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Boris gives green light to loan charge

Boris gives green light to loan charge review

Boris Johnson has announced a review into the loan charge after being challenged on Prime Minister’s Question Time. Conservative MP for Aberdeen South, Ross Thomson, asked the conservative leader what action the government was taking to address the controversial issue, which has caused thousands of contractors serious distress.

The PM came under pressure from campaigners to make good on comments made during his leadership contest. While running for PM, Mr Johnson said the loan charge needed ‘a proper independent review’. This is the view he’s held since being a backbencher when Mr Johnson was one of 50 Conservative MPs who signed a letter to Philip Hammond urging him to announce an immediate suspension of the tax.

This led many contractors to hope that steps would be taken to abolish the charge under his leadership. Although the PM has been busy with Brexit, a number of Mr Johnson’s allies have publicly demanded action from the PM about the loan charge. Last month, Iain Duncan Smith and Mr Alex Thomson both publicly criticised Mr Johnson for not yet honouring his promises on the tax, calling the loan charge an ‘injustice that had to be put right’ and pledging to keep the pressure on the PM.

A previous review in March was criticised as a ‘whitewash’ by campaigners, when the government simply confirmed the legitimacy of the charge and stated that it was based on ‘sound legislation.’ The charge affects as many as 50,000 people who used loan-based tax schemes. It requires them to pay up to 20 years of tax in one financial year and has been attacked for its devastating financial impact on those involved.

On Tuesday campaigners held a candlelit vigil outside HMRC’s Whitehall office, which was attended by family members of two individuals facing the charge who had taken their own lives. Public protests were also held outside parliament on Wednesday morning, before the prime minister’s announcement, reminding him of his previous comments to review and suspend the charge.

Although Mr Johnson’s response on Prime Minister’s Question Time wasn’t anticipated, he took the opportunity to make his announcement, acknowledging that many of his constituents had raised the matter, commenting: ‘It is a very, very difficult issue and what I have undertaken to do is have a thorough review.’ On Wednesday 11th, it was confirmed Sir Amyas Morse, Chief Executive of the National Audit Office (NAO), will lead an independent review into the loan charge.

The review, commissioned by the Chancellor, Sajid Javid, will consider whether the policy is an appropriate way of dealing with disguised remuneration loan schemes. The Treasury has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self-Assessment deadline.

With the deadline for voluntary disclosure on the charge already passed and another fast approaching, the Loan Charge Action Group has called for an immediate suspension of the charge pending the review. Around 100 MPs have also written individually to the Chancellor Sajid Javid calling for a suspension. However, independent tax consultants have stated that action in relation to current settlements is not suspended. This means that contractors shouldn’t stop making payments under agreed plans and are still required to provide information to HMRC by the September 30th deadline, unless they have already done so.

The review of the loan charge review will come ahead of the controversial off-payroll changes scheduled for implementation next year. While these two taxes are being heavily enforced by HMRC, negative press surrounding the government’s heavy handed attempts to increase their tax revenue at the contractor’s expense are meeting with increasingly public denouncements. In the majority of IR35 tax tribunals, HMRC have been defeated, casting further doubt on their methods.  Although the review marks a step in the right direction, contractors will no doubt be hoping for further affirmative action that protects their statutory right in the future.

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