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A cross-party group of MPs has secured unanimous support from across the House of Commons for its continued push to have all retrospective aspects of the government’s controversial loan charge policy removed.
The policy has seen thousands of IT contractors saddled with life-changing tax bills relating back to work they did between 6 April 1999 and 5 April 2019, which they were remunerated for in the form of loans, rather than a conventional salary.
In HM Revenue & Customs’ (HMRC) opinion, these loans were never intended to be repaid and so should have been classified as taxable income.
An amendment was therefore added to the Finance Act in 2017 that made it possible for HMRC to demand contractors pay the tax the agency claims they avoided during this 20-year window through the introduction of the loan charge policy in November 2017.
The policy has been linked to at least seven suicides to-date, and many of those caught within its scope (which also includes NHS workers and social care professionals) have no means of repaying the huge sums of money HMRC claims they owe.
In late 2019, an independent inquiry into the policy – chaired by former National Audit Office (NAO) comptroller Amyas Morse – concluded its look-back period should be shortened by around 11 years, so only individuals who participated in loan remuneration schemes from 9 December 2010 onwards would be covered.
The report’s justification for that decision is because, in its view, the law on using loan-based remuneration schemes became clear from that date onwards, which coincides with the publication of the draft Finance Bill 2011.
Arbitrary start date
However, as previously detailed by Computer Weekly, the revised start date for the loan charge policy has been described as “arbitrary”, on the grounds that the Finance Bill 2011 did not come into force until several months after.
This point was recently raised during a debate in the House of Commons, put forward by the Loan Charge All Party Parliamentary Group (APPG) of cross-party MPs, that made the case of having all retrospective elements of the policy removed.
This would mean the policy would only apply from the year it was brought into law, which is 2017, and would result in tens of thousands of individuals falling out of its scope.
Mike Penning, Conservative MP and co-chair of the loan charge APPG, set out the rationale for tweaking the policy in a statement.
“Colleagues from across the House of Commons have consistently expressed their opposition against retrospective legislation, but the now discredited Morse Review recommends that retrospection back to 2010 should remain, which is not acceptable,” he said.
“The only fair thing to do is to make the loan charge apply from when it was introduced, not retrospectively. So we hope that Ministers will now look at our report and will agree finally that having any retrospection of the loan charge is wrong and amend the Finance Bill to this effect.”
Support from MPs
More than 20 MPs spoke in support of this idea during the debate, and more than 40 MPs from across all parties added their support for it ahead of time by signing a motion ahead of the debate along these lines
In the wake of the debate, the motion to remove all retrospective elements of the policy passed unanimously, and stated: “This House believes the loan charge is an unjust and retrospective tax; notes that the law on the loan charge was not settled until 2017; and calls on HMRC to cease action on loans paid before 2017.”
While the motion expresses the will of the House of Commons on this matter, it cannot force the government to act, the loan charge APPG acknowledge in a statement.
However, given the level of opposition amongst MPs to retaining the 9 December 2010 start-date for the policy, it would be in the government’s best interests to consider making further adjustments before the Finance Bill 2020 reaches royal assent.
“With such strong cross-party opposition to the retrospective nature of the loan charge, the pressure increases on the government to go further than they currently plan to when amending the Loan Charge in the forthcoming Finance Bill,” said the APPG statement.
Read more about the loan charge
- Thousands of IT contractors are at risk of financial ruin as HMRC pursues them for tax it claims they owe on work they did up to two decades ago and were reimbursed for via loan remuneration schemes.
- The IT contractor community shares its verdict on the UK government’s plans to revamp its controversial loan charge policy, which has left thousands of people facing life-changing tax bills and financial ruin.
Ruth Cadbury, Labour MP and fellow Loan Charge APPG co-chair, said amending the policy now would help relieved pressure on those within its scope, who are now finding their ability to work under pressure because of the covid-19 coronavirus pandemic.
“This is a time of incredible worry for most people in this country for their loved ones, their neighbours and themselves, and many of our constituents—perhaps most of them—are facing catastrophic and even absolute loss of income,” she said.
“While this debate is wholly unrelated to the Covid-19 virus, for the victims of the loan charge scandal, who are already worried about their financial futures, the coronavirus outbreak only heaps more agony on top. The new suggested cut-off date of 9 December 2010 is based on the law being clear, yet we know now that this was not the case. If the law was clear then why did we need the loan charge and another change in legislation in 2016.
“I urge the government to listen to the strong opposition to this retrospective, unjust and unfair tax and, quite simply, to do the right thing,” said Cadbury.
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