Ahead of a general election, party positions itself to win support from self-employed
Labour’s Shadow Chancellor of the Exchequer, Rachel Reeves, has suggested her party would review the Loan Charge if it wins a general election, offering some hope to the tens of thousands of workers affected by the scandal.
Speaking on LBC radio last week (Monday 29th January), and as reported by the Telegraph, Reeves said that “the way people are being treated” by HMRC over the Loan Charge is “not acceptable”.
“We are not talking about the biggest earners here”, Reeves said. “We are talking about ordinary people on ordinary wages” who were “encouraged by their accountants to participate in these schemes”.
“HMRC seem to be coming after the people who were mis-sold these products rather than the people who were mis-selling them and that is the real scandal”, she added.
Alongside the suggestion that her party would open a new, independent inquiry into the Loan Charge, the Telegraph reports that Labour is “pressing the Government to review” existing Loan Charge cases.
As part of the review, Labour wants to see evidence that HMRC acts in a “more proportionate” way when handling new cases, and does not “pursue people who could not afford to pay” an inflated tax bill.
Loan Charge back in limelight following debate
The Loan Charge, controversial since its introduction, has left thousands of workers with unpayable tax bills for alleged tax avoidance via disguised remuneration schemes.
Such arrangements were widely marketed as tax-compliant by accounting professionals and saw contractors paid via loans rather than salaries, avoiding income tax and national insurance payments.
However, HMRC now aggressively targets these schemes while also attempting to recover historic taxes via the Loan Charge, treating all earnings as income in one tax year. Many taxpayers have been issued unpayable tax bills as a result.
The policy is under scrutiny once again following a Parliamentary debate held on Thursday 18th January. The debate allowed MPs to raise concerns over HMRC’s conduct.
Several Labour MPs attended the debate – including John McDonnell, who previously served as Shadow Chancellor under the party’s previous leader, Jeremy Corbyn. McDonnell noted that his own constituents had had “incredibly distressing” interactions with HMRC as a result of the Loan Charge.
He had also called for an “immediate”, “time-limited” and “truly independent” review into the scandal, to cut through the “culture of secrecy and protectionism” at HMRC.
Labour aspires to be “pro-business part”
Alongside the calls for Loan Charge justice from senior figures in the party in recent weeks, Labour began its general election campaign with its second Annual Business Conference, also held last week (Thursday 1st February).
With the government’s Spring Budget taking place next month, the event was an opportunity for Labour to articulate its plans to reform the UK’s complex tax system.
As such, at the conference, Rachel Reeves promised that Labour would both “campaign as a pro-business party” and “govern as a pro-business party”.
One of the headline promises to businesses was that the main rate of Corporation Tax would be frozen for five years under a Labour government. Reeves also hinted that Labour would consider re-evaluating the freeze and lowering the headline rate, “should our competitiveness come under threat”.
Despite this, however, there was little additional insight into other potential tax cuts, either those affecting businesses, the wider self-employed workforce or taxpayers in general – leaving question marks over Labour’s long-term plans for tax reforms.