Lords speak out against Loan Charge
Amendments to the 2019 Loan Charge garnered further parliamentary support last week during an impassioned speech in the House of Lords by Conservative peer Baroness Noakes.
Baroness Noakes was appointed to the Economic Affairs Finance Bill Sub-Committee in September, which is the Lords’ sub-committee that scrutinises the Budget and corresponding finance legislation. She said her work on the sub-committee has brought to her attention the “personal misery and havoc” that the Loan Charge is creating:
“A demand for tax on 20 years’ income has come as a massive and unsustainable shock to many. I have no doubt that many people were foolish. What is very clear from the cases I have seen, however, is that the individuals concerned have spent the money on living expenses. They would find it difficult to pay one year’s worth of tax, let alone 20 years’ worth. Faced with HMRC’s demands, many now face losing their homes. Some will opt for bankruptcy. The Government knew this when the legislation was enacted. Their December 2016 impact statement chillingly stated:
“‘The Government anticipate that some of these individuals will become insolvent as a result’.
“That is now coming to pass.”
The Baroness noted an unexpected “deluge of evidence” received by the sub-committee revealing that some affected taxpayers are suicidal and that personal relationships have been destroyed, asking if the cure is indeed worse than the disease. “I hope there is a beating heart somewhere in the Treasury”, she said.
Lady Noakes, a chartered accountant and KPMG partner for 17 years, was scathing about how the measure passed through the Commons without objection, saying that the legislation was not scrutinised in detail and the impact on affected individuals not explored at all. She said the Financial Secretary and his opposite number just discussed tax avoidance generally instead: “The provisions found their way into law with ease.”
The House of Lords has been prohibited from amending or blocking financial legislation since 1911.
Baroness Noakes’ sentiments were echoed by fellow sub-committee member Baroness Kramer (Lib Dem), who also noted the Early Day Motion calling for the Loan Charge to be revised so that it only applies to loans issued after April 2017, which now has the support of more than 100 MPs.
“These are ordinary people such as hospital cleaners, social workers and nurses, who found themselves moved out of their normal employment and did not have the scope or understanding to realise that they were being put into tax-fragile arrangements when they were moved over to work as contract workers. I ask the Minister to take this back.”, she said.
As Lady Noakes pointed out, if the Loan Charge were to be amended it could leave a gaping hole in the public finances: “[the loan charge] is thus not an insignificant part of the fiscal arithmetic underpinning the Budget”. This leads commentators to suspect that the law is now unlikely to be changed, although tens of thousands of affected contractors continue to lobby the government.
In October, Financial Secretary to the Treasury Mel Stride MP refused to appear before the sub-committee to be grilled on the Loan Charge, despite being cited the Ministerial Code by chairman Lord Forsyth of Drumlean.
The Loan Charge will be subject to a dedicated debate in Parliament this Tuesday, 20th November at 2:30pm.