Sir Keir Starmer is on the verge of doing the right thing; officially opposing the HMRC loan charge that’s wronged so many workers

It’s been over three years since a group of ordinary people, who realised they faced potential ruin from HMRC and its policy of Disguised Remuneration (DR), formed the Loan Charge Action Group.

Others in the same boat then joined and the campaign against the draconian Loan Charge began. 

But campaigning, like many things in human existence -- politics, sport, war -- involves a huge effort. Faced with an ever-changing situation, progress and setbacks are inevitable. To achieve success involves a series of small victories, moving forward, if sometimes only a few steps at a time.

One such step forward for the campaign against the Loan Charge – and we hope a genuine and significant one – is the new publicly announced position by Sir Keir Starmer, leader of the Labour Party, Her Majesty’s Official Opposition, writes Steve Packham, spokesperson for the Loan Charge Action Group.

Our delight at this significant step forward

Following relentless and hugely effective communications from the highly regarded tax barrister, Keith Gordon, who is a constituent of the Labour leader, Sir Keir has now instructed his shadow ministers to meet with Loan Charge campaigners - who are, of course, victims of the HMRC policy. And we’re delighted that this is now being facilitated.   

We at LCAG wrote to Sir Keir following the party’s change of position and, in response to our letter, a Labour spokesperson stated: “Ministers cannot ignore the distressing cases where lives have been ruined and they must ensure HMRC approaches this issue in a fairer and more effective manner, while pursuing the architects of the schemes.”

This is very heartening and testament to the power of campaigning – by Mr Gordon, by other constituents of Sir Keir’s and by LCAG.

Consistent, and courageous

It is a very positive development that the opposition have now pledged to work with campaigners and to listen to the reality of what is both a scandal and an injustice. There has been consistent and courageous support from many individual Labour MPs but before now, seemingly little official Labour party interest in defending those caught in the Loan Charge Scandal.

Only a year ago, droves of people were devastated when New Clause 31 in the Finance Bill, which would have restored most people’s tax position to the law as it stood at the time they were using the loan arrangements, failed to be called to vote because Labour decided to abstain. It seemed strange that a former Director of Public Prosecutions (Sir Keir) didn’t recognise the injustice in a retrospective law that takes away the basic right of a taxpayer – a citizen – to challenge HMRC in court.

Always clear? The facts suggest not

Thankfully, this incoming meeting gives us a golden opportunity to explain to the Labour front bench just how the loan charge clearly undermines the rule of law. Labour ministers need to hear first-hand about the sheer cruelty of a policy that has caused suicides over HMRC bills for tax which have NEVER been legally proven to be due. Consider -- a recent FOI request revealed that HMRC have 161,000 open enquiries relating to DR arrangements. Well if 'the law was always clear' (as the government has claimed), why have HMRC failed to take action over many of these outstanding enquiries, in some instance for up to almost TWENTY years?  These are things which should cause great concern to the Labour frontbench.

Dear Sir Kier...

Our message to Sir Keir and his shadow ministers is simple.

Firstly, that what many have now called the ‘Tory Retro Tax’ is an affront to basic principles of justice, in that it overrules people’s basic right to legally challenge HMRC over their tax demands. As respected commentators have said, “either they win, or they win” because HMRC designed the loan charge so that regardless of any tax tribunal cases, they can still demand payment.

Secondly, we’ll be showing the Labour frontbench that whatever spin is put on it, the stark reality is that HMRC – and the Conservative government – are not asking for a single penny of the disputed tax which HMRC claim is due from the many rich promoters (who made vast sums of money promoting and operating the schemes now subject to the loan charge). Ordinary taxpayers, hard-working people paid as much as 15% of their earnings as fees to these companies for managing their payroll arrangements, yet the loan charge levies this --  in addition to high rate income tax and inheritance tax (which shouldn’t be charged on income), plus back-dated interest, solely on those who used these arrangements. And of course it doesn’t ask for a single penny from those who recommended and operated the schemes.  Significantly, some companies and individuals who made huge sums from operating these schemes are closely linked to the Conservative Party. So, it really is time Labour asked why ordinary contractors, freelance workers and locum workers are being hit with unpayable life-ruining bills, while the promoters have faced a lot of tough talk but no action. The parallels with the recent PPE Medpro scandal are pretty clear.    

An unresolved mis-selling scandal

Thirdly, we’ll be telling Labour shadow ministers that the overwhelming majority of people facing the loan charge (or those who have settled to avoid it) are not only victims of a retrospective change to tax law, but also victims of mis-selling. This mis-selling took the form of what people were told but also, and perhaps even more so, of what they were not told. People, who of course entered these arrangements due to Labour’s flawed ‘IR35’ policy, were told that the arrangements were tax law-abiding and HMRC compliant, even that they were QC-approved. At the same time, people were not given any sense of the risk of any future action from HMRC. The proof? A recent survey of people facing the loan charge, conducted by the Loan Charge APPG (now the Loan Charge and Taxpayer Fairness APPG) found that 99% of people were explicitly told that the arrangements were legitimate/compliant at the time they entered those schemes. 

As the cross-party MP group’s report on the survey concludes: “It is clear that people were mis-sold the schemes, as they were never given any sense of the risk of HMRC open enquiries or their seeking to close them down.

“People were given the impression that the schemes were entirely compliant with tax law and that there was nothing to worry about, even though advisers and promoters knew that government and HMRC wanted to stop the operation of schemes and that the direction of travel, politically, was that they would do so”.

Once the Labour Party properly engages with this issue and scandal, in the way campaigning Labour MP Ruth Cadbury did, surely they must see that this Conservative policy is one they must properly challenge and oppose.  

Back the 117

Our suggestion to Labour? The party should back the calls made now by 117 Parliamentarians, to support a fair, final and affordable resolution, to ensure a solution that prevents bankruptcies and suicides, but that also allows HMRC (and indeed Parliament) to move on from the past three years of attrition by closing the 161,000 open enquiries, having achieved the goal of raising £3 billion pounds from the expected £3.2 billion the measures were designed to collect.

Ultimately, both HMRC and HMT know that the APPG survey revealed that many people simply cannot pay the sums demanded. You cannot collect what people simply do not have or cannot afford and to enforce will lead to more lives ruined. This is not only fundamentally inhuman and cruel, but also should make no logical sense -- even to those as bloody-minded as loan charge poster boys Jesse Norman (of HMT) and Jim Harra (of HMRC), both of whom have suffered considerable reputational damage from their attempts to deny the reality of the effects of the Loan Charge. Bankruptcy benefits no-one.

We also believe that shadow ministers should look at the recent statement by the TUC on the murky world of umbrella companies, some of which facilitated or still facilitate promoters as well as engaging in unethical practices, such as withholding holiday pay. 

More tough talk

Despite talking tough (again), the reality is that the government has come up with nothing that will really stop the ongoing promotion of schemes. Not surprising, perhaps, considering the biggest nonsense of the loan charge is that it does not even apply to schemes entered into after April 5th 2019, which makes it both a profound failure as promoters continue to openly operate, but also discriminatory -- by hitting people only on one side of an arbitrary date.

Rather than tinkering around the edges as the government and HMRC are proposing, surely Labour should back putting an end to these schemes once and for all. Some of the same promoters (some with links to the Conservative Party) are still operating them now, right as you read this! We think that Labour under Sir Keir’s leadership should support changing the law so that if someone mis-sells such arrangements (or where people are put into them without their consent) then the promoter, not the victim of mis-selling, should become liable for any tax later deemed to have been avoided.     

The future

The current support of the Labour leader is another small campaigning success, yet each success is a mere part of the campaign to ultimately bring finality to this nightmare, whereby resolution to the whole loan charge issue can be achieved. So we need a stop both to the 161,000 open enquiries (many of which have remained unfairly open for years) and to the chillingly sinister Accelerated Payment Notices, which overturn the basic principle of ‘innocent until proven guilty.’

We sincerely look forward to working with the Labour Treasury team, as well as the Loan Charge and Taxpayer Fairness APPG, including the many courageous Conservative MPs like David Davis and Sir Iain Duncan Smith, who have consistently opposed the loan charge and helped challenge their own government’s total mishandling of it.

On behalf of contractors caught by the charge, and on behalf of their families too, we will keep campaigning, both as an action group and as a community, so we still urge all individuals who are affected by HMRC’s unwieldy DR policy to join us in calling out this abject injustice. Whether you face the Loan Charge, whether you have settled to avoid it, whether you have found yourself facing HMRC action for schemes post April 2019 or whether you face endless open enquiries and APNs. There needs to be a resolution for everybody. Email us here because you shouldn’t have to stand alone, rather let’s stand together and fight for a fair conclusion to the loan charge scandal and a just, more accountable tax authority treating workers fairly. With Sir Keir’s help, let’s keep campaigning and push for another small victory as a step along the way to achieving resolution for the hard-working thousands and thousands, understandably aggrieved and unfairly suffering from this retrospective and plainly wrong HMRC policy.