Dozens of MPs have backed a cross-party amendment tabled by Sir Ed Davey, which has forced the Treasury to review its position on the controversial Loan Charge rules.
Background to the Loan Charge
The Loan Charge is targeted at individuals who took part in disguised remuneration schemes where participants were paid in the form of loans (which were typically never repaid). Controversially, the new legislation enables HMRC to recover taxes from engagements as far back as 1999 – even in cases where a tax avoidance scheme was not deemed to be illegal at the time.
HMRC’s attempts to pursue tens of thousands of individuals retrospectively has resulted in many documented cases of hardship by those affected (many of them contractors). You can find out more on the 2019 Loan Charge Action Group (LCAG) site.
House of Lords criticism
Last month, the House of Lords published a highly critical report of the Loan Charge measures. The Economic Affairs Committee concluded that HMRC had misused its powers in collecting the backdated taxes, and that the taxman’s newly acquired powers “undermine the rule of law and hinders taxpayers’ access to justice.”
Amendment forces Government review
Yesterday, Lib Dem MP Sir Ed Davey secured an amendment (NC23), backed by dozens of MPs, which obliges the Treasury to review its current stance, and to report back by March 30th 2019.
Loan Charge: delighted to report I have just led a X-party amendment & forced Ministers to backdown to uphold fairness & rule of law!
— Edward Davey (@EdwardJDavey) January 8, 2019
The LCAG commented: “Sir Ed Davey’s successful amendment forces the Government to conduct a review of the policy and to do so before the end of March. Sir Ed and other supportive MPs had sought to table an amendment removing the retrospective element of the Loan Charge, but were prevented from doing so. In a cynical move, the Government failed to table an ‘amendment to the law’ which is usual practice and allows MPs to make changes to the Bill.
“Despite this the review of the Loan Charge that will now take place [and] will ensure that the Government faces the truth about the damage their ill-considered policy will do to individuals, to the contracting industry in the UK, as well as to the economy and public services. ”
What happens now?
Although this amendment will have no immediate impact on those individuals faced with repaying backdated taxes, the Prime Minister confirmed today (at PMQs) that the Chancellor will meet with a cross-party group of MPs to discuss the Loan Charge review further.
In another sign of the growing opposition to the Loan Charge within Parliament, over 100 MPs have now backed Early Day Motion 1239 calling on the Government to “revise the legislation to avoid significant damage to independent contractors and freelancers in the UK”.