A review into a “draconian” Government policy must be carried out by a body independent of the Treasury, according to an influential group of MPs.
Campaigners have welcomed the commitment from Prime Minister Boris Johnson to hold a “thorough-going” review of the loan charge, a policy which critics say breaches the rule of law and has been linked with a number of suicides.
In a tweet, the The All-Party Parliamentary Group on the Loan Charge (APPG), which has led the campaign against the charge, said: “The loan charge review MUST be independent of Government (Treasury & HMRC).
“That is what Boris Johnson committed to in Carlisle (at a hustings event).
“There must also be an immediate suspension of settlements, something the Prime Minister also called for in the March letter to the previous Chancellor.”
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 have been hit with large tax bills, which in some cases date back to 1999.
A letter from the APPG to HMRC said: “Now a review has been announced it could have a number of recommendations and outcomes including changes to the loan charge.
“Consequently, it is now the case that settlement discussions with people facing the loan charge must be suspended.”
Steve Packham, a spokesman for the Loan Charge Action Group said: “We thank all the MPs who continue to support the campaign against the draconian loan charge. It is welcome that Boris Johnson has announced a review into this policy, but without a suspension any review is meaningless and more lives are at risk.
“The Prime Minister himself backed a suspension in March in a letter to Phillip Hammond, now he needs to show leadership and do it. This issue is in Boris’ hands and to avoid further tragedy, he needs to act now and suspend the Loan Charge and announce the independent review he promised”.
George Bull, a senior tax partner at professional services firm RSM, said Mr Johnson’s announcement of a new review into the loan charge will be welcomed by many of the campaigners who have been pressuring the Government to act.
But he added: “However, the timing of this announcement is somewhat bizarre, given that we have already passed the August 31 deadline for the finalisation of voluntary settlements and two further deadlines are looming.
Mr Bull added: “By September 30, loans affected by the loan charge must be disclosed via the online portal, and by January 31 2020, these must be all be disclosed as part of the tax return.
Mr Bull added: “Without further details on the terms of reference and the crucial question of whether the loan charge policy will be suspended pending the outcome of this review, campaigners will need to keep the champagne on ice.
“To date, the Treasury has only said that it would “set out further details in due course”.
“This is less than reassuring and leaves the estimated 50,000 people subject to the loan charge in limbo.
“In March this year, the Treasury published its report on time limits and the charge on disguised remuneration loans, which was described by the All Party Parliamentary Group as a ‘whitewash’.
“Whatever the outcome of this new review, if it means MPs will need to revisit the legislation, then it is imperative that they do so this time with a complete understanding of the consequences of their decisions.
“This whole sorry saga has been a salutary lesson on how not to enact new tax legislation.”
During Prime Minister’s question time, Ross Thomson MP, the vice chairman of the APPG, said the loan charge was driving people to despair and reportedly some to suicide.
Mr Johnson replied: “I thank my honourable friend because this is an issue that my own constituents have raised with me.”
A Treasury spokesperson said: “As the PM has announced, the Government will undertake a thorough review of the loan charge and will set out further details in due course.”
Mel Stride, the former Financial Secretary to the Treasury, always maintained that the loan charge was not retrospective.