MP secures meeting with Chancellor for a cross-party delegation to discuss the controversial Loan Charge

LCAG Media Release 9th January 2019

The Prime Minister has committed the Chancellor to meeting a cross-party group of MPs to discuss the review of the controversial 2019 Loan Charge, after the Government was forced to concede a cross-party amendment to the Finance Bill.

Sir Edward Davey MP (Liberal Democrat, Kingston and Surbiton) made the request at Prime Minister’s Questions today asking the Prime Minister, Theresa May, if she would meet with him and “a cross-party delegation of MPs to discuss this new review into the Loan Charge” and “which offends against the rule of law and has caused misery to tens of thousands of people”. Sir Ed pointed out that the issue had united the House. In the current political climate, this unity shows the importance of this issue and the damage the loan charge will cause.

The Prime Minister said that, as a first stage, the cross-party delegation should meet with the Chancellor. Sir Ed Davey’s office is now arranging that meeting which needs to happen quickly as the review will need to be conducted in the next 11 weeks.

Yesterday, in the Report Stage of the Finance Bill, Sir Ed tabled a cross-party amendment, New Clause 26 (#NC26) to the Finance Bill, calling for a review of the controversial 2019 Loan Charge. A total of 38 MPs from across the political spectrum had already signed the amendment before the debate. Many more MPs came forward to support NC26 during the day and joined the debate on the clause. With it clear that the Government would lose the vote, with even Conservative and DUP MPs expressing their opposition to the retrospective nature of the Loan Charge, the Government gave in and accepted the review.This review will now be enshrined in law and must happen. A report must be presented to the House of Commons by the 30th March 2019.

The Loan Charge, due to come into effect in April this year, would see thousands of freelance workers facing bankruptcy, homelessness and breakdown. The draconian Loan Charge 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, which include social workers, teachers, doctors and nurses as well as IT contractors, followed professional advice. They submitted their tax returns every year, with HMRC never challenging them at the time. They now face life-destroying tax bills that they cannot pay or appeal to an independent tribunal or court.

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 tax 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.”

Many people would be unable to work again if hit by the charge and two people facing the Loan Charge have tragically committed suicide, one citing the policy.

Sir Ed Davey commented:

“I am pleased the Prime Minister has said the Chancellor will meet me and a cross-party delegation to discuss the review into the Loan Charge, established by my amendment to the Finance Bill last night.

“This is an issue affecting tens of thousands of people up and down the country – and MPs have heard from their constituents how the retrospective nature of the Loan Charge is so unfair and will cause bankruptcies and ruin lives.

“The review that’s been established must be a genuine review and look at the reality of the policy and the disastrous impact it will have on many individuals and families up and down the country.

“So far the Government has refused to listen but now, with the Prime Minister taking an interest, it is time they did and reformed this flawed policy”.

LGAG spokesperson, Steve Packham, said:

“Thousands of families are extremely grateful to Sir Edward Davey for asking this question to the Prime Minister and pleased that a cross-party delegation will be meeting with the Chancellor, but we are disappointed the Prime Minister ducked the request to meet.

“We know full well that so far the Treasury have failed to listen and worse still have consistently misled MPs about the reality of this pernicious and unfair measure. So we are deeply concerned that the Chancellor, who already has had to correct his false statement to the Select Committee, will carry on in the same vein and ignore the scrutiny.   

“The review into the Loan Charge must be a genuine one and not a whitewash by the Treasury, who have spent months misleading MPs and covering up HMRC’s failures and we urge all the cross-party MPs and peers who have so far expressed concern to tell the Chancellor the policy must be changed.

“It’s time for the Chancellor and the Prime Minister to start looking at the reality of their deeply flawed policy before it destroys the lives of tens thousands of people in just three months’ time.”

ENDS

Notes to Editors

Media Contact: Mark Sebright – [email protected] / 07988 680796

1. Ed Davey’s full PMQ: “Mr Speaker, an unusual thing happened last night. Conservative MPs and Opposition MPs united.  Leavers and Remainers united. United to back my proposal for review of retrospection in a law called the Loan Charge – which offends against the rule of law and has caused misery to tens of thousands of people. So, in her role as First Lord of the Treasury, will the Prime Minister agree to meet with me, and a cross-party delegation of MPs, to discuss this new review into the Loan Charge?”

2.  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

3. The report of the House of Lords Economic Affairs Committee (4^th 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

4. 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:

5. 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