The Loan Charge All Party Parliamentary Group (APPG) has voiced its “huge disappointment” that there was no vote on New Clause 31 in the Finance Bill, which supporters described as a simple amendment to restore basic taxpayer rights.
Liberal Democrat, Sir Ed Davey MP, co-chairman of the Loan Charge APPG, said: “With 54 MPs signing this amendment and with so many others expressing concerns about retrospective taxation, we had hoped that the House of Commons might have backed this.
“The issue now goes to the House of Lords and while the Lords cannot remove the retrospection, we hope our members who are peers will again raise the injustice of the loan charge and call for changes. The Loan Charge APPG will continue to challenge the injustice of the loan charge and to speak up on behalf of those facing ruin.”
Ruth Cadbury MP, Co-Chair of the Loan Charge APPG (Labour), said: “The loan charge APPG officers continue to believe that the retrospective loan charge is wrong and that this, and the way it denies the rights of people to defend themselves, undermines the rule of law.
"We will continue to raise this in both Houses of Parliament and will now focus on pushing HMRC to be far more reasonable and will continue to highlight unacceptable behaviour by them”.
Sir Mike Penning MP, Co-Chair of the Loan Charge APPG (Conservative), said: “We still oppose the retrospective nature of the loan charge and believe this should be scrapped, but we also now call on the Government to consider a realistic voluntary settlement offer.
"This would allow people to pay a percentage of the disputed tax, as full and final settlement and to allow people to do this and get on with their lives, if they are able to make such a settlement. Such an approach would prevent the many bankruptcies which we expect and would actually be likely to bring in more revenue than the current unreasonable and punitive approach."
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 believed further changes were 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.
A substantial number of people, especially in the public sector, did not know or understand that their pay arrangements involved loans, the APPG said.
The APPG has stated on Twitter that "many people face huge retrospective loan charge bills despite these never being legally proven".
The amendment, which was not voted on last week, would have removed 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.
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