A Q&A with HMRC: loan charge defeat

A Q&A with HMRC: loan charge defeat

Politicians are often slippery when it comes to answering questions, especially so when the subject addressed is murky. It doesn’t get much murkier than the IR35 reform, as announced in Budget 2018, and its draconian sibling the 2019 loan charge.

MPs of all colours have united against HMRC’s propositions. The House of Lords released a scathing report on the Treasury’s abuse of power back in December while growing organisations like the Loan Charge Action Group (LCAG) have been consistently taking aim (with some success) at the most diabolical aspects of its scrabble for revenue.

This accumulated in Ed Davey, Liberal Democrat MP for Kingston and Surbiton, tabling an amendment this week (read new clause 68 here) that was signed by 38 MPs in an overwhelming show of support.

Yet the Treasury is still skirting the truth (despite numerous public slip-ups, like one infamous webinar instructing NHS bosses to just blanket determine staff as in-IR35) when it comes to facing questions with unpopular answers.

So, here’s a roundup of HMRC’s most evasive takes over the last week.

Will the Prime Minister be supporting the loan charge review?

Edward Davey, Liberal Democrat Spokesperson (Home Affairs), asks:
An unusual thing happened last night: Conservative MPs and Opposition MPs united, and leavers and remainers united. They united to back my proposal for a 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. In her role as First Lord of the Treasury, will the Prime Minister agree to meet me and a cross-party delegation of MPs to discuss the new review of the loan charge?

Theresa May, Prime Minister, Leader of the Conservative Party, responds:
On the question he puts about the review of the loan charge—[Interruption.] I get the point he was trying to make, but may I just make this point? He talked about Opposition and Government MPs uniting. Actually, the Government accepted his review into the loan charge. I think the first stage might be for the Chancellor of the Exchequer to sit down with him and a group of cross-party MPs to look at how that review is being taken forward.

What does it really mean?
While Mrs. May acknowledges that the loan charge review has indeed been accepted by the government (can we get another cheer?), she skillfully deflects the core of Mr. Davey’s question.

What Mr. Davey is asking for here is not so much an official confirmation of a review but the Prime Minister’s support in ensuring thousands of innocent, working people are safe from a merciless pursuit of revenue. Instead of committing her own time to the review, she instead offers the Chancellor of the Exchequer – the same Phillip Hammond that allowed the loan charge, along with the IR35 reform and Making Tax Digital
to form unchecked.

There’s very little commitment here from Theresa May. However, the fact that the question even made it to the Prime Minister is very, very hopeful.

How many working people are currently being pursued by the loan charge?

Anne Main, Conservative, St Albans, asks:
To ask the Chancellor of the Exchequer, how many people are being pursued for repayments under the 2019 Loan Charge in (a) St Albans and (b) the UK since it came into force.

Mel Stride, Financial Secretary to the Treasury and Paymaster General, responds:
The Government estimates that up to 50,000 individuals will be affected by the 2019 loan charge. Information is not held at constituency level.
Since the announcement of the 2019 loan charge at Budget 2016, HMRC has agreed settlements on disguised remuneration schemes with employers and individuals of over 650 million pounds. More than 90% of this amount was collected from employers, with less than 10% from individuals.

What does it really mean?
It’s outright hard to believe that 90% of the £650m disguised remuneration scheme settlements so far were collected from employers. Let’s not forget that the loan charge review that was begrudgingly accepted by Mr. Stride earlier this week was brought about due to the potential bankruptcy of thousands of contractors, a direct result of HMRC’s aggressive collection tactics.

Untruths and fudged figures, however, are the lesser evils with this one. HMRC has already stated that any money overpaid on these settlements will not be eligible to claim back (unlike income tax), so what happens to the individuals that have been urged into settling by the Treasury’s fearmongering?

When the loan charge legislation is reviewed, hopefully many of the more heinous aspects – like retrospective charges – are eradicated completely. However, individuals that have already declared themselves as ‘historical users of tax-avoidance schemes’ by settling could be doubly punished by not being able to claim their money back, unless this is a specific point that’s addressed during the review. We sincerely hope it is.

Takeaways for the week

Let’s not allow the above to detract from the exceptional result won by a mix of dedicated campaigning, incredible organisation and sheer determination. The loan charge review gives a glimpse of light at the end of a long and distressing tunnel for many contractors.

It’s important to remember that the war is far from won though. There’re many elements, like not being able to claim back money unfairly paid to HMRC, that are uncertain still and there’s no doubt that the review will see continued resistance by the Treasury.

Despite this, we take joy in repeating ourselves from our last Q&A breakdown: there’s ever more valid hope that HMRC can be brought to heel in 2019.

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