Depending on which reports you pay attention to, the Loan Charge has left anywhere between 50,000 and 100,000 contractors and agency workers with retrospective tax bills that can amount to well over £100,000.
So the arrival of the Loan Charge on 5th April was met with dismay and resistance from thousands of contractors, who were often mis-sold these ‘tax-free’ loans as a solution to IR35 up to 20 years ago.
Now, over 100 MPs have weighed in on the debate. First of all, the Loan Charge All-Party Parliamentary Group (APPG), in which MPs and other stakeholders discuss the issue, was particularly critical of HMRC in a report published a few days before the charge took effect.
Among other things, the review called on the government to delay the incoming charge by six months, suspend all settlements and hand the individuals affected statutory rights to challenge cases. It also recommended an independent review into the Loan Charge and outlined the importance of a 24-hour support telephone line, which isn’t surprising given the emotional toll the issue is having on contractors.
Media reactions to the Loan Charge
The reaction in the media suggests the review made a compelling case. It has also been said that it encouraged as many as 129 MPs to sign a letter to The Financial Secretary to The Treasury, Mel Stride MP, urging him to immediately delay the introduction of the charge.
Contractor lobbying body, IPSE, has had its say on the matter too. Like MPs, the association also wrote a letter to the Chancellor, asking the government to pursue the promoters of these non-compliant loans. The association’s Deputy Director of Policy and External Affairs, Andy Chamberlain, reiterated IPSE’s stance in a recent blog:
“By focusing on those who created, enabled and profited from the use of the schemes, a more reasonable approach could be applied to the individuals. Currently, it seems the government has taken the view it should be the other way around.”
However, such pressure hasn’t paid off. Not yet anyway. That said, in the days since the arrival of the charge, national media has raised greater awareness of the issue with regular reporting. The Telegraph, for example, recently wrote that thousands of contractors are yet to receive a settlement offer from HMRC because of a ‘backlog at the tax office.’
Government U-Turn Support
Support from politicians for a government U-turn over the Loan Charge could grow further. At the time of writing, MPs are set to continue debating the issue in Parliament in the coming days.
Right now, however, contractors who used disguised remuneration schemes and are yet to settle with HMRC could be penalised if they fail to report the details to the taxman before 1st October 2019. These individuals could face an initial £300 penalty, which increases by £60 per day up to a maximum of 90 days. For each deliberate or careless inaccuracy, contractors can be fined up to £3000.
While HMRC has come under attack because of the way it has handled the loan charge, it is understood that the taxman will take into account individuals who have a reasonable excuse for not settling. On its website, the government said: “We also want to help people who have used these schemes to get their tax affairs right - there are a range of flexible payment options for those who may have difficulty paying what they owe.”
In the meantime, and as MPs voice their concerns to HMRC over the introduction of the Loan Charge, those worried about how to pay this retrospective tax are being encouraged to contact HMRC to discuss their options. Contractors who haven’t received a letter from the taxman and who think the charge might apply to them are also being advised to get in contact.
Visit our 2019 Loan Charge guide for more information on the Loan Charge; what it is, why it’s been brought in and who it affects.