LCAG Press Release – Government hypocrisy over National Freelancers Day exposed by tax policy devastation on UK freelancers
• Thousands of freelance workers face bankruptcy, unemployment and depression from aggressive HMRC pursuit of 2019 Loan Charge
• Whilst Government Ministers like to praise freelancing and the ‘gig economy’, furious self-employed contractors point to the huge damage being done by flawed tax policy and call for urgent review of tax treatment of contract workers
• 64 cross-party MPs sign Early Day Motion calling for Loan Charge reform to protect workers and UK economy
As the UK celebrates the self-employed and ‘power of the freelance model’ on National Freelance Day (Thursday 28 June 2018), campaigners are warning that the Government and HMRC is using retrospective tax legislation intended to tackle corporate tax avoidance schemes to bankrupt independent contract workers.
Despite claiming to be ‘the true party’ of the gig economy, in its 2017 budget the Government reclassified contract worker employment arrangements as full-time employees though never having enjoyed the security or benefits of full-time employment.
As a result, many of these workers, including locum doctors, nurses, supply teachers, social workers, IT and oil and gas contractors, face retrospective tax bills going back 20 years and ranging from £50,000 to £100,000s when the 2019 Loan Charge becomes due next April, and the real prospect of personal bankruptcy and unemployment as a result.
Contractor support organisation, the Loan Charge Action Group (LCAG) spokesperson, Richard Horsley, says: “The Loan Charge is a not only an unjustified and vindictive tax grab on hard-working ordinary people, but a wholly self-defeating and self-destructive piece of legislation that will do enormous damage to the UK economy.”
The Loan schemes, which were perfectly legal at the time and meant to facilitate flexible short-term working contractors, enabled private and public sector employers, including the NHS, to avoid billions of pounds in VAT and NIC contributions which HMRC is now seeking to recover from individual workers.
LCAG spokesperson, Richard Horsley commented:
Our members never set out to avoid tax. They were simply following professional advice, often as a requirement of their contract employment, Most are not able to meet these demands, and face the prospect of personal bankruptcy when the Loan Charge becomes due next April,
That means HMRC will not be able to collect the Charge, nor any future tax revenues from those it makes bankrupt as they will then be ineligible to work. The Loan Charge is literally driving contract workers out of work and out of the UK, exasperating the severe staff shortages many organisations like the NHS are already experiencing.
According to the Office of National Statistics (ONS) report ‘‘Labour Market Economic Commentary, March 2018’, the proportion of self-employed in the UK stands at 4.8 million, representing 15% of the total workforce, whilst a study by the Association of Independent Professionals and the Self Employed (IPSE), ‘freelancers in the UK contributed £119 billion to the economy in 2016.’
Government Ministers, including Foreign Secretary Boris Johnson and former Prime Minister David Cameron have been very happy to praise freelancing, whilst Cabinet Minister Liz Truss has claimed the Conservatives are “the true party” of the gig economy and yet Horsley says this rings very hollow to tens of thousands of contractors facing financial ruin as a result of the destructive and unfair 2019 Loan Charge, due next April.
It is absolute madness that the Government is unjustifiably pursuing contract workers in this way when they are such a vital contributor to the UK economy,” says Richard Horsley. “It makes a mockery of everything National Freelance Day is supposed to be celebrating, We urge HMRC, HM Treasury and others to urgently reconsider this policy.
LCAG has collated almost 200 impact statements after being inundated with calls from distressed contractors asking the organisation for help, and last week wrote to HMRC Chief Executive and Director General Jon Thompson, demanding he ‘establish,‘as a matter of urgency, a 24 hour helpline that individuals may call if in severe mental distress or have suicidal thoughts, with the suicide risk being a direct result of your relentless pursuit of individuals, including our members.’
Liberal Democrat MP Stephen Lloyd has posted an early day motion signed by 64 cross-party MPs including Liberal Democrat leader Sir Vince Cable, former Conservative mayoral candidate Zac Goldsmith, and Dagenham’s Labour MP Jon Cruddas, calling for a debate on the issue. ENDS
Notes to Editors
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 HMG 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
About the Loan Charge
HM Govt has nasty surprise in store for anyone miss-sold an Employment Arrangement involving remuneration through ‘loans’ next April in the form of the 2019 Loan Charge. Everyone who has ever been employed through a loan scheme structure will be hit with a retrospective charge in the 2018-19 tax year.
The Early Day Motion states:
This House recognises that the (Loan) 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… believes it is unfair that 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…. with no independent right of appeal; further believes that the Charge is likely to cause financial distress and bankruptcies, and believes that retrospectively taxing something that was technically allowed at the time, is unfair.