More than two hundred Parliamentarians have now signed an open letter to incoming HMRC minister Jesse Norman. It is written urging him to suspend the Loan Charge immediately in order to conduct an independent review of the policy for getting residents to pay taxes.
The signatories include the leaders of three political parties, thirty privy counsellors and at least sixty-three former members of government, including thirteen former Cabinet ministers.
The threshold is significant due to the convention of collective responsibility. Neither current members of the Government, nor members of the Opposition frontbench can independently oppose the policy. They represent at least 250 of the 650 MPs that sit in the House of Commons.
Given that the seven Sinn Fein MPs do not sit in the Commons, and only four of the signatories of the open letter to Norman are members of the House of Lords, the number of signatories to the letter indicates that more than half of the backbenchers in the House of Commons now publicly support a halt to the Loan Charge.
The outgoing leader of the Liberal Democrats, Vince Cable, has shown his support, in addition to Lib Dem leadership hopeful Sir Ed Davey. He also chairs the All-Party Parliamentary Group on the Loan Charge, and was the sponsor of an amendment to the Finance Bill that compelled a Treasury review of the policy. That review was later downgraded and branded a “whitewash” by furious MPs.
Caroline Lucas, the co-leader and only MP of the Green Party has also signed the letter to Norman, as well as leader of the Co-operative Party Anna Turley. Former Conservative Party leader and Cabinet minister Iain Duncan Smith is also among the signatories.
Support for a delay to the Loan Charge is supported across all of the major political parties, with nearly half of Conservative backbenchers and over half of Labour’s backbenchers signing the letter. Only one of the Liberal Democrats’ twelve MPs is yet to sign the letter. MPs from Change UK, the DUP, the SNP and Plaid Cyrmu have also shown their support for the initiative. Seven independent MPs have also signed the government open letter.
The level of support from Conservative backbenchers is unprecedented. Key figures such as former leadership candidates David Davis, Dominic Raab and Esther McVey, former Conservative Party Chair Grant Shapps, and ex-Cabinet ministers Justine Greening, Caroline Spelman and John Whittingdale all have signed the letter to Norman criticising the harsh tax policy.
Nine members of the 1922 Committee of Conservative Backbenchers have also signed the open letter, including the current joint acting chair and ex-Cabinet minister Dame Cheryl Gillian. The letter was also signed by former Committee chair Sir Graham Brady, who stepped down in May to launch a party leadership bid that subsequently failed to get off the ground.
The chair of the Intelligence and Security Committee, QC and former Attorney General Dominic Grieve, is also a signatory.
Forty-two of the signatories have at least twenty years’ experience in the House of Commons, with Commons grandees such as Dennis Skinner, Frank Field, Anne Clwyd and Bill Cash, and Winston Churchill’s grandson Nicolas Soames all registering their endorsement of a delay to the Loan Charge.
Whilst some signatories to the letter have only a few years’ Commons experience, the average amount of years in the Commons per signatory is nearly twelve, indicating the breadth of Parliamentary experience in those opposing the policy.
A handful of signatories have also served on the Commons’ or Lords’ finance select committees.
The 2019 Loan Charge closes down a tax loophole that allowed tax-free payments via intermediaries such as trusts in the form of loans. It disproportionately affects contractors, self-employed people and freelancers.
Many of these contractors were introduced into loan schemes via umbrella company arrangements intended to avoid IR35.
The main criticism of the Loan Charge is that it can be applied to transactions that were made using these tax avoidance schemes up to twenty years before the charge became law.
As a result, in its opponent’s view, its quasi-retrospective scope undermines taxpayer certainty. Critics have compared it to introducing the Congestion Charge in central London and then retrospectively charging anyone who drove into the zone during the twenty years prior to its introduction.
The retrospective effect of the Loan Charge also means that taxpayers who used loan schemes and declared the usage on their tax returns, had their tax returns approved by HMRC and the tax years “closed” for the purposes of the Taxes Management Act 1970 can now be charged tax again for the years in question. These tax rules give HMRC a “second go” at collecting the total tax where they failed first time around. Statutory tax payer protections and HMRC time limits are designed to prevent this sort of retrospective taxation on income tax liability.
Most MPs agree that tax avoidance needs to be tackled. But, in the case of the Loan Charge, many MPs now feel that the measure is subject to be punitive as opposed to corrective. This may be a complete breach of HMRC’s charter and, as such, an abuse of their powers.
Jesse Norman joined the Treasury following Andrea Leadsom’s resignation as Leader of the House of Commons in May, when former Financial Secretary of the Treasury Mel Stride was promoted into her former role. The Loan Charge represents one of his first challenges, and perhaps may prove to be his most difficult.
28th June 2019.