No refund of loan charge voluntary settlement payments

In Douglas Lambourne v HMRC [2022] TC08666, the First Tier Tribunal (FTT) reluctantly struck out an appeal against HMRC’s refusal to repay amounts voluntarily paid to settle a disguised remuneration scheme following the 2019 loan charge review. The tribunal did not have jurisdiction as the legislation did not allow for such an appeal.

Following the 2019 review of the Loan charge, HMRC agreed, under the Disguised Remuneration Voluntary Repayment Scheme, to refund voluntary payments made in order to prevent the loan charge arising included in a settlement agreement reached after 16 March 2016 for tax years where:

• The loans were made before 9 December 2010.
• Or the loans were made before 6 April 2016, the avoidance scheme use was fully disclosed to HMRC, and they did not take action.
• And HMRC did not have the power to recover the Income Tax or National Insurance Contributions (NICs) at the date the settlement agreement was made.

Mr Lambourne participated in an employment-related remuneration trust tax avoidance scheme during 2004-05 which he settled with HMRC in July 2019.

• No enquiry was opened into his own tax affairs. His employer company was issued with a regulation 80 determination for Income Tax and a section 8 notice for NICs in respect of the contributions to the trust allocated to Mr Lambourne.
• The company was put into liquidation in 2016 and dissolved in 2020.
• Mr Lambourne applied for repayment of the settlement amount of £6,480 on the grounds that he entered into the settlement agreement voluntarily given that:
  • HMRC had no hope of collecting the liabilities from his employer which, by then, had been in insolvent liquidation for over three years.
  • HMRC had tried and failed to recover the liabilities from the company directors.
  • Three of his colleagues who had implemented the same scheme had not settled and were not subject to the loan charge, which was unfair.
• HMRC refused the repayment on the grounds that they were legally entitled to recover the amounts from the employer company at the time the settlement agreement was entered into due to the regulation 80 and section 8 determinations.
• Following an unsuccessful review, Mr Lambourne requested a further review. As the provisions of the repayment scheme did not provide for this, HMRC treated it as a complaint and Mr Lambourne appealed to the tribunal.

The FTT, whilst sympathetic to Mr Lambourne’s plight and agreeing with the unfairness of his position, nevertheless had to strike out his appeal:

• The legislation covering the Disguised Remuneration Voluntary Repayment Scheme does not provide for any right to appeal to the tribunal.
• Mr Lambourne’s only legal recourse was through judicial review.

However, noting that HMRC had not yet issued a termination notice under the repayment scheme meaning that the position remained open, the judge invited HMRC to carefully consider, in the light of the facts known at that time, whether it could be said that they had a realistic prospect of recovering the amounts paid by Mr Lambourne at the time that he concluded his settlement with them. The judge noted however that the failed claims against the directors had not yet been taken at that time.

The judge went on to comment that there is perhaps a case for parliament to consider whether to introduce a right of appeal to the FTT here given the costs and complexities of applying for judicial review.

Useful guides on this topic

Disguised remuneration loan charge
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?

Disguised remuneration 2020 settlement opportunity
What is HMRC's position on disguised remuneration loans where settlement was not reached by 30 September 2020? Can a settlement still be reached?

Recovery of PAYE: Regulation 80 and 72 assessments for PAYE
When can HMRC assess an employer or an employee for unpaid Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs)? What is a regulation 80 determination? What is a regulation 72 determination? Who is assessed and what are the conditions?

External link

Douglas Lambourne v HMRC [2022] TC08666