Cross-party group of MPs calls on Loan Charge contractors to participate in call for evidence

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.

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.