Raymond Doherty 12 Aug 2019 11:34am

Cable backs independent loan charge review

Former Liberal Democrat leader Sir Vince Cable has called for an independent review of HMRC’s controversial loan charge

In a letter to newly-appointed chancellor Sajid Javid, Sir Vince warned that if there was not a review it would risk “further suicides” related to the charge as a result of “bankruptcies, damage to livelihoods and loss of homes”.

“This is a punitive measure and - particularly because it extends 20 years back - it is unfair. The legislation primarily targets the individuals rather than the advisers and companies that sold or encouraged the schemes (several of whom it would be difficult to pursue as they are either offshore or no longer exist).

“The impact is substantial for many of the affected families and settling with HMRC would be life-changing. They are contractors and freelancers who do not have regular protections and benefits such as holiday and sick pay or pension contributions, and are more financially vulnerable,” wrote Sir Vince.

The loan charge came into effect on 6 April and applies to anyone who used so-called disguised remuneration schemes. The legislation added a 45% non-refundable charge on all loans advanced through the schemes – some of them dating back to 20 years ago – unless the individual had agreed with HMRC to settle their tax affairs by midnight on 5 April.

However, many of the 50,000 people caught up in the issue are low paid, such as nurses and social workers, and were persuaded by their employers to join the schemes. Many of them are facing bankruptcy and one person has committed suicide as a direct result. Yet, at the time the schemes were set up, HMRC did not question their legitimacy.

“There have been accounts of HMRC aggressively pursuing people, putting significant pressure on individuals,” Sir Vince said. He asked Javid, “If the arrangements were as your department has argued, always illegal, why was it necessary to enact new legislation? And if tax was liable, why was HMRC unable to show that in an enquiry?”

A number of MPs took up their cause but pleas to defer the loan charge introduction until an independent review had been held fell on deaf ears. A Treasury review of the campaign confirmed that the government would be implementing the charge on schedule.

Recently a group of MPs – David Davis, Dame Caroline Spelman, Ross Thomson, Bob Neill, Philip Davies, Chris Green, Adam Holloway, Andrew Selous, Richard Benyon, all members and supporters of the All-Party Parliamentary Loan Charge Group – wrote to both of the Conservative Party leadership candidates asking them to agree to suspend the charge, to commission an independent review and to remove the retrospective element.

In his leadership campaign, prime minister Boris Johnson promised a review of the charge.

Last month Financial Secretary to the Treasury Jesse Norman faced a grilling from the House of Lords’ Economic Affairs Committee over the charge.

Baroness Kramer questioned the five-year period given to repay the loan charge, saying that it “allowed death over five years, rather than death over three”.