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Lives depend on revoking the Loan Charge “scandal”

Founder of Loan Charge Action Group has his say on “draconian policy”

If it wasn’t for the Brexit merry-go-round, then another political hot potato would be getting a lot more coverage than it currently is. The Loan Charge scandal, unlike Brexit, is uniting Parliamentarians against a draconian policy that has been slammed by MPs and peers as undermining the rule of law and costing lives, writes Steve Packham, Spokesperson and co-founder of The Loan Charge Action Group.

An extraordinary 276 MPs, from all political parties, have supported a suspension or scrapping of the retrospective Loan Charge. With such huge concern amongst our decision-makers, it is hard to believe that this policy hasn’t been amended and revoked. This shows that, in reality, it is the unaccountable and out-of-control HMRC who are really in charge here and it is they who are desperately and illegitimately trying to thwart the will of Parliament, something that needs an investigation in itself.

The support of so many MPs is, refreshingly, as a direct result of people power, of lots of Davids and Davinas fighting back against the unaccountable Goliaths of HMRC and the Treasury. As people attended constituency surgeries and protests in Westminster, more and more MPs became aware and the Loan Charge scandal is now regarded as a fiasco of bad policymaking, inadequate scrutiny and disinformation.

“Eye-watering sums”

The Loan Charge Action Group, the group representing the thousands of people and families facing the Loan Charge, was formed in early 2018. Many ordinary contractors had started to receive brown envelopes demanding eye-watering sums for ‘tax’ that has never been legally proven to be due, for arrangements that were never illegal. Arrangements that people had been advised and encouraged to use, to avoid the flawed ‘IR35’ legislation and the administration and costs of running a limited company.

Our campaigning and the support of many excellent MPs and the Loan Charge APPG finally led to the Government conceding a Loan Charge review, chaired by former Comptroller and Auditor General of the National Audit Office, Sir Aymas Morse. This happened after the now Prime Minister was asked publicly if he would commit to a review. It will report in mid-November.

Review “unlikely to be objective”

There are still concerns, though, as to whether the review will be the genuinely independent review needed. First of all, the Secretariat is made up of HMRC staff, who therefore are unlikely to be objective about the role and conduct of their own organisation, something that must be fully and properly examined. Secondly, a Freedom of Information request exposed that the Terms of Reference of what is supposed to be an independent review was actually drawn up by HMRC and the Treasury. So they clearly attempted to stitch up the review before it had even begun. More hopefully, though, Sir Amyas has stated that he will decide on the remit of the review and he will be the one making decisions, so we can only hope this is true and that it is based on the evidence.

It remains a huge concern, in any case, that despite being forced to announce a review, the Treasury and HMRC are still refusing to suspend the Loan Charge (which will be due in January 2020) and related activity, including the legally and morally questionable ‘Accelerated Payment Notices’ which give HMRC a near-absolute right to pursue people for sums that have never been proven, and only allow an appeal after an individual has paid up. So you might be able to challenge a bill you were forced to pay and have it overturned, but that would be little consolation if you’ve already sold your home or been made bankrupt. 

“Seven confirmed suicides”

Tragically, but inevitably, the Loan Charge has led to seven confirmed suicides, something that both the Government and HMRC were warned would happen and have shamefully ignored. The All-Party Parliamentary Loan Charge Group have been sent evidence of these tragic and unnecessary deaths and have sent this evidence to Sir Amyas’ review. A few weeks ago, there was a moving vigil at HMRC when family members handed in a letter begging Sir Jonathan Thompson to avoid further tragedies, a plea he coldly ignored.

Even now, knowing that seven families have lost loved ones, the Treasury and HMRC are refusing to stop pursuing people, something which MPs have described as callous and reckless. It also looks as though this refusal may form part of a legal case into Misconduct in Public Office.

IR35 reform is HMRC’s “weapon”

At least the review gives the many thousands of people facing the Loan Charge some hope. Yet at the same time, the same forces in HMRC and the Treasury are seeking to attack contractors and freelancers with a new weapon, the so-called IR35 ‘off-payroll rules’, known as the Off-Payroll Tax. This reform is something that the current Government intends to introduce next April, yet already contractors, many also facing the Loan Charge, are being told they won’t be needed after December.

On top of the unpayable demands due to the Loan Charge, many people now face losing their jobs and livelihoods and this means that contractors cajoled into paying monthly ‘time-to-pay’ instalments will no longer be able to do so, nor pay the Loan Charge. So the Government’s latest policy would perversely actually make it impossible for the Loan Charge to succeed. This latest blow, part of this Government’s unfathomable ‘war on contracting’, will also cause even more anxiety and stress, which could lead to further tragedies.

Contractors must “make voices heard”

So the Government and HMRC created this whole mess, through bad legislation, wrongly pursuing genuine contractors and freelancers for imagined underpayment of tax, when contractors have none of the security or benefits of employment. Now, not only are they refusing to clean up the catastrophic mess of the Loan Charge, they seem hellbent on making it worse. This from a Chancellor who in the past said that the “silly” IR35 legislation should be repealed. If there is a General Election, as seems likely, then contractors and freelancers must make sure their voice – a voice of several million UK workers – is heard.

For now, we hope that the Loan Charge Review will properly look at the evidence before it, the evidence of a major national scandal and one that has cost lives. Brexit may inevitably be proving very difficult to resolve but the Loan Charge scandal could and must be and with such overwhelmingly support for doing so in Parliament, the Government must listen. Lives and the reputation of the UK as a fair country depends on it.

If you have been impacted by the Loan Charge, for more information and support, please contact the Loan Charge Action Group.

By Steve Packham

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13 thoughts on “Lives depend on revoking the Loan Charge “scandal””

  1. Biggles

    The Loan Charge and IR35 fiasco are being led by people who hide behind the cloak of ‘governmant’. These people have an hidden agenda and are determined to push these laws in at any cost.

    You see this isn’t just about money- the ‘system’ has all the money. It’s all numbers behind a computer screen. They can and do make money out of thin air and then lend it to you with interest- and that is being done all the time.

    What we’re seeing here is a tightening of the noose. People with money are dangerous, especially if they are not paid off stooges, which most IT contractors aren’t. It’s control, control of our finances- i.e ensure everyone is scared and living hand to mouth. Brexit, foreign wars, immigration, tax, I could go on. It’s all about putting people in their place and keeping them pre-occupied with both small and large issues to hide the fact that we are much more than money making slaves wasting our time with silly jobs that mean NOTHING. Yes nothing. Jobs are simply supporting the system that oppresses us and making us petrified by way of debt to ensure we keep working.

    It’s all a mess, and many people like myself will hang up our boots and go on to do something else. There will be no 25-100K cheques from me to HMRC ever again.

    The corperate world will be losing many good people, but it thinks our outsourced friends will plug the gap. Good luck with that.

    My advise is to seriously think about semi- retirment if you are able to do so. Sign on and claim the 50 quid or so a week. They don’t care so why should you.

  2. Huw

    You can’t help but have sympathy for the families of those who’ve taken their own lives, or for those who are so desperate that they’re considering it.
    However, back in the 1990s my accountant hosted an event for her contractor customers and I listened incredulously to how this scheme would work: a very contrived plan involving an offshore trust and non-repayable loans – I seem to remember that one further selling-point was that it would offset against inheritance tax. The presenters suggested that this was a legal loophole that they expected to be able to exploit for a minimum of three years, after which HMRC would have had sufficient time to close it.
    I’m not particularly well-informed about financial matters, but I thought then that no one, except someone very greedy or downright stupid (the latter ruling out most contractors) could ever have thought that it was an acceptable way of managing their tax affairs.
    A person who thinks that they can sensibly (or morally) avoid tax to that extent really needs to take a look at themselves.

    • Bob Johnson

      Huw, you must not forgot that 1) HMRC wilfully AGREED over a decade ago (supreme court stuff) there was nothing illegal, new or not-understood to these arrangements, 2) many people actually declared their use on their tax return. So the issue at hand is that HMRC have overstepped their lawful remit, and that the law as it was *before* the Loan Charge already had provision to deal effectively with tax avoidance. What’s going on with Loan Charge goes right up against democratic principles, and, Huw, I’m sure you’d be *really* pissed off, if something akin to the Loan Charge was imposed on ‘outside IR35’ PSC contractors – with 20 years retroactive effect. Wait and see. It just might happen.

  3. Ceri

    Well said huw, when MSCs were closed out I had colleagues who thought the IOM loan schemes would be less hassle than becoming a Ltd. The %s for take-home, tax paid and commission, number of different entities and QCs legal opinion really didn’t pass the smell test.
    It is annoying that MPs are happy to plead the case for people who used the loan schemes while voting through the changes to IR35 for consultants who were paying their tax.

    • Biggles

      These schemes were legal at the time. MP’s themselves were using them. The lack of empathy from people like you is typical of the ‘not me guv’ goody two shoe jobsworths we have amongst us.

      Are you the type who tells people “I’m good at my job”..sadly many are but suck as human beings.

    • Bob Johnson

      I don’t think you fully understand the implications of the loan charge. Outside IR35 PSCs will be next in the HMRC slaughterhouse. Low hanging fruit is what it’s all about.

  4. Ant

    They should be putting the people who missold these methods in jail.
    If the laws were clear at the time then these must have been missold. If the laws were not clear they need to give up on it. Retrospective legislation is illegal.
    Actively going after them and not the suckers who bought into them is a secondary thing.

  5. LargeCorporatePermie

    The fear of this type of retrospective tax on anything else that is currently legal (e.g. high proportion of company revenue ending up as dividends to a small number of shareholders, etc) is exactly why I closed my company.
    It bankrupted some of my friends, cost them their houses, marriages and families, so didn’t see worth the risk to try to be a small business owner any more.
    That and the fact that I was providing services to large corporates, who are now scared of what IR35 will mean, so are stopping all small company contracts – which didn’t bode well when my USP was IT Service Management restructuring in large corporates…. all of this plays straight into the hands of big consultancies, so I can guess pretty quickly who has lobbied for such a perverse tax structure.
    Regards,
    Large Corporate Permie (now helping expatriate profits rather than let them be taxed in the UK)

  6. Get ally Happy

    It’s a sad day when you are penalised for using a legal scheme.

    It must have be incumbent on HMRC to close this as early as possible, so there is blame there.

    How come Gina Miller can force the government into doing something it didn’t want to

    But 1/2 million contractors cannot ??

  7. Andrew Harrison

    I haven’t seen an issue polarise contractors this dramatically. Yes, it was too good to be true and obviously artificial but legal opinion said it was o.k. (that’s a legal ok not a moral ok). HMRC left it too long and went after the recipients not the promoters. Their method of attack was clever – go for the unrepaid loan not the transactions in the past. That makes it look legal but I think the wider view is that it is retrospective and ought to be ruled “out of time”.
    The trail has gone cold for investigating the sales methods for these schemes and the morality of those who designed them. I have equally little hope of investigating why it took HMRC so long to take action.
    On this one there is no moral high ground that makes sense of the current situation.

    • Dodo Exist

      HMRC creates rules without any Parliamentary scrutiny whatsoever. Therefore it is not only undemocratic but illegal. Why are these jobsworths allowed to get away criminal actions?

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