Ed Davey leads efforts to suspend loan charge enforcement

Today in the House of Commons, Ed Davey, as one of the proposers of a motion on backbench business day, will call on the Government to suspend enforcement of the 2019 Loan Charge.

HMRC is currently pursuing people who, as  contractors years ago, took part in perfectly legal schemes whereby they took their salary as loans from a company and therefore paid a lower rate of tax.  They now face bills for arrears of tax out of the blue. In some cases, it could be hundreds of thousands of pounds. These aren’t super rich people and what they were doing was absolutely transparent and above board at the time. They are now being pursued for tax in a way that they never expected.

Closing a loophole is one thing. Making it retrospective is another.

The motion for debate today says:

That this House expresses its serious concern at the 2019 Loan Charge which applies from 5 April 2019; expresses deep concern and regret about the effect of the mental and emotional impact on people facing the Loan Charge; is further concerned about suicides of people facing the Loan Charge and the identified suicide risk, which was reported to HMRC; believes that the Loan Charge is fundamentally unfair and undermines the principle of the rule of law by overriding statutory taxpayer protections; expresses disappointment at the lack of notice served by HMRC and the delays in communication with those now facing the Loan Charge, which has further increased anxiety of individuals and families; is concerned about the nature and accuracy of the information circulated by HMRC with regard to the Loan Charge; further regrets the inadequate impact assessment originally conducted; understands that many individuals have received miscalculated settlement information; calls for an immediate suspension of the Loan Charge for a period of six months and for all related settlements to be put on hold; and further calls for an independent inquiry into the Loan Charge to be conducted by a party that is not connected with either the Government or HMRC.

Ed has been at the forefront of trying to get the Government to think again and is chair of an All Party Parliamentary Group on the issue.

Last week, he outlined a series of key questions to HMRC:

The group asked HMRC 15 questions about its loan charge statements, including the convictions it has so secured so far in relation to payroll-loan arrangements; the legal precedent for the loan charge; and its statements about typical liabilities of those affected by the charge. It also questioned the department’s assertion that 75% of the anticipated £3.2bn in loan charge income will come from employers.

Davey, a Liberal Democrat who was energy secretary for the coalition government, also reprimanded HMRC and the Treasury for declining to attend an APPG evidence session last month at which the questions could have been answered.

“Parliamentarians need straight answers from ministers and civil servants in order to perform our role of oversight,” he said.

“HMRC and the Treasury have, so far, appeared willing to say whatever is necessary in order to justify the loan charge.

“It is telling that HMRC would not even attend our inquiry to answer questions in person and have also been caught out issuing misleading statements in an attempt to justify an unjustifiable policy.

“This is totally unacceptable and we now call upon Sir Jonathan Thompson to respond to our points properly and honestly.”

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10 Comments

  • Mark Seaman 4th Apr '19 - 10:53am

    Using fake loans as a means to reduce tax payments was never ‘perfectly legal’. It was always an attempt to circumvent the clear intent and letter of the law, as per all tax avoidance schemes. Ed Davey is being a dupe in arguing that people who used such methods should get away with paying less tax than those of us who were in PAYE. Referring to such schemes as loopholes shows a fundamental lack of understanding of the tax avoidance ‘industry’… p.s. I worked in HMRC and its predecessor organisations for over 20 years.

  • Lee_Thacker 4th Apr '19 - 11:23am

    So according to Ed Davey these people are not super rich and yet some are being pursued for hundreds of thousands of pounds in unpaid tax? That sounds odd.

    What were the payment terms for these “loans”?

    @ Mark Seaman – would love to hear more about how these “schemes” operate

    @ Ed Davey – I think I will be voting for Jo Swinson

  • Mark Seaman 4th Apr '19 - 4:02pm

    @Lee_Thacker
    To You and Me a loan is a payment that must be repaid, and will have some kind of repayment schedule… BUT, having an exact repayment schedule is not a must, apparently, so the schemes simply state that the payments COULD have to be repaid, and that therefore they are loans… except that the person receiving the payment, in reality, will never be asked to repay the money. It was Rangers football club that tried to use this system to pay their players and avoid paying tax, that particularly raised the profile of this dodge. As per many avoidance schemes there is either a lie or deliberate lack of honesty at the heart of it.

  • @Lee_Thacker
    One of the surprising aspects of this case was who were these employees (and their employers), it wasn’t so much your football players but people doing relatively normal jobs. Hence it isn’t odd for someone on a relatively modest salary to have clocked up £100,000+ of unpaid taxes over 20 years (compared to them taking the salary as normal wages subject to NI&PAYE).

    If it were the “super rich” the individual tax bills would be in the millions.

  • Philip Moss 5th Apr '19 - 12:48pm

    as the saying goes not in my name Mr Davey.
    Lack of tax paid means lack of services , schools, health, police et al.
    It could be seen quite easily that this was a tax evasion scheme.

  • Philip Moss 5th Apr '19 - 1:05pm

    As a follow up, What benefits did the employer, repeat the employer gain by this payment method? How did they reduce their costs? Pay the employee less? save on employer payments in some way? This should be followed up by Mr. Davey

  • how can a law be backdated when at the time is was not illegal. surely if the HMRC want to outlaw the use of this scheme then surely it should outline it from now. if we bought back Capital Punishment are going to hang everyone who has commited murder from 1964-2019. just another example of a greedy failing HMRC…Discraceful i know of people who are on suicide watch because of this and some have taken their own lives. immoral and illegal

  • These people were not, as some of the above comments suggest, employees they were contractors. The second paragraph in this post says they were paid a salary. Contractors are not salaried. Should some of these people have been classified as employees? They would then have been liable for national insurance contributions and so would the employers.

    Were some of the individuals directors or so-called shadow directors?

    Did the company auditors know about or comment on the situation?

  • Also instead of them going after the so called small person whose lives will be destroyed why don’t they focus their affords on global companies like Amazon. Do you think HMRC would have the balls to back date a legislation and go after them for a total which is probably a thousand times larger than this loan charge …… I don’t think so !!

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