Fiasco and farce: HMRC contractors paid by HMRC now being pursued by HMRC!

LCAG Media Release 19th November 2018

In the latest extraordinary revelation about the discredited and dangerous Loan Charge, it has become apparent that HMRC themselves were using and paying contractors who are now subject to the Loan Charge!

One MP has already referred to the Loan Charge as a, “fiasco” but this latest eye-opening development means the ill-considered Loan Charge is fast becoming a complete farce.

The draconian Loan Charge, which breaks normal legal convention, allows HMRC to go back twenty years, demanding huge tax bills for arrangements that were legal and openly declared to HMRC at the time. The victims – who include social workers, teachers, doctors and nurses as well as IT contractors – simply followed professional advice and submitted their tax returns every year, with HMRC never challenging these returns at the time. Yet they now face unjustifiable and life-destroying tax bills they cannot pay and cannot fairly appeal.

It has emerged that HMRC contractors that were also using such arrangements will also be subject to the Loan Charge.
The Loan Charge Action Group, who represent thousands of Loan Charge victims, are writing to the Chancellor and to Jon Thompson, Chief Executive and Permanent Secretary of HM Revenue and Customs to flag up this latest absurdity.

Tomorrow (Tuesday 20^th October) MPs will discuss the Loan Charge in a debate in Westminster Hall called by former cabinet minister, Steve Baker MP, Conservative MP for Wycombe. An Early Day Motion calling for the retrospective Loan Charge to be scrapped has now been signed by 101 MPs https://www.parliament.uk/edm/2017-19/1239.

It has been reported that Mel Stride, the minister overseeing the Loan Charge, will not be fronting up this debate and will instead be sending a deputy. Mel Stride has already refused several invitations from the House of Lords Finance Bill Committee to appear before them on this very subject, and this latest “sidestepping” by not appearing in this important Loan Charge debate yet further brings into question the accountability and credibility of Mr Stride, not to mention the validity of the Loan Charge policy itself.

There is huge cross-party support against the Loan Charge. Alison McGovern MP (Labour, Wirral South) coined the phrase “Loan Charge Fiasco”, Stephen Lloyd MP (Liberal Democrat, Eastbourne) has called the Loan Charge “immoral” with the Liberal Democrat Leader Vince Cable describing it as, “penal action by HMRC against many freelance workers who were unintentionally involved in tax schemes”. Leading political broadcaster and former Conservative candidate Iain Dale has slammed the Loan Charge 2019 as “outrageous” and has said it is “a political crisis in the making”. This is something that certainly seems to be the case with more and more MPs on bothsides of the House of Commons and peers in the Lords opposing the Loan Charge.

Conservative MP Peter Bone (Wellingborough) said in the House of Commons that “people will commit suicide” because of the Loan Charge, something the Treasury and HMRC are aware of, but have so far refused to do anything meaningful to address.

Both the Treasury and HMRC are aware of the known suicide risk caused by the Loan Charge. LCAG surveyed 500 of its members about the impact of the Loan Charge and a huge 68% of those facing the Loan Charge reported suffering from depression and anxiety and a shocking 39% – well over a third of all affected – reported suicidal thoughts and a risk of self-harm.

Richard Horsley, Spokesperson for the Loan Charge Action Group said:

“Even in the context of the grossly ill-considered and unfair Loan Charge, to now find out that HMRC were paying contractors using these arrangements turns this from fiasco into farce. In an even more bizarre twist, those very contractors, who delivered important projects for HMRC, now find themselves facing financial ruin as they are pursued under the new Loan Charge legislation.”

“One of the disgraceful things about the Loan Charge fiasco is that HMRC knew fullwell about these employment arrangements yet did absolutely nothing about them for many years. The fact that HMRC were actually paying contractors through such arrangements raises serious questions of competence at the highest levels of HMRC. Instead of trying to mislead MPs, it is time HMRC and the Treasury faced proper scrutiny about their conduct and about the fiasco and farce of the Loan Charge”.

Notes to Editors

Media Contact: Mark Sebright – [email protected] / 07504 042613

1. About the Loan Charge Action Group: The Loan Charge Action Group seeks to raise awareness and reform of the retrospective IR35 tax charge introduced by HM Treasury in the 2017 Budget and build a community where affected individuals can find information and support. The Group does not provide any form of chargeable service or professional advice. Visit www.hmrcloancharge.info

2. LCAG members’ survey: In summer 2018, LCAG surveyed 500 of its members about the impact of the Loan Charge and the following were the responses as to how if was affecting people:

3. House of Commons Early Day Motion 1239: That this House expresses its concern at the 2019 Loan Charge; notes that it is retrospective applying back to 1999; further notes that as a result of the introduction of IR35, umbrella companies were set up and recommended by professional advisers and employment agencies; recognises that the Charge will affect contractors, freelancers and agency workers, including social workers, supply teachers and bank and locum nurses and doctors; notes that employment was not an option and in some cases the company or organisation insisted on those arrangements, including to avoid paying National Insurance; notes that these individuals did not receive sick or holiday pay; believes it is unfair that HM Revenue and Customs (HMRC) are pursuing people who acted in good faith rather than the client organisations, agencies or umbrella companies all of whom benefited significantly; notes that HMRC are aggressively pursuing individuals through Advanced Payment Notices with no independent right of appeal; further believes that the Charge is likely to cause financial distress and bankruptcies, impeding HMRC’s ability to recover these tax liabilities and causing a devastating impact on people; believes that retrospectively taxing something that was technically allowed at the time, is unfair; calls on the Government to revise the legislation to avoid significant damage to independent contractors and freelancers in the UK; and calls for the Charge to apply only to disguised remuneration loans entered into after the Finance Act 2017 received Royal Assent. For full register of MPs supporting Parliamentary motion see https://www.parliament.uk/edm/2017-19/1239

4. Suicide risk – HMRC and HMT are aware of the suicide risk being created by the Loan Charge (as reported in the Evening Standard https://www.standard.co.uk/business/suicide-watch-the-preventable-tax-timebomb-looming-for-freelancers-a3861916.html, yet so far have refused to set up a 24 hour helpline for people needing urgent counselling, see https://www.hmrcloancharge.info/news/hmrc_please_be_suicidal_during_office_hours/