Government must #STOPtheLoanCharge - a potential injustice that could damage the UK economy and destroy lives
Liberal Democrat Spokesperson for Work & Pensions Stephen Lloyd writes ahead of a #StoptheLoanCharge lobby day in parliament and calls on the Government to amend the 2019 Loan Charge within the Finance Act 2017 so it does not apply retrospectively.
This Wednesday, 24th October, people from all over the country are coming to Westminster to join the #StoptheLoanCharge lobby day. When this legislation comes in next April, it could potentially damage the economy and public services, and will drive many people to the brink of despair.
The 2019 Loan Charge is a retrospective measure introduced in the Finance Act 2017 which reclassified thousands of contract workers as 'disguised employees' under IR35 tax legislation. The Charge potentially affects tens of thousands of contractors, freelancers and agency workers - including social workers, supply teachers, IT specialists, bank and locum nurses - who were recommended to become self-employed under umbrella companies by employers, professional advisers and employment agencies. A consequence of the legislation is that many people will be hit with unforeseen bills of tens of thousands of pounds, and like most of us managing family budgets, they’ll simply not be able to pay without going bankrupt or selling their homes.
In numerous cases PAYE employment was never an option and in some the company or organisation, allegedly, insisted on such arrangements!
In addition, those affected who are now facing tax rates above the highest levels for employees, received none of the benefits of employment – no pensions, no sick or holiday pay.
Frankly I think this is unfair, and the Institute of Chartered Accountants in England and Wales has said the proposals from HMRC “contravene generally accepted notions of fairness, break the constitutional convention against retrospective legislation and impose tax charges in cases where taxpayers already had legal certainty that no tax was due”.
Everyone agrees we should pay our taxes but when the tax authorities pursue people for arrangements as far back as 20 years, which were legal at the time, were not challenged by the professional advisers and agencies recommending; this all brings our tax system into disrepute.
There are hardworking, honest people up and down the country who are now facing ruin, debt and bankruptcy as a result, including constituents of mine. That’s why I tabled Early Day Motion 1239 and I’m pleased nearly 100 MPs have already signed, making it the third best supported EDM in this parliamentary session so far.
Since tabling the motion, I’ve also been contacted by workers up and down the country. Some are already suffering with anxiety and depression, some are facing family breakdown, some are apparently also identified as a suicide risk. Of course, it was never the intention that people should suffer in this way, but they are. Leading political broadcaster and former Conservative candidate Iain Dale has already slammed the Loan Charge 2019 as “outrageous” and has said it is “a political crisis in the making” following an explosive interview with the Treasury Minister behind the policy, Mel Stride MP.
It has also emerged that it appears neither Treasury nor HMRC did a detailed assessment, failing to predict the impact the Loan Charge will have on those affected, on contracting in the UK, on large corporations reliant on skilled contractors and on the NHS, with doctors and nurses caught by it. HMRC even denied that doctors and nurses were involved, before later admitting they are. Frankly it’s a mess and an example in how not to make and implement policy.
For once, the solutions here are straightforward. The Government just has to amend the legislation so that the Loan Charge applies only from the passing of the Finance Act and does not apply retrospectively. That way, all contracted workers will know what arrangements need to be going forward and the Government will avoid damaging the lives of so many people.
I’ll be delighted to meet the Loan Charge victims and campaigners on Wednesday and, together with the support of many other MPs, we hope to make the Government listen.
Stephen Lloyd is the Liberal Democrat Spokesperson for Work and Pensions & MP for Eastbourne.