The All-Party Parliamentary Group on the Loan Charge (APPG) argues that the charge is retrospective and overrides taxpayer protections - claims which have been disputed by the Treasury.
At a hustings event, Boris Johnson, who is standing for the Tory party leadership, said of those affected by the loan charge: “It seems superficially unjust that they should be retrospectively pursued..they need an independent review”.
Jeremy Hunt, who is also challenging for the leadership, said he will look at the loan charge and added “if an independent inquiry is what’s needed, I’ll do that”.
The loan charge was introduced in response to the Treasury’s concerns about “disguised remuneration 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.
According to the Treasury, the loan charge means people paying themselves through loans will have to contribute their “fair share” to pay for our public services.
Workers from a wide range of professions - including locum doctors and nurses - have been hit with tax bills of up to tens of thousands of pounds dating back to 1999.
So far 204 Parliamentarians - including 77 Conservatives MPs - have signed the open letter calling for a suspension of the loan charge and an independent review.
A group of Conservative MPs has called on Mr Johnson and Mr Hunt to sign a pledge to suspend the loan charge and launch an official review if they become Prime Minister.
The group of MPs – David Davis, Dame Caroline Spelman, Ross Thomson, Bob Neill, Philip Davies, Chris Green, Adam Holloway and Andrew Selous- -who are all members and supporters of the APPG, have written to both of the candidates for the Conservative leadership asking them to agree to suspend the loan charge and to commission an independent review.
In a statement, the APPG said: “The loan charge is a retrospective charge that overrides existing statutory protections. It allows HMRC to go back and demand tax for arrangements that were legal at the time. This includes issuing demands for ‘closed’ tax years, where HMRC failed to raise any concerns at the time and missed the statutory time limits in which to challenge a person’s tax returns.”
David Davis MP, a loan charge APPG supporter and MP for Haltemprice and Howden said: “The retrospective loan charge is absolutely wrong. The people affected by this policy are not wealthy city slickers, bankers or financial specialists.
“They are nurses, doctors, locums and care workers. All of whom are suffering mental strain day in, day out. It must be a priority for the next Prime Minister to put right this serious injustice.”
Bob Neill MP said: “The loan charge will have a considerable impact on thousands of individuals and businesses.
“Common justice indicates that, out of decency and fairness, we should pause this process, ensure there is an independent review of the charge, and have time to fully and properly digest its findings.”
The APPG’s report into the loan charge concludes: “The evidence seen and heard by the APPG shows there is a clear risk to the mental welfare of people facing the loan charge, including a known suicide risk.”
A Treasury report into the loan charge said: “The Government is clear that the legislation is not retrospective.
“It applies a tax charge to outstanding DR (disguised remuneration) loan balances at April 5 2019.
“It does not change the tax position of any previous year, the tax treatment of any historic transaction, or the outcome of any open compliance checks.
“By the time of its introduction ..individuals will have had three years since the Budget 2016 announcement to act to stop it applying, either by settling their liability with HMRC or repaying their loans.
“The Government considers that the rationale for this charge is clear and robust, and has been consistently clear there is no intention to change the relevant legislation which has been enacted by Parliament.”
A HMRC spokesman said: “We have committed to giving people as long as they need to pay the loan charge as we completely understand that facing a large tax bill can be difficult and stressful. Our teams are trained to identify customers who are anxious, worried or need extra support and ensure they get the help they need.”If people are worried about being able to pay the loan charge, they should get in touch with HMRC as soon as possible by calling the dedicated HMRC helpline on 03000 599110.