MPs find a formula in staunchly anti-loan charge letters to Boris Johnson and Sajid Javid

A former business secretary and Lib Dem leader is among the growing number of MPs who appear to be concentrating their arrows against Loan Charge 2019, in formal letters they have fired off to the government’s number one and two.

Sir Vince Cable, who is also an ex-shadow chancellor, has written to object to the charge to Sajid Javid, the current chancellor.

The Tory MPs Andrea Jenkyns and Andrew Rosindell have done the same, in their freshly sent letters to prime minister Boris Johnson.

But as well as the three MPs all appealing to No 10 and No 11 Downing Street to make the same announcement -- a pause to the charge until a judge-led review can complete, the trio do so on nearly identical grounds.

'Deeply perverse'

Sir Vince writes: “I am against the government’s plan to tax retrospectively people who took part in employee benefit trust loan plans which, at the time, were not illegal”.

In her letter, Ms Jenkyns writes: “The levy is a retrospective back tax for people who used a loan based scheme which, at the time of being taken out, were both legal and recommended by accounting industry professionals.

“Therefore, to retrospectively charge 45% on those loan payments which were paid in good faith and under legal assurance, is deeply perverse.”

'Perfectly legal'

In his letter, Mr Rosindell writes: “We must first point out that at the time these loans were perfectly legal measures.

“HMRC did not pursue individuals on the schemes at the time. We must be clear this was an error on the part of HMRC.”

The Conservative MPs Esther McVey and David TC Davies, and Labour MP Jim Fitzpatrick, have also written to the government to make similar points in favour of suspending and reviewing the charge.

'Always illegal'

But the pattern in the Cable-Jenkyns-Rosindell letters is that having first established that the loans were lawful at the time, the authors then point out that contrary to HM Treasury’s claims, the legislation announced at Budget 2016 to deal with them must therefore be retrospective.

Of the MPs, Sir Vince seems to sum it up best when he asks: “If the arrangements were as your department has argued, always illegal, why was it necessary to enact new legislation?

“And if tax was liable, why was HMRC unable to show that in an enquiry?”

'Disgraceful'

With unfair retrospection outlined, the three letters then tend to draw on the huge financial impact such a backdating has on individuals whose freelance status makes HMRC’s accrued demands exorbitant.

Mr Rosindell states: “The way in which HMRC has demanded this is simply disgraceful.

“They have demanded that all those affected must pay the whole charge in the 2019/20 tax year, effectively resulting in this being a lump sum. Those affected by this charge are mostly self-employed people. The group tend to have fewer stable sources of income than others”.

'Contractors without regular protections'

Sir Vince states: “They are contractors and freelancers who do not have regular protections and benefits such as holiday and sick pay or pension contributions and are more financially vulnerable.

“It is unreasonable to expect that many of those affected can pay the back tax by the end of the 2019/20 tax year.”

Ms Jenkyns states: “Those who have been employed through such a scheme are being demanded to pay this levy in one go which is unaffordable for many.

'Unrealistic'

“The unrealistic amounts demanded of taxpayers and the short time frame in which to pay the charge has deeply concerning consequences…[and] tragically, instances of suicide have been reported.”

As to any ‘next steps’ after the sought suspension and review, which are both time-pressured due to HMRC’s loan charge deadlines, Sir Vince suggests it is to make the Loan Charge prospective, not retrospective.

“It [currently] amounts to a sizeable tax burden for people who had no reasonable expectation they would be financially liable when they entered into the arrangements . Removing the elements of the Loan Charge that pertain to years before the law received Royal Assent would resolve the most controversial  issues.”

'Serious conflict'

Sounding of a similar conviction, Mr Rosindell concludes in his letter: “The principle of retrospectively applying new legislation seems to come into serious conflict with the rule of law. How can it be right that one can be prosecuted for disobeying a potential future law?”

Ms Jenkyns agrees, writing in her letter “The retrospective nature of the charge is an erosion of statutory taxpayer protections. The Loan Charge breaks a trusted precedent of the tax system and basic principle of tax certainty.”

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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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