Loan charge will lead to scores of bankruptcies, MP warns Chancellor

Liberal Democrat MP Munira Wilson claims the loan charge has left some of her constituents facing bankruptcy at a time when the country is suffering the economic impact of COVID-19.

Ms Wilson is calling on Mr Sunak to make the “punitive loan charge” fairer for her constituents who have been hit with significant retrospective charges.

In her letter to Mr Sunak, Ms Wilson, said: “These constituents are not deliberate tax evaders the scheme was intended to target but ordinary, hard-working individuals, who having entered into entirely legal arrangements, now find themselves facing a retrospective charge.

“Demands for sums far in excess of the disputed tax amount, payment terms which are often harsher than those imposed on convicted criminals, and the increasingly aggressive and threatening behaviour of HMRC have left my constituents at breaking point.”

Ms Wilson said that, in spite of the changes introduced following the review into the loan charge conducted last year by Sir Amyas Morse, it is clear the current terms for settlement “are not fit for purpose and only serve to make settlement impossible for the vast majority affected by the charge”.

“ I therefore urge you to adopt the fair and affordable settlement opportunity proposed by the Loan Charge All Party Parliamentary Group (APPG).”

Ms Wilson is a member of the APPG, which is concerned about the loan charge’s impact on vulnerable people.

She called on Mr Sunak to adopt the APPG’s proposals without delay.

She added: “Not only will this provide certainty for those facing the charge, enabling them to pay an Income Tax rate of 10% on loan balances in full and final settlement, it will also increase HMRC’s chances of concluding settlements and bringing in disputed tax revenue.

“I also urge you to move the Loan Charge declaration date from 30 September 2020 to 31 January 2021 to provide sufficient time for settlements to be agreed.”

"Without these changes, we will see scores of bankruptcies and the loss of the small businesses and entrepreneurs which are integral to our recovery from the unprecedented economic impact of COVID-19. This cannot be allowed to happen.

"I therefore implore you to do the right thing and adopt the APPG’s proposals without delay. Those facing the charge have already suffered too much: it is time to give them closure so that they can finally move on with their lives."

Responding to the APPG's letter to Mr Sunak, a Government spokesperson said: “The loan charge was introduced to tackle disguised remuneration (DR) tax avoidance schemes. It is the view of HMRC that loans made through these schemes have always been taxable.

"The Government will continue to tackle this and other forms of tax avoidance vigorously.

“HMRC has to be fair to all taxpayers, and this includes those who have already settled their use of DR tax avoidance schemes with HMRC or have never used tax avoidance schemes in the first place.

"As set out in HMRC’s Litigation and Settlement Strategy, they will only settle for an amount that is consistent with the law.”

“The Government has already extended the deadline for individuals affected by the loan charge to submit their 2018/19 Self Assessment tax return to 30 September 2020.”

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James Mitchinson