MPs are being urged to support an amendment to the forthcoming Finance Bill that could potentially free thousands of people from being within the scope of the government’s controversial loan charge policy.
The Finance Bill 2019-2021 has been working its way through the House of Commons since March 2020, and is due to enter the report stage ahead of its third reading on Wednesday 1 July.
Ahead of that, a series of suggested amendments to the bill were published on 26 June, including one proposal to tighten up the government’s loan charge policy so that it applies only to individuals who knowingly sought to evade tax by receiving payments in the form of loans.
The amendment document states: “This new clause provides that, in respect of loans made prior to 2015/16, the loan charge applies only if the taxpayer submitted their tax return and deliberately did not declare the loan to be income. The clause also extends this protection to taxpayers who were not required by HMRC [HM Revenue & Customs] to submit tax returns.”
As previously reported by Computer Weekly, the loan charge policy has seen thousands of IT contractors saddled with life-changing tax bills pertaining to work done previously for which they were remunerated in the form of non-taxable loans, rather than a conventional salary.
The loan charge policy was introduced in November 2017 to clamp down on individuals, working across a number of sectors beyond IT, who enrolled in loan-based remuneration schemes, to ensure they repay the employment tax that HMRC claims they avoided by participating in the schemes.
Initially, the policy sought to recoup unpaid taxes from individuals who took part in such schemes between 6 April 1999 and 5 April 2019, but the start date has since been revised to only include participants who joined schemes after 9 December 2010.
Read more about the loan charge policy
- A cross-party group of MPs claims to have uncovered evidence that the conclusions of an independent inquiry into the government’s controversial loan charge policy were based on a potentially skewed interpretation of the evidence supplied to it by various tax experts.
- Tax collection agency counts costs of having to upgrade IT systems to prepare for incoming changes to its controversial loan charge disguised remuneration policy, which has left thousands of IT contractors facing financial ruin.
In the eyes of HMRC, the loans that participants received were never intended to be repaid and should, therefore, be reclassified as employment income, and taxed accordingly.
However, those opposing the policy – including a 200-strong group of cross-party MPS banding together under the banner of the Loan Charge All-Party Parliamentary Group (APPG) – feel the retrospective nature of the policy is unjust and all retrospective elements of it should be removed.
The amendment will go some way to addressing that if it wins the support of enough MPs, who are set to vote on the Finance Bill 2019-21 amendments on Wednesday 1 July.
The Loan Charge Action Group (LCAG), which is also actively campaigning for the retrospective elements of the policy to be removed, described the amendment as a “big step forward” in its ongoing fight to stop the policy.
“Now is the time for everyone to push their MP to vote in favour,” the group said in a post on its Twitter feed.
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