NOTHING destroys a business quite like long term financial uncertainty.
Many sole traders will face a bleak Christmas as they wait to hear the outcome of a review that may seal their financial fate.
A speedy – and just – conclusion to the loan charge review is in everyone’s interests.
Opponents of the loan charge argue that it is retrospective and overrides taxpayer protections. All these claims had been disputed by the Treasury, before it entered the purdah of a general election.
Earlier this autumn, a review was commissioned into the loan charge after hundreds of MPs expressed concerns about the policy. It had originally been hoped that it would deliver its findings by mid November,
Earlier this week, the Loan Charge All Party Parliamentary Group said it been informed that Sir Amyas Morse’s review into the charge will not report back until mid December, when the new Government has been formed.
The APPG said in a letter to the Chancellor : “It is now imperative that there is an immediate announcement that the loan charge will not fall due for payment by January 31 2020 and that the loan charge will be suspended for at least six months.”
The loan charge was introduced in response to the Treasury’s concerns about what it described as 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.
Workers from a wide range of professions have been hit with large tax bills, which in some cases date back to 1999
The APPG has compiled a harrowing account of the ordeal faced by people who are subject to the loan charge.
An APPG report said: “There are a number of reports of miscarriages due to stress as well as of people deciding to delay or to abandon plans to start a family.”
“People feel that they are being punished for failure to understand an overly-complex tax system and for relying on expert advice. There is an overwhelming feeling that retrospective tax laws targeting ordinary people are wrong.”
The Federation of Small Businesses’ National Chairman Mike Cherry has called for a complete suspension of the loan charge until the review has been concluded and its findings thoroughly assessed.
“That could easily take a couple of years or more,’’ he said. “This latest development will have thousands of sole traders heading into the festive season wondering if they’re going to lose everything in January.
“Many of those impacted by the loan charge were acting on the advice of employers or financial professionals when they agreed to schemes which were, at the time of participation, perfectly legal.
“A lot of these people are not financial experts or high earners. There are individuals being targeted here who could lose everything. The priority must be intervening to protect those who were following professional advice or guidance from employers or third parties.
Mr Cherry added: “Interventions like the loan charge make it impossible to plan for the future. Many who are playing fair when planning their tax affairs today will be wondering where else the Government might suddenly change the rules, start applying new laws to years past and demand big pay-outs.
“ In future, HMRC should establish a tax efficiency white list, guaranteeing that – if the scheme is listed – you have cast iron protection from a retrospective grab if you use it.”
I understand that the Government is confident that it will be able to provide clarity about tax positions in advance of the January 31 deadline. HMRC has always maintained that the loan charge is not retrospective, because it doesn’t change the tax position of any previous year, or the outcome of any open compliance checks.
A failure to suspend the charge offends natural justice. During its 11 months of life, the APPG has won a House of Commons motion for a suspension of the loan charge and secured the review. We may be in election season, but the will of our elected representatives has been clear for some time. The charge must be suspended until the new Government has a chance to study the long awaited review in detail.