Loan charge campaigners urge MPs to back amendments to Finance Bill

CAMPAIGNERS opposed to the loan charge are urging MPs to support amendments to the Finance Bill because they believe they will help to lift the threat of life-changing tax bills from thousands of people.

David Davis MP
David Davis MP

The Loan Charge Action Group has described the move as “the only game in town” and supporters claim the amendments will remove an injustice from the original legislation.

One member of the group said that by supporting the amendments, MPs will have an opportunity to protect the victims while empowering HMRC to continue fighting real tax evasion.

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The loan charge is an anti-avoidance measure introduced in the 2016 Budget to address tax loss from what the Treasury called a variety of “disguised remuneration” schemes.

Under such schemes, individuals - often freelancers or self-employed contractors - were paid via a third party in the form of loans, replacing part or all of their salary.

Last year, a review led by Sir Amyas Morse made a series of recommendations about the design of the loan charge and its impact on those in its scope.

The review found that the loan charge should remain in place, that disguised remuneration schemes are a form of tax avoidance and that it was right for the Government to try to tackle them, as they were unfair to the vast majority of taxpayers who pay the correct tax.

However, Sir Amyas added: "As my review makes clear, the design and delivery of the loan charge didn’t get the balance right between tackling tax avoidance and protecting the rights of taxpayers and, in some cases, has caused serious distress to the individuals affected.

“I’m pleased to see Government commit to act on the recommendations of my review, bringing the loan charge back into line with the wider tax system, better protecting those who are least able to repay and providing certainty for all those affected”.

Sir Amyas recommended a package of reforms to the design and implementation of the loan charge, which included ending the "unprecedented" 20 year look back period.

Last year, the Treasury said it recognised the concerns raised by the loan charge review and had responded by accepting all but one of its recommendations.

More than 30,000 people are estimated to benefit from these changes, around 11,000 of whom will be taken out of the charge altogether, according to the Treasury’s estimates.

However, campaigners believe further changes are required. Evidence uncovered by the Loan Charge All-Party Parliamentary Group (APPG) found that, in the vast majority of cases, these arrangements were not entered as aggressive tax avoidance and were often a condition of employment, especially in the public sector.

Furthermore, a substantial number of people, especially in the public sector, did not know or understand that their pay arrangements involved loans.

The APPG has stated on Twitter that "many people face huge retrospective loan charge bills despite these never being legally proven".

The Loan Charge Action Group, which represents thousands of people affected by the charge, said that two cross-party amendments had been successfully tabled by a group of MPs led by Loan Charge APPG member David Davis to the Finance Bill and signed by more than 30 MPs.

The LCAG said in a statement sent to its supporters: “The report Stage for the Finance Bill commences next Wednesday July 1 and we need everyone to push their MPs to support this amendment. This is quite literally the only game in town.”

The amendment removes the loan charge for anyone who was not aware that the loans received should have been disclosed on their tax return as taxable income and did not declare them in this way.

In a statements, the LCAG said: “We believe this is true of the vast majority - quite likely every single one - of the LCAG members. There is, in addition, a second related amendment which lets anyone who settled whilst facing the loan charge, but the loan charge no longer applies to, to apply to HMRC to have the money refunded.”

The group added: “We want MPs to vote for this additional amendment too, but it will not pass unless the main one - the new clause - passes.”

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