Thousands of people are still victims of retrospective taxation, warns influential group of MPs

MPs are due to meet with people who have been affected by the loan charge Picture; PA
MPs are due to meet with people who have been affected by the loan charge Picture; PA
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The findings of a review into the loan charge have been described as "questionable" by an influential group of MPs who claim it will still leave thousands of people facing retrospective tax bills.

The Loan Charge All Party Parliamentary Group is due to meet on Tuesday to hear from individuals directly impacted by the loan charge.

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.

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

In a statement on Twitter, the APPG praised, Dean Russell, the Conservative MP for Watford, for raising his constituents' concerns about the loan charge during a meeting with the Chancellor Sajid Javid.

The APPG said: "The Morse loan charge recommendations are questionable and would still leave at least 40,000 people facing retrospective tax bills which have never been legally proven. It will not resolve the issue. Retrospective legislation is wrong and wrong for everyone."

The APPG said: "We need a fair resolution to the loan charge scandal."

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.

The review was commissioned to look at the impact of the charge, which was introduced to tackle what the Treasury described as "disguised remuneration schemes".

After publishing his review, 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.”

“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”

The Government has 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.

The Government has said it will make changes so that the loan charge will now only apply to loans taken out on or after December 9 2010. The review found that legislation announced in 2010 removed any doubt that tax was due.

It will not apply the loan charge to users of loan schemes between December 9 2010 and April 5 2016 who fully disclosed their schemes on their tax return and where HMRC failed to take action.

The Government has said it will allow users to defer filing their returns and paying their loan charge liability until September 2020.

It will also allow taxpayers to split the loan balance over three tax years to make the bills more affordable and invest in a new HMRC team to collect tax from those who used the avoidance schemes pre-2010.

The Treasury said: "The package of measures announced are estimated to reduce bills for more than 30,000 people subject to the loan charge, more than 60 per cent of the total number of users. That includes an estimated 11,000 who will be taken out of it altogether."

The Government has also announced steps to crack down on promoters of disguised remuneration schemes and will announce further action at Budget to tackle their use.

Speaking in December, 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.”