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November's round up of the latest tax investigation news and cases:
This bulletin relates only to clients who have not yet settled with HMRC and who have been subject to the HMRC Loan Charge. The report was not commissioned to review pre loan charge (before 9 December 2010), post loan charge (post 5 April 2019) liabilities or the liabilities of those taxpayers who although there are comments about these cases in the report (see below).
On Budget Day the independent Loan Charge report requested by the Government was published. If focused on the factors that were preventing taxpayers from settling with HMRC.
1) The previous review by Sir Amyras Morse was not independent and HMRC was accused of tampering with the outcome.
2) The handling of Loan Charge work by HMRC was inadequate with frequent significant delays and officers allocated to casework were not empowered to make decisions or even to calculate liability without passing queries up the line. This created further delays.
3) Taxpayers who could not afford to pay the duties due and who could not afford to make payments on account were particularly affected by accruing interest.
4) The Loan Charge tax is unfair because it pushed taxpayers into the highest rate bracket whereas if the income has been tax in the years in which it arose mush less tax would be payable.
The report in full, to which we contributed, can be accessed by following this link.
The report acknowledges, at page 67 paragraphs 25 and 26, “The recommendations of the Review, if accepted by the Government, would potentially raise questions of fairness for those taxpayers who have previously settled their liability. As the Review does not have details of previously settled cases, it will be for HMRC to decide on how such cases should be concluded, in the event that the taxpayer wishes to have their settled position reviewed.”
Paragraph 30 does mention pre 9 December 2010 cases as follows “Why these cases remain open is unknown, but this in itself should be a cause for concern and unacceptable to HMRC. After such a long period of time, fully establishing the facts and having access to contemporaneous documents becomes much more difficult. The individuals involved would also have become involved in loan schemes at a time when the legal position was less clear and, had the matter been litigated at a much earlier point, it is uncertain that any HMRC position would have been supported by the Tribunal (the Review obviously has no visibility of the full range of individuals, or the type of schemes involved).”
1) Introduce a new settlement opportunity for individuals The Review recommends that HMRC introduce a new settlement opportunity for those who used loan schemes, who have yet to settle their liability.
2) Suspend part of the liability.
3) Calculating the suspended liability by:
4) More straightforward payment plans:
5) Individuals on only State Pension/Universal Credit. Where, in a very small minority of cases, there is no reasonable prospect of recovering much of the liability due to the economic circumstances, take an exceptional approach.
6) Improved time to pay for businesses where liabilities are settled with employers rather than the employees, do not disallow any corporation tax deduction, and as with individuals, do not apply penalties or IHT, and ensure sufficient time to pay is available.
The Government response accepts all but 1 of the recommendations and with regards to recommendation 6 it will treat all taxpayers, individual and businesses in the same way. Also references to liability, interest, penalties and Inhertitance Tax being suspended will now mean that these liabilities are written off at the time of settlement. Inheritance Tax write offs will not be considered to have contributed to the £70,000 cap.
In addition and to support those taxpayers with smaller liabilities the Government will also provide an additional £5,000 deduction from the principal amount for everyone in scope of the Review.
HMRC summarises most of this on the website https://www.gov.uk/government/publications/loan-charge-independent-review/loan-charge-review but there is no reference to penalties. The report recommended that HMRC should not seek to apply penalties as part of the settlement offer unless there is clear evidence of egregious behaviour. Why is HMRC silent on penalties. Are they plotting something behand the scenes or is this further evidence of their incompetence? We will press for answers on this.
HMRC will write to follow up in early 2026 those taxpayers who have already been notified about the independent report but we have no confidence that HMRC will be able contact all taxpayers in this category. So clients subject to the Loan Charge who have do not receive confirmation from HMRC should contact us so we can follow up on this.
As part of the new HMRC settlement opportunity taxpayers receiving those letters we will need to send HMRC the following:
In most cases dealt with by us HMRC will already hold this information.
It remains unclear if changes to legislation will be needed in the 2026 Finance Act to enshrine any of the recommendations into law. It legislation is needed there could be further delays in settling these cases.
Households could receive substantial financial rewards by reporting tax fraud to HMRC under a proposed new incentive scheme modeled on US practices.
The initiative could see informants of tax fraud rewarded with up to 30% of the taxes recovered if they successfully tip off HMRC about fraudulent activity.
The scheme would operate similarly to practices in the US, where whistleblowers receive a percentage of recovered tax as a reward for their information.
Details of the scheme are set to be announced in the Budget on November 26, according to the Financial Times.
Currently, HMRC only pays discretionary awards based on factors such as the amount of tax recovered and the time saved in investigations. The new scheme would lead to higher rewards for those who report fraud, serving as an incentive for increased public participation.
The government is attempting to crack down on individuals and businesses not paying taxes, which costs approximately £47 billion annually.
The taxman recently admitted using artificial intelligence (AI) to monitor workers' social media posts for evidence of tax bill evasion.
The initiative comes after HMRC received a record number of tip-offs on tax fraud last year.
In 2024-25, there were reportedly over 164,670 reports to its fraud hotline, according to analysis by accountancy firm Price Bailey.
The figures, reported in the Telegraph, mark a 9% increase in tip-offs year-on-year.
However, while the number of people reporting their peers reached a record high, the amount of cash distributed by HMRC decreased. Last year, the tax office handed out a total of £852,438 to whistleblowers—down 13% compared to the 2023-24 period.
Tax fraud can be reported online through the government's website or by calling the HMRC hotline on 0800 788 887.
There are numerous offences that can be reported, including tax credit and child benefit fraud and tax avoidance or evasion.
Individuals do not have to provide personal details, and any information given will be confidential.
The Treasury declined to comment on the reported plans.
Tax fraud occurs when someone deliberately avoids paying tax to the government.
This can include:
Anyone found guilty of committing tax fraud could be fined or even receive a criminal conviction and face imprisonment.
If HMRC is investigating someone for potential tax fraud, it will send a letter notifying them of this investigation.
The proposed scheme represents a significant shift in HMRC's approach to incentivizing public cooperation in tax enforcement. By aligning with the US model, which has demonstrated success in generating substantial tax recoveries, the UK government aims to close the tax gap more effectively while providing financial motivation for informants to come forward with credible information about tax fraud.
The timing of the announcement, coinciding with broader government efforts to enhance tax compliance and utilize advanced technology for enforcement, suggests a comprehensive strategy to address tax evasion across multiple fronts.
A company linked to Baroness Michelle Mone and her husband Doug Barrowman owes £39 million in tax in addition to the £148 million it was ordered to pay the government for breaching a contract to supply PPE.
Documents filed by PPE Medpro's administrator revealed the figure owed to His Majesty's Revenue and Customs (HMRC).
Last month, a court ruled the company breached a contract to supply medical gowns during the Covid pandemic because they did not meet certification requirements for sterility.
HMRC and the administrators declined to comment.
PPE Medpro was put into administration last month, and Health Secretary Wes Streeting said the government would pursue the company "with everything we've got" to recover the cash.
PPE Medpro has £672,774 available to unsecured creditors, far less than the money owed to the DHSC, the administrators' filings show.
The filings also reveal that the debt to the government is even larger than previously known.
During the outbreak of the Covid pandemic in 2020, the government scrambled to secure supplies of PPE as the country went into lockdown and hospitals across the country were reporting shortages of clothing and accessories to protect medics from the virus.
In May that year, PPE Medpro was set up by a consortium led by Baroness Mone's husband, Doug Barrowman, and won its first government contract to supply masks through a so-called VIP lane after being recommended by Baroness Mone.
The Department of Health and Social Care sued PPE Medpro and won damages over claims the company breached its contract to supply medical gowns.
Mr Barrowman told the BBC in an interview in 2023 that he was the ultimate beneficial owner of PPE Medpro. The shares are held in the name of an accountant, Arthur Lancaster, according to Companies House documents.
In that same interview, he admitted receiving more than £60 million in profits from PPE Medpro.
Baroness Mone, best known for founding the lingerie company Ultimo, admitted that millions of pounds from those profits were put into a trust from which she and her children stood to benefit.
An Isle of Man company linked to Mr Barrowman, Angelo (PTC), has a secured debt of £1 million to PPE Medpro, which means it is likely to rank ahead of government creditors when it comes to paying out whatever cash can be recovered from the company.
The administrators' report says it expects there will be enough money to repay this in full.
Filings in the Isle of Man show the beneficial owner of Angelo (PTC) is Knox House Trust, part of Barrowman's Knox group of companies.
Arthur Lancaster and a spokesperson for Doug Barrowman did not respond to requests for comment.
The substantial gap between available assets and outstanding debts to government entities presents significant challenges for recovery efforts. With unsecured creditors having access to only £672,774 against combined government claims exceeding £187 million, the prospects for full recovery appear limited, particularly given the priority position of secured creditors in the administration process.
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