Greg Wright: Why the will of Parliament must prevail over the loan charge

During a time of seemingly unbridgeable political divisions, one policy has managed to unite an unlikely band of politicians.

MPs from across the political divide oppose the loan charge.  Photo: Steve Parsons/PA Wire
MPs from across the political divide oppose the loan charge. Photo: Steve Parsons/PA Wire

Esther McVey, Vince Cable and Dennis Skinner rarely sing from the same hymn sheet.

But all three have added their names to the growing list of politicians who have signed an open letter calling for a suspension of the loan charge, a policy which MPs have linked with a number of suicides and denounced as a breach of the rule of law.

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The loan charge raises questions about the overall quality of tax-making policy in the UK, and in particular, the level of consultation and analysis before sweeping changes that affect the financial wellbeing of thousands of people are implemented by the Treasury.

The loan charge seems a textbook example of how NOT to go about devising a policy that bolsters confidence in a Government that is clinging to power.

According to the Treasury, the loan charge means that people who paid themselves through loans, often from offshore trusts, will have to contribute their fair share to pay for our public services

Somebody has to ensure taxes are collected to pay for services we take for granted. Most people take a dim view of anyone who tries to avoid doing their bit to support the public purse.

But evidence collected by the tireless All-Party Parliamentary Group on the Loan Charge (APPG) found that, in the vast majority of cases they examined, these arrangements were not entered as “aggressive tax avoidance”, but after professional advice. A “substantial number” of people, especially in the public sector, did not know their pay involved loan payments.

Workers such as locum doctors and nurses have been hit with unexpected tax bills running into tens of thousands of pounds dating back to the last century. There is overwhelming evidence that the loan charge is a punitive measure that could ruin, honest hard-working people whose faith in their professional advisers was terribly misplaced.

There will be many bankruptcies as a result of the Loan Charge, reducing the estimated tax take and hitting the real economy, the APPG has warned

To quote the APPG’s report: “The inquiry criticises in the strongest possible terms HMRC’s failure to set up a proper 24-hour counselling helpline, despite knowing the clear suicide risk of people facing the loan charge.”

A loan charge campaigner said on Twitter: “I think I’ll lose my best friend to this. He talks about ending it. He has a wife and three kids. What upsets me most is I already lost one of my closest mates to cancer and that was not preventable but this is, and yet the Government won’t act.”

Mel Stride, the former Financial Secretary to the Treasury, always maintained that the loan charge was not retrospective. The Treasury has acknowledged that some individuals are facing large tax bills due to the loan charge.

The spokesman said: “HMRC understands that tax bills are stressful and is committed to providing affordable payment arrangements and the enhanced support more vulnerable customers may need.”

HMRC has stressed that suicide is a complex issue and there is rarely a single cause.

Let me ask some naive questions. If the tax was always due, why is the loan charge necessary? If HMRC was doing its job properly, why didn’t it collect the sums covered by the loan charge years ago?

One businessman affected by the loan charge told me: “I have spent the last six years trying to understand tax legislation. I have no faith in any legal or tax experts as it was they who I received assurance from that my employment was legitimate in the first place.

He added: “If laws can be changed retrospectively how can anyone ever be certain of anything again? It’s not something I want my children to have to ever encounter so I’m fighting to expose the Loan Charge for what it is – unjust, unfair, retrospective, a removal of all certainty and legal rights for taxpayers.”

So far the Treasury has resisted all calls for a change of heart. But acknowledging you’ve taken a wrong turn is a sign of strength and not weakness.

In this case, the will of Parliament must prevail.