House of Lords accuses HMRC of 'disproportionate' activity

A House of Lords report has said HM Revenue and Customs (HMRC) has used stronger powers to tackle tax avoidance and evasion in an excessive way that has undermined the rule of law and created injustices. This includes criticisms of high penalties that are designed to deter taxpayers from making appeals, as well as the use of the 'loan charge'.

The loan charge applies where employees were paid by means of a loan to avoid tax and national insurance. In clamping down on this HMRC has been levying backdated charges that Economic Affairs Committee Lord Forsyth of Drumlean said is "claiming tax from years which should be closed to enquiry".

Independent bodies have welcomed the report. Victoria Todd of the Low Incomes Tax Reform Group said HMRC's powers "need to be proportionate and accompanied by accessible safeguards", while John Cullinane of the Chartered Institute of Taxation noted the focus on the loan charge. He said it is important for HMRC to take a "sensible and realistic view" of individual circumstances and not levy charges people cannot possibly pay.