MP vows to fight loan charge ‘injustices’ as Parliamentary group plans next phase of campaign

Sir Ed Davey has been an outspoken critic of the loan charge. Picture: PA
Sir Ed Davey has been an outspoken critic of the loan charge. Picture: PA
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A Parliamentary group which successfully fought for the review of a controversial policy which caused “serious distress” to a large number of taxpayers will continue its campaigning work this year.

The inaugural meeting of the prospective Loan Charge All Party Parliamentary Group for the new Parliament will take place on Tuesday.

The loan charge was introduced in response to the Treasury’s concerns about what it described as “disguised remuneration schemes”. Workers from a wide range of professions were hit with large tax bills, which in some cases dated back to 1999.

Before the election, the APPG said it had received reports of seven suicides of people who were facing the loan charge.

Along with the Loan Charge Action Group, the APPG successfully campaigned for a review of the loan charge, which was carried out by Sir Amyas Morse.

Last month, the Government said it planned to implement changes to the loan charge, after the review found that it caused “serious distress” to some people affected by it.

Sir Amyas, the former head of the National Audit Office, concluded the schemes were a form of tax avoidance but made a series of recommendations about the design of the charge and its impact on those in its scope.

Sir Amyas Morse, said: “The foundation of our tax system is fairness and where this is undermined through avoidance schemes it is right that these are tackled. However, in doing so, the government and HMRC must act proportionately and responsibly.

“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.”

The Government said it recognised the concerns raised in the review about the impact on individuals and fairness of some aspects of the Loan Charge. To address them, all but one of the recommendations have been accepted by the Government.

Sir Ed Davey MP, Liberal Democrat MP for Kingston and Surbiton and chair of the Loan Charge APPG in the previous Parliament, said: “At last we have the news that the draconian Loan Charge legislation is to be significantly amended in Parliament.

“This is great news and a testament to the campaigning of the Loan Charge Cross-Party Group I established, the Loan Charge Action Group and other campaigners.

“There are welcome and significant changes, yet I still believe there remain injustices which will need further changes, including the removal of all aspects of retrospection.”

A submission compiled by the APPG last year stated: “The evidence clearly shows that the main reason the vast majority of people entered into payroll loan schemes was not to avoid tax, which is the basis for the aggressive pursuit by HMRC and indeed the whole punitive approach of the loan charge.

The statement added: “The overwhelming majority of people sought and followed professional advice. Many sought further reassurances that the schemes were legal and compliant with tax law.

“They were advised that they were. The way the Treasury and HMRC continually..claim that people entered into these schemes as a form of deliberate aggressive tax avoidance’ is simply not supported by the evidence.”

Speaking after the review was published, Financial Secretary to the Treasury Jesse Norman said: “We welcome this careful and considered report, and I thank Sir Amyas and his team for their work.

“There have been important public concerns about this policy, and that is why we commissioned this report and have responded so quickly to it.

“The changes we are making go to the heart of Sir Amyas’ concerns about the fairness and application of the Loan Charge, which he accepts in principle.

“We also have plans under way to crack down further on the promoters of these avoidance schemes.”

Among other recommendations in the Review, HMRC will – once legislation has been passed – repay parts of some settlements reached with taxpayers where they had voluntarily paid amounts due for earlier years.