IT contractors back MP's bid to quash BN66

A Tory MP has been saluted by scores of IT contractors for his brave albeit unsuccessful attempt to remove the retrospective part of Section 58 of the Finance Act 2008, which threatens thousands of such workers with “financial ruin.”

Steve Baker, Conservative MP for Wycombe, went against the wishes of the government and his own party’s whips by tabling a clause designed to amend the Labour-conceived legislation, so it would operate prospectively rather than retrospectively.

He told the House of Commons that it was a “hallmark of despotism” for contractors to be given a “realistic expectation” that their tax arrangements would be accepted, only for their plans to be “swept away” once the compliance “ground...shifted under their feet.”

Baker, a former IT contractor, explained: “I believe we cannot afford to undermine the fundamental principle that people in this country do not suffer at the hands of the authorities for conduct which was lawful at the time.”

Despite 17 other MPs agreeing with him that Section 58(4) of the Finance Act 2008 should be changed - by replacing the words “always having had effect” with “having effect from 12 March 2008” – the government was unmoved.

“Action is sometimes necessary…to protect the UK tax base,” responded Treasury minister David Gauke. “The priorities of reducing the deficit and ensuring a level playing field for all require firm action in tackling avoidance.”

The minister added: “The previous government reached the conclusion that retrospective clarification was warranted in respect of the wholly artificial scheme targeted by Section 58. For the reasons I have explained, there is no reason to disturb that decision.”

Although dismayed, No To Retro Tax (NTRT), a lobby group for taxpayers caught by Budget Note 66 (BN66) – the document which the retrospective element of S58 was announced on, says Baker was right to withdraw his clause in light of the minister’s comments.

“Mr Baker withdrew the amendment as he correctly judged that at this moment the Government was not ready to accept it,” the group said.

“This has ensured that NTRT have retained the opportunity for a further push either at the Report Stage of the Bill or in subsequent legislation.”

The lobbyist sees further upsides. Reflecting on the House of Commons Finance Bill debate, where Mr Baker tabled his clause, NTRT said: “The debate was the longest amount of time that our issue has been discussed in parliament since the retrospective legislation was first considered back in 2008.”

It added: “Conservative MPs Brooks Newmark and Sheryll Murray…, Nigel Mills [and] Liberal Democrat MP Mike Thornton and Shadow Exchequer Secretary Catherine McKinnell…asked some pertinent questions to the Minister which will be helpful to us as we go forward.”

Less positively for the campaigner - and the BN66 contractors it represents, who the Commons heard face “financial ruin” and other “devastating consequences” - Mr Gauke appeared to dismiss its findings.

The minister said: “There is no evidence to suggest that the views expressed by that small proportion of scheme users [surveyed by NTRT] represent anything other than those of the individuals concerned.”

And standing by the backdating of tax law, Mr Gauke concluded: “I believe that government should use retrospection only after very careful consideration, even where the change does no more than clarify law or put its meaning beyond doubt. However, we must reserve the right to use retrospection in wholly exceptional circumstances, in line with the protocol we have introduced.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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