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IT contractors who have found themselves in-scope of the government’s controversial loan charge policy are being urged to participate in a call for evidence overseen by a group of cross-party MPs.
The Loan Charge and Taxpayer Fairness All Party Parliamentary Group (APPG) wants all contractors who have been affected by HM Revenue & Customs’ (HMRC) disguised remuneration policy to participate in the call to evidence so they can build a picture of the reality of living in the shadow of the Loan Charge.
The policy, introduced in the 2017 Budget, is geared towards recouping the tax HMRC claims contractors avoided paying by opting to have part of their salary paid to them in the form of non-taxable loans when working on assignments between December 2010 and 5 April 2019.
Loan-based remuneration schemes are known to have proliferated in the wake of the IR35 reforms being introduced at the turn of the millennium, with setups commonly marketed through non-compliant umbrella companies as an HMRC-approved means for contractors to bolster their take-home pay by artificially minimising their employment tax liabilities.
Thousands of IT contractors who participated in these schemes in the nine-year period to 5 April 2019 have since been landed with six-figure tax bills from HMRC, reportedly resulting in mass bankruptcies and contributing to at least eight suicides.
According to the APPG, HMRC and HM Treasury have sought to downplay the effects the policy has had on the affected contractors, and – the Group claim – “gloss over the realities of the impact of the Loan Charge”.
It has also previously claimed the policy was not subject to adequate amounts of scrutiny by Parliament ahead of its introduction, nor does it have any justified legal basis. For this reason, the APPG called on HMRC to pause its enforcement action of the policy back in December 2021.
Read more about the loan charge
- MPs are calling on HM Revenue & Customs (HMRC) to suspend its enforcement of the UK government’s controversial loan charge policy on the basis that there remains no “relevant or justified legal basis” for it.
- A document dump of emails shared between HMRC officials has prompted loan charge campaigners to further question the legal footing of the government’s controversial disguised remuneration policy.
- 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. Computer Weekly investigates.
- HM Revenue and Customs must do more to reduce the exposure of contractors to tax avoidance-focused disguised remuneration schemes, the House of Lords Economic Affairs Finance Bill Sub-Committee has concluded.
In February 2022, the APPG wrote to HMRC’s CEO, Jim Harra, asking for answers to 12 questions it claims the tax collection agency has previously tried to side-step responding to by using “rhetoric that seeks to divert and confuse”.
They include clarification on the precise number of people in-scope of the policy, the mean average amount of money HMRC claims these individuals owe, and information about how many of them have reached a settlement, as well as how many of them have paid these sums off in full.
The APPG said these “key facts” about the policy are yet to be established, which is why it is launching a call for evidence of its own.
“The call for evidence is being done because it remains unclear what the reality is for people or what the real impact of the Loan Charge is likely to be, and because HMRC and the Treasury have sought to gloss over the reality of the impact of the Loan Charge, despite privately admitting that there will be bankruptcies,” said the group, in a statement.
“No proper impact assessment was done for the Loan Charge … [and] the call for evidence is also important, because there are a number of key facts that haven’t yet been established, as HMRC and the Treasury have failed to provide them when asked.”
The APPG said anyone who is either facing the Loan Charge or has reached a settlement to avoid it can participate in the Call for Evidence, with the submission deadline being Friday 8 April 2022.
Evidence not acknowledged
Sammy Wilson, MP and co-chair of the Loan Charge and Taxpayer Fairness APPG, said the Group has received numerous pieces of evidence to-date about the serious impact the policy is having on those in-scope of it, which HMRC and HM Treasury refuse to acknowledge.
“It is clear from evidence sent to the APPG and also to individual MPs that the personal impact on those affected by the Loan Charge is serious, yet so far HMRC and the Treasury have not properly acknowledged this, nor admitted what is likely to happen if HMRC enforce the Loan Charge this year,” said Wilson.
“We urge all who have faced the Loan Charge to heed the Loan Charge and Taxpayer Fairness call for evidence, so that we can fully understand the position people are in and the likely impact.”
Fellow Loan Charge and Taxpayer Fairness APPG co-chair, Greg Smith added: “We wish to understand the situation of those facing the Loan Charge and those who have settled, so that we can even more strongly make the case to the Treasury to show compassion and come up with a fair resolution that avoids the many bankruptcies and breakdowns that will alas otherwise happen.”
Computer Weekly contacted HMRC for a response to news of the APPG’s call for evidence, and received the following statement from a spokesperson: “The Loan Charge was introduced to ensure those who used disguised remuneration tax avoidance schemes paid their fair share of income tax and national insurance contributions. It is only right that we continue to tackle these types of avoidance schemes as they deprive our public services of vital funding.
“HMRC has already published settlement terms for those who have used disguised remuneration schemes. We encourage anyone who is worried about paying the Loan Charge to contact HMRC so they can help. HMRC is committed to working with taxpayers to enter manageable payment plans to spread their tax liability and ensure they are affordable.”
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