IT contractors write to MPs about Section 58

IT contractors are writing to hundreds of MPs urging their support for a change to this year’s Finance Bill aimed at overturning the retrospective effect of controversial tax rule Section 58, dubbed ‘BN66,’ ahead of the amendment’s tabling on Tuesday.

The letters, a sample of which is available from No To Retro Tax, call on the MPs to ensure Exchequer Secretary David Gauke supports a new clause in the bill, scheduled to be tabled in the House of Commons on June 26th by Conservative MP Nigel Mills.

According to its supporters, his amendment aims to secure a review of Section 58 and its impact on taxpayers, particularly in relation to bankruptcies and the scale of the retrospective tax demands imposed, including on some 2,000 IT contractors.

Buried in the Finance Act 2008, S58 was the Labour government’s tool to close a series of loopholes which had permitted tax liabilities to be minimised through the use of offshore trusts and Double Taxation Treaties.

Schemes exploiting the loopholes were popular with freelancers, IT consultants, property professionals and healthcare staff who, despite some grumbles from HMRC at the time, used them to arrange their tax affairs.

But in March 2008, Section 58 (4) not only closed these workers’ tax schemes down prospectively, it also made them unlawful for the entire period they had been in operation, campaigners at No To Retro Tax say.

The campaigners also rightly point out that, even though its officials knew about them, HMRC failed to take action against the schemes for seven years, until it clamped down on them retrospectively.

Set up to oppose all forms of retrospective taxation, NTRT adds: “As a result, thousands of UK taxpayers are now being pursued by HMRC for backdated liabilities stretching back almost ten years, despite the fact that the schemes had previously been acknowledged by HMRC as perfectly legal.”

Although the High Court in 2010 reaffirmed that assessments by HMRC of income tax are capped to six years, the tax authority has the power to reach back further where it can allege ‘fraud’ or ‘negligence’ on the part of the taxpayer.  

“The retrospective application of this law is threatening to force thousands of people, including myself, into bankruptcy, simply for arranging my affairs in a manner that was entirely transparent and legal the time,” taxpayers say in the letters, which NTRT told CUK “hundreds” of MPs have now received.

The written appeal concludes: “I understand that an amendment is due to be tabled imminently to this year’s Finance Bill which would remove the retrospective application of Section 58(4) and mean that the tax changes it introduced would only come into effect from the date they were first announced.

“This would not only bring the legislation in line with parliamentary protocol and natural justice, but prevent myself and thousands of others from being unfairly forced into bankruptcy. I would be most grateful if you could contact the Exchequer Secretary David Gauke MP as a matter of urgency on my behalf and urge him to support this amendment.”

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