EVERYONE knows that a week can be a very long time in politics.
The gap between “fiscal events” can seem like a lifetime when you’re facing a financial crisis.
When Boris Johnson arrived at Number 10, hopes were high among campaigners that the new PM would announce a suspension and a review of the loan charge, a controversial policy which critics claim breaches the rule of law.
To the Treasury, the loan charge is a means of tackling tax avoidance and ensuring everyone pays their fair share for vital public services. Supporters of the charge say it builds on more than 20 years of HMRC action to challenge “disguised remuneration” schemes. It was introduced because of the Treasury’s concerns about schemes which involved individuals being paid through loans, usually via an offshore trust in a low or no tax jurisdiction, which they did not have to repay.
As a result of the charge, some workers have been hit with hefty, unexpected tax bills dating back to 1999.
Many people who have received these bills have been driven to despair and complained to their MP in a bid to get the loan charge halted.
The All-Party Parliamentary Loan Charge Group (APPG) has marshalled a campaign for a suspension of the loan charge because they believe it is retrospective and overrides taxpayer protections - all claims which have been rejected by the Treasury.
During a hustings event in the run up to his election, Mr Johnson said of those affected by the loan charge: “It seems superficially unjust that they should be retrospectively pursued..they need an independent review”.
In a letter to Mr Johnson, Ross Thomson MP, who has been an outspoken critic of the charge, reminded the new Prime Minister that “like myself you are uncomfortable with the retrospective nature of the legislation and signed my letter to the Chancellor earlier this year”.
The letter added: “The reality is that if the policy continues unamended, there will be many bankruptcies at a significant cost to the taxpayer. Some individuals affected will be unable to work again ..The human impact, which is becoming increasingly apparent, will be serious.”
To support their case the APPG has collected 820 impact statements from people affected by the “draconian” loan charge
One person who provided evidence to the MPs said: “We were given 30 days to pay about £150,000, a sum made up of ‘debt’, interest and surcharges. After subsequent time to pay negotiations...we now find ourselves in the ludicrous situation of my husband paying [HMRC] £500 a month until he is 82.”
A man from Yorkshire, who contacted The Yorkshire Post, but asked to remain anonymous, said: “I am a victim with a looming bill of £205,000. This exceeds my life savings (which were) built up over more than 10 years and which were destined to buy a house for my family.
“If I am forced to pay this bill then my take home income in the affected years will have been in the region of 25 per cent of what I was actually paid as an IT contractor - below my cost of living at the time.”
The APPG held an exhaustive inquiry into the loan charge and concluded that “in the vast majority of cases examined” these arrangements were not entered as “aggressive tax avoidance” but after professional advice.
A large number of people, especially in the public sector, did not understand their pay involved loan payments, the MPs concluded.
Mr Johnson and his team will be setting out details on their policy agendas over the next few weeks and months.
A Treasury spokesman said: “As always, decisions on tax are for the Chancellor to announce at fiscal events.”
The campaigners are unwilling to wait for the next “fiscal event” to hear if the Government will change its course.
If Mr Johnson really does wish to conduct Government with a human face and challenge convention, he could order the Chancellor to suspend the loan charge now. It would provide a lifeline for people who are desperately seeking certainty over their financial fate.