calling for an urgent independent inquiry into the whole Loan Charge scandal.

Greg Smith MP, co-chair of the Loan and Taxpayer Fairness APPG said: ‘It’s absolutely staggering to discover that just a year before the Loan Charge was introduced to parliament, that HMRC agreed a deal allowing large companies to settle for just 15% of what HMRC said they owed, for use of similar arrangements.

“The Treasury has known all along that large companies were allowed to settle for just 15%, representing an 85% discount, yet then wasted yet more taxpayers’ money calling for a review of settlement terms when clearly the maximum HMRC should be asking from individuals is also 15%.

‘Considering that ministers have acknowledged that people facing the Loan Charge are victims of mis-selling, then it would be outrageous to ask them to pay more than large companies, who unlike the victims of mis-selling, did know what they were getting into.

‘Regardless of what Ray McCann recommends in his report on settlement terms, all those facing the Loan Charge and those pushed to settle to avoid it must all be offered no more than 15% as full and final settlement. Anything else would be unfair and represent different treatment of taxpayers which is a breach of HMRC’s duty to treat taxpayers fairly and not to discriminate between them. 

‘There also must now be an independent inquiry into the whole Loan Charge scandal including this secret deal and why parliament was not informed about it, as well the extent of HMRC’s dishonesty, with Ray McCann himself referring to one of their statements by saying “you could say it was lies”.’

Sarah Olney MP, vice chair of the Loan Charge and Taxpayer Fairness APPG: ‘It is unacceptable that victims have been consistently refused the justice they deserve while large companies received settlements a decade ago.

‘This information shows the need for a proper, independent inquiry that looks at the whole Loan Charge Scandal.’

There are an estimated 50,000 contractors affected by the outstanding loan charge demands, illustrating the scale of the issue, and the damage it has wrought on the affected community.

Steve Packham from the Loan Charge Action Group said: ‘Ten people have killed themselves as a direct result of HMRC’s ruthless persecution of people who the chancellor herself has described as “victims of mis-selling”.

‘Yet we now know that just a year before the Loan Charge was introduced to parliament, HMRC agreed a deal with large companies letting them pay just 15% of what they said they owed.

‘The contrast with HMRC’s treatment of contractors is stark, ruthlessly refusing to offer any meaningful discounts and imposing penalties and interest, meaning some people have been hit with bills that were even more than they even earned at the time.

‘As Ray McCann told Sir Amyas Morse, contractors are the only group that have not been offered any discounts and that this is discrimination by HMRC.’

HMRC fights back

The claims are robustly rejected by HMRC which said that all settlements are agreed after considering the individual facts of each cases and made under published settlement terms. 

Between 2012 and July 2015, HMRC confirmed that it offered employers with liabilities relating to certain disguised remuneration schemes the opportunity to settle through the Employee Benefit Trust Settlement Opportunity.

An HMRC spokesperson told Business & Accountancy Daily: ‘We don’t recognise these claims. We’re absolutely committed to ensuring every taxpayer, regardless of size, pays the tax that’s legally due.

‘Given an independent review is underway it would be inappropriate for us to comment further.’

The McCann review into the loan charge is due to report back to the government this summer, with an announcement on next steps expected at the Budget this autumn, although a date for this has not yet been announced.