A debate on the new Loan Charge scheduled for Parliament
A dedicated Parliamentary debate to discuss the Loan Charge has been scheduled for next Tuesday, 20th November, from 2:30pm to 4:00pm, an event that will be closely followed by many contractors affected by the impending legislation.
After weeks of lobbying and pressure from affected taxpayers, the debate was secured by Conservative MP for Wycombe Steve Baker, a former chairman of the European Research Group. The debate will provide politicians with a dedicated forum to discuss the consequences of the loan charge which, it is believed, will result in bankruptcy for up to thousands of contractors who have previously used loan schemes to avoid income tax and National Insurance. Many of those affected believe that they were missold the schemes.
Affected taxpayers are now being urged by the Loan Charge Action Group (LCAG) to contact their MPs to encourage them to attend the debate. The timing could not be worse however, with Westminster currently in bedlam due to the furore over the Brexit withdrawal agreement.
The number of MPs to have signed an Early Day Motion requesting that the Loan Charge apply only to loans issued after 2017 (when the rules were published) rose to 101 this week with Labour MP for Canterbury Rosie Duffield being the latest MP to show their support. Mr Baker has not yet signed the EDM.
The Loan Charge introduced at Budget 2017 will charge income tax and National Insurance to outstanding loan balances accrued using tax avoidance schemes that sought to defer income payments via trusts and other intermediaries. The legislation will take effect on April 6th 2019 and for some affected taxpayers, will have the result of charging many years’ tax bills in one go. HMRC have said they will allow taxpayers earning less than £50,000 annually to pay the amount owed over 5 years, if they have stopped engaging in tax avoidance. Individuals earning more than this will need to negotiate with HMRC on a case-by-case basis.
The controversial legislation has been the subject of several Parliamentary Questions already which have been met with firm responses by Treasury ministers, indicating that it is highly unlikely that the legislation will now be amended or repealed – the Treasury’s position being that the arrangements never worked and the tax must be paid to maintain a fair system. Contractors and legal experts continue to dispute this, and will be hoping that the coming debate further highlights to the Government the damage that this legislation will cause when it comes into effect next Spring.
16th November 2018.