LCAG Media Release 7th January 2019
Sir Edward Davey MP (Liberal Democrat, Kingston and Surbiton) has tabled an amendment, New Clause 26 (#NC26) to the Finance Bill, calling for a review of the Government’s controversial 2019 Loan Charge. The Report Stage of the Bill is tomorrow, Tuesday 8th January and if selected by the Speaker, there is expected to be a rebellion by some Conservative and DUP MPs over the issue.
Thousands of freelance workers are facing bankruptcy, anxiety and stress due to the draconian Loan Charge which overrides all regular taxpayer protections and allows HMRC to go back twenty years, demanding huge tax bills for employment arrangements that were legal and fully declared to HMRC at the time. Victims, who include social workers, teachers, doctors and nurses as well as IT contractors, followed professional advice and submitted their tax returns every year, with HMRC never challenging them at the time, yet now they face life-destroying tax bills they cannot pay or appeal to an independent tribunal or court.
Sir Ed Davey’s amendment, if voted for, would force the Government to conduct a review of the policy which is due to come in in April 2019 and will cause bankruptcies, force families out of their homes and has already been linked to two suicides. Sir Ed and other supportive MPs had wanted to table an amendment removing the retrospective element of the Loan Charge, but were prevented from doing so, with the Government cynically failing to table an “amendment to the law” which is usual practice and allows MPs to make changes to the Bill. Nonetheless it is hoped that a review of the Loan Charge will lead to the Government being forced to finally admit the truth of the damage their ill-considered policy will do to individuals, to contracting in the UK and also to the economy and public services.
Opposition to the retrospective Loan Charge has already attracted widespread political support. Over 100 cross-party MPs, including Conservatives and DUP MPs, have signed an Early Day Motion calling on the Government to ‘revise the legislation to avoid significant damage to independent contractors and freelancers in the UK’. HMRC’s unfair and aggressive pursuit of retrospective Loan Charge taxes has also been damned in a powerful report published by the House of Lords Economic Affairs Committee on 4th December 2018, which said there is “disturbing evidence” and “reports of increasingly aggressive behaviour towards taxpayers”. It calls on the Government to reform the Loan Charge, which Lords declared is “clearly retrospective” and ”undermines basic principles of tax fairness and certainty. “
The Loan Charge Action Group are calling on MPs to sign Sir Ed’s amendment and help force the Government to take action to amend the Loan Charge, before it is too late.
Sir Ed Davey commented:
“I’m pleased to be tabling this amendment to demand a review of the ill-designed Loan Charge which has proved so unfair.
“So I’m grateful to all the cross-party colleagues who have co-sponsored it.
“The Government know that there is a majority who oppose the retrospective element of the charge which is why they have rigged proceedings to prevent an amendment to take it out.
“Yet my amendment still gives MPs a great opportunity to show this level of concern and force the Government to finally listen and change this policy before it causes bankruptcies and destroys more lives”.
LGAG spokesperson, Steve Packham, said:
“We are very grateful to Sir Edward Davey for tabling this important amendment to the Finance Bill and raising the unfair Loan Charge in Parliament.
“We are disappointed that the Government cynically prevented an amendment that could actually change the law, it is clear they know that they could face defeat over this and other issues. We would, however, welcome a genuine review which would, like the House of Lords report, expose the reality of this damaging and unfair measure.
So we call upon all MPs who believe in the rule of law and the basic principles of tax certainty to support New Clause 26 and force a review into the disgraceful Loan Charge.
“We also call on the Government to listen to the overwhelming evidence and support for reform to this manifestly unfair legislation before it destroys the lives of tens thousands of families in just three months’ time.”
Notes to Editors
Media Contact: Mark Sebright – firstname.lastname@example.org / 07988 680796
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 hmrcloancharge.info
2. The report of the House of Lords Economic Affairs Committee (4th December 2018) is mentioned here https://www.parliament.uk/business/committees/committees-a-z/lords-select/economic-affairs-finance-bill-sub-committee/news-parliament-2017/powers-report/ and the full report is here https://publications.parliament.uk/pa/ld201719/ldselect/ldeconaf/242/24202.htm
3. 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:
|Depression / Anxiety / Mental health impact:||68%|
|Loss of residence / home:||49%|
|Divorce / Relationship breakdown:||31%|
|Loss of career:||30%|
|Suicidal thoughts / self-harm:||39%|
4. 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