MPs have backed a motion which calls for an immediate suspension of the loan charge for a period of six months and for all related settlements to be put on hold.
The motion also expressed “deep concern and regret about the effect of the mental and emotional impact on people facing the loan charge; (and) is further concerned about suicides of people facing the loan charge and the identified suicide risk”.
The loan charge was introduced in response to the Treasury’s concerns about “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.
The Treasury has argued that because the money is claimed to be a loan rather than earnings, income tax and National Insurance contributions go unpaid, costing the taxpayer hundreds of millions of pounds a year
Opponents of the loan charge claim it undermines the rule of law because it is a retrospective charge, although the Treasury disputes this claim.
Ross Thomson MP, the vice chairman of the Loan Charge All Party Parliamentary Group, said: “I’m delighted that Parliament unanimously agreed to the motion calling for a delay to the loan charge in order to have an independent review. This is now the expressed will of the House of Commons. MPs across the House expressed serious concerns about the fairness of the loan charge and the impact it will have on people. We are not going away so if the Government do not act MPs will find other ways in Parliament to make changes.”
The leaders of the campaign against the loan charge include the former Yorkshire MP Greg Mulholland.
Liberal Democrat Mr Mulholland, who served as Leeds North West MP for 12 years, said: “I was very happy to take up this issue as the loan charge is an affront to natural justice and the ways it’s been introduced and justified is one of the worst examples of bad policy making I’ve ever seen.”
One anti-loan charge campaigner told The Yorkshire Post: “I truly believe that the knock-on effects of this legislation to individuals and their dependents will be tragic, they will never be quantified, but they are surely far greater than any short-term benefit to be gained.”
However, Mel Stride MP, Financial Secretary to the Treasury, told the House of Commons: “Most speakers have referred to the fact that they have no time for aggressive and contrived tax avoidance, and they are right.”
Mr Stride also said there was a “commonly held misconception” that the loan charge is retrospective.
He added: “There was never a time in the history of our country where the model for payment that I have just outlined has ever been correct within the tax rules of any previous year. That is a simple fact.”
He added: “Some of the other misinformation includes the idea that thousands upon thousands of taxpayers are about to be made bankrupt. HMRC very, very rarely has a situation where somebody is placed in bankruptcy.
“It has also been suggested that people will lose their home as a consequence of the loan charge. It could not be clearer: HMRC has publicly stated that nobody will lose their primary residence as a consequence of settling their loan charge liability.”