Mortgage cost: MPs in ‘fraudsters’ row with HMRC

HM Income and Customs (HMRC) is engaged in a bitter disagreement with MPs over the so-called “mortgage cost”.

The cost – introduced in final 12 months to shut a tax loophole – has landed 1000’s of freelancers with giant, surprising payments courting again 20 years.

The all-party mortgage cost group has accused HMRC of suggesting those that should pay the cost are fraudsters.

HMRC’s chief govt Jim Harrah insists a press launch didn’t say that and is demanding a retraction.

However the all-party group says it “stands by” its criticism.

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The group’s chairman, performing Lib Dem chief Sir Ed Davey, mentioned the mortgage cost was a “unhealthy coverage” that had triggered distress to many individuals and was “very unhealthy for the economic system”.

Household breakdown

He instructed the BBC a lot of his constituents had been victims of “each this disgraceful authorities coverage and the way in which it has been applied by HMRC”.

The mortgage cost is aimed toward tackling a sort of tax avoidance HMRC calls “disguised remuneration”.

In 1999, the then Labour authorities launched tax legislation known as IR35, which sought to class many self-employed freelance staff as employers, which means they must pay Nationwide Insurance coverage.

Many signed as much as schemes, promoted by attorneys and accountants, permitting them to legally keep away from paying Nationwide Insurance coverage. This normally concerned the freelancers paying cash to umbrella corporations, who loaned it again to them.

The federal government has closed this loophole and is now demanding retrospective fee of enormous sums from the freelancers.

The Mortgage Cost Motion Group says somebody incomes greater than £50,000 a 12 months may face a invoice for greater than £500,000, and even individuals on extra modest incomes face expenses in extra of £10,000.

It says this has led to despair, household breakdown and, in a couple of circumstances, suicide.

‘Harmful’

The campaigners have accused HMRC of victimising freelancers who’re topic to the mortgage cost and attempting to painting them as criminals or fraudsters, when they’re, the truth is, victims of fraud themselves.

The newest row centres round a press release issued by HMRC final week, which introduced the arrest of 5 individuals suspected of selling schemes to get spherical paying the mortgage cost.

The discharge included a warning to “suppose extraordinarily fastidiously” earlier than getting into into “any scheme that claims to considerably decrease your tax invoice” and that if a “one thing seems too good to be true, then it virtually definitely is”.

It mentioned HMRC wished to guard individuals from schemes that, at worst, may see them “being concerned in fraud”.

In a letter to Mr Harrah, the all-party group mentioned that utilizing this sort of language created the impression that mortgage fraud victims had been criminals.

The group additionally claimed that the press launch “provides the overall impression” that the arrests had been for promoting mortgage schemes, which was not the case.

“The conflation of this stuff could help HMRC overlaying up their full lack of motion towards promoters of mortgage schemes, however is unhelpful and in addition harmful,” it mentioned.

‘Honesty’

Mr Harrah wrote to Sir Ed Davey to demand the all-party group withdraw its allegations and publish a correction on its web site.

“The press launch doesn’t say, or indicate, that customers of disguised remuneration schemes have dedicated fraud,” wrote Mr Harrah.

However the all-party group, co-chaired by Labour’s Ruth Cadbury and Conservative MP Sir Mike Penning, is standing by its allegations.

In a Twitter message, it mentioned HMRC had “misrepresented arrests as being motion towards promotion of schemes now topic to the #LoanCharge, once they haven’t been”.

The BBC understands HMRC took the weird step of releasing details about arrests as a result of it wished to be seen to be taking motion, following criticism about poor communication, in a report last year.

However the organisation insists it was clear in its launch that the arrests had been associated to schemes to get around the mortgage cost – not individuals liable for promoting mortgage cost schemes, or the individuals who had used these schemes.

Glyn Fullelove, president of the Chartered Establishment of Taxation, tweeted that he could not see how HMRC might be accused of “conflation”.