MPs brand 2019 Loan Charge ‘unacceptable’

The MP who has forced the government to review the 2019 Loan Charge has spoken up about why the April tax should have its retrospective element removed.

Sir Edward Davey says the government was right to introduce the charge for the purposes of stopping “future abuse”, meaning it should have force from Budget 2016, but not before.

“The loan charge, as introduced, offends against the rule of law,” the Liberal Democrat MP said, referring to its applicability to loans made as far back as April 1999.

“It is the sort of taxation that led the barons to rebel against King John and gave birth to Magna Carta. It is simply not acceptable for a government to introduce a law that makes illegal something someone did years ago, when that action was considered legal.”

Not only was it considered lawful at the time, but it was actually encouraged and advised by  a range of parties, ranging from scheme providers to professional tax advisers, MPs point out.

“One of my constituents, an IT contractor, was advised by his own accountant,” said Scottish Conservative MP Luke Graham.

Another signatory of Sir Ed’s now-accepted clause, the SNP’s Tommy Sheppard said: “The real culprits in this are not the individuals who were conned and duped by professionals into taking out these schemes and now face bankruptcy, but the firms that designed and sold them the schemes in the first place, some of which are still operating.”

But the MPs are even more exercised by the fact that on top of the loans being both lawful at the time, and encouraged or advised by professionals, HMRC is refusing to accept reasonable settlement offers.

“One of my constituents, who worked as an IT professional in the FinTech industries, is being pursued for £900,000 by HMRC for the loan charge,” revealed the Conservatives’ Anne Main.

“He had been advised that what he had done was lawful and he considered it to be so. He told me, worryingly, that he tried to settle the case with HMRC for about £700,000, but that had been rejected.”

The Tory MP for St Albans concluded that, despite HMRC traditionally making negotiated settlements, it seems “this particular group of people are being treated very unfairly” by HMRC.

And Sir Ed Davey believes that if a ‘reasonableness’ test, included a proposed new section of the finance bill, gets applied to the loan charge, any retrospective tax collection will be prohibited.

“HMRC knew about these tax schemes for years and took no action,” he said. “Let us remember that these people -- our constituents -- were given professional tax advice and behaved in a way they thought was right and lawful at the time.”

Speaking in the House of Commons, Mrs Main said: “The fact that people cannot negotiate a reasonable settlement even though they acted in good faith at the time, and are being pursued to the point of the destruction of their careers, homes, family lives and marriages, is completely unacceptable.”