Judicial Review into 2019 Loan Charge launched

The 2019 Loan Charge is to be subjected to a Judicial Review which -- if successful -- could prohibit HMRC from collecting the tax, penalties and interest it deems contractors owe.

Vowing yesterday to start the process to launch the review in just “a matter of weeks”, the group behind the £1million legal challenge said they expected the first ruling in September 2019.

But £500,000 is first needed to reach this initial judgment by the High Court, further to two lots of £250,000 for potentially Court of Appeal and Supreme Court hearings too, said the LCAG.

'Several years'

In guidance on how people can help fund the challenge, the latter court was identified as the most likely to ultimately decide the case, albeit possibly “several years” from now.

Yet even at this currently very early stage, tax specialist Robert Venables QC, who has been appointed to bring the JR against HMRC, believes there is a “good prospect” of success.

In particular, he suggested the courts are likely to declare the legislation enacting the 2019 Loan Charge as “incompatible” with the European Convention on Human Rights.

'Peaceful enjoyment of possessions'

The court could then say that the LC -- which is levied on sums received as far back as 1999 -- is an infringement of the right of individuals to peaceful enjoyment of their possessions (including their cash).

The Loan Charge Action Group (LCAG) adds that, citing section 6 of the UK Human Rights Act 1998, Venables will also ask the court to make a ‘declaration’ that HMRC cannot lawfully collect the tax charged under the LC.

Extending to penalties and interest, the declaration will rest on the argument that HMRC lacks an absolute obligation, and only has a statutory discretion, on whether to collect the tax.

'Very slow HMRC'

“Currently HMRC are being very slow to conclude enquiries, possibly because the Loan Charge is on the horizon,” said the LCAG, which called the backdated charge “immoral.”

“[If we are successful] HMRC will need to continue their enquiries and can be pushed to conclude these, which then means there is an option for the conclusion to those enquiries to be challenged through the proper processes.”

However, in FAQs including those on addressing what happens to LC taxpayers while the JR is ongoing, the group points out that the underlying tax situation “will not be resolved” even if the JR succeeds, meaning APNs, for example, will remain.

'A win will benefit all'

Contractors wanting to contribute to the “fighting fund” are recommended by the LCAG to make a minimum contribution of £600, partly as below this amount refunds in the event of the JR’s success will go to charity.

“We need sufficient money to be able to fight HMRC appealing against our win (which we are pretty confident about),” the group said in a statement.

“Ultimately, everyone affected by the Loan Charge will benefit from a win in court. However, if people all rely on others to contribute there will be no money, and then there will be no case.”

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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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