Johnson allies urge him to deliver on promise of Loan Charge inquiry

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A key advocate of the repeal of the 2019 Loan Charge, who is also a Conservative backbencher, has revealed the extent of Boris Johnson’s previous contempt for the controversial contractor tax, which seeks to levy a charge on historical payments made by users of disguised remuneration tax avoidance schemes – a significant proportion of whom are contractors.

Talking to the Financial Times, Ross Thomson, vice-chair of the Loan Charge All-Party Parliamentary Group (Loan Charge APPG), told the newspaper that Mr Johnson, who as Prime Minister has received numerous letters from Parliamentary colleagues lobbying for a review of the Loan Charge, was said to be so impassioned by the “unjust” contractor tax when speaking to Mr Thomson as a backbencher that he signed a letter calling for the suspension of the charge to then-Chancellor Philip Hammond on the spot.

The letter was also signed by Dominic Raab and Grant Shapps, both of whom have subsequently been promoted to Cabinet-level positions by Johnson, and also two ministers who attend Cabinet meetings, Esther McVey and Jo Johnson.

Johnson committed to a review of the Loan Charge during a Conservative leadership contest hustings event in July, saying “it needs a proper independent review” – but since becoming Prime Minister last month has not mentioned the policy, any tax relief or other payments for the tax year again. Key allies of Johnson are now urging him to make good on his promise to suspend the Loan Charge, as important deadlines approach for disclosure and tax payments for the tax year.

Those self-employed people who contacted HMRC before April 5th to take up the tax authority’s much-criticised settlement opportunity, which required taxpayers to waive their statutory rights to appeal, have until August 31st to disclose their qualifying loan balances or risk facing the Loan Charge payments in full.

Taxpayers who chose not to participate in the settlement plan have until September 30th to give HMRC information about their outstanding loans, estimated taxes and deductions. If they don’t do so, or if the information provided is inaccurate or incomplete, they face an initial penalty of £300, followed by penalties of up to £60 a day for a maximum of 90 days. HMRC may also levy penalty payments of up to £3,000 for each inaccuracy “deliberately or carelessly included”.

Anyone paying the Loan Charge outside of the settlement opportunity or tax deadlines will also need to provide the requisite information via a self-assessment tax return. If they do not normally submit a return, the deadline for registering for self-assessment is October 5th. Failing to register into the self-assessment system in time could provide HMRC with a further chance to levy penalties.

Mr Thomson, who has met with Mr Johnson’s policy team, said they agreed the charge was “retrospective and wasn’t a good policy”. He is still hopeful that the government will change course for these estimated taxes but told the Financial Times that he was disappointed it had not yet done so.

“Commitments have been made, people’s expectations and hopes have been raised,” Mr Thomson said. “Boris does need to act on this. We’re not going to be quiet. The government doesn’t have a huge majority.”

Iain Duncan Smith, the former Conservative leader who was a key supporter of Mr Johnson’s leadership bid and has been a staunch loan charge critic, told the FT: “He [Johnson] signed the letter that it was unjust and unfair and against the rules of natural justice before he even stood in the campaign. I am calling on him to deliver on what he said.”

Mr Duncan Smith added that he was “ashamed” that his government had not yet suspended the policy or the tax payments on account. Mr Duncan Smith, who voted for the 2017 Finance Bill, which made the loan charge law, also blamed “Treasury ministers” whom he said had given assurances to Tory MPs that the policy “would not be retrospective”, and HMRC which, he said, had launched a “money grab”.

In a sign that any decision to suspend the Loan Charge payments for this tax may come at a key Treasury announcement, a government spokesperson said: “The PM and his team of ministers will be setting out more details on their planned policy agendas over the next few weeks and months. As always, decisions on tax are for the chancellor to announce at fiscal events.”

20th August 2019.