Boris Johnson has delivered on his promise and ordered a review of the controversial Loan Charge. Having previously described it as “superficially unjust” in the Conservative Party leadership race only a few months ago, Mr Johnson announced last week in Prime Minister’s Questions that the Government will conduct a “thorough review.”
The Loan Charge is a retrospective tax impacting reportedly 50,000 or more individuals who took out disguised remuneration schemes dating back to 6th April 1999, which paid their earnings through tax-free loans.
However, given that many contractors were mis-sold these loans and took them out on the understanding that they did not need to pay income tax and National Insurance Contributions on them, the Government has been criticised for expecting thousands of individuals to settle huge tax bills in one go.
MP David Davis, for example, recently said it is “an injustice that has to be put right.” Mr Davis is one of 200 MPs from various parties who – before the new Prime Minister was announced – wrote to Mr Johnson and his opponent, Jeremy Hunt. Many of these letters outlined the importance of suspending the tax, which was introduced on 5th April 2019 and has reportedly led to several individuals affected committing suicide.
Confirmation that a review will take place has been welcomed by most, but Steve Packham, Spokesperson for the Loan Charge Action Group, made it clear that “without a suspension, any review is meaningless and more lives are at risk.” In response to the news, Mr Packham also went on to say that “the issue is in Boris’ hands and to avoid further tragedy, he needs to act now and suspend the Loan Charge.”
After ignoring pressure to delay the introduction of the charge earlier this year, a Government led by the previous Prime Minister, Theresa May, set contractors a deadline of 30th September 2019 to disclose the full details of the loans to HMRC.
The tax office has said it has written to around 40,000 people that it believes must repay this tax. However, with HMRC itself stating that another 10,000 individuals are implicated, contractors are advised to think carefully about whether the charge could apply to them.
With individuals being pursued by HMRC for hundreds of thousands of pounds in certain cases and the tax office hoping to raise £3.2bn from it, the fact that the new Prime Minister, who spoke of the “very very difficult issue” has bowed to mounting pressure was welcomed by the Loan Charge All Parliamentary Party Group (APPG).
That said, the cross-party group did stress “the loan charge review MUST be independent” of HMRC and the Treasury, while the Government last week said it will publish further details regarding the review in “due course.”