The 2019 Loan Charge has been highly criticized for being unfair and causing financial hardships for many contractors.
Recently the president of the Chartered Institute of Taxation (CIOT), Ray McCann, has also put forth strong criticism against the legislation calling it the ‘worst retrospective legislation’ ever.
Mr. McCann addressed the Treasury sub-committee stating that the Loan Charge violates legal protections afforded to taxpayers in a recent statement. He said that the Government’s approach in investigating 12-years old taxation cases is highly contentious. The retrospective effect of the legislation takes away the assurance given by the parliament related to their past affairs.
Details of the Sub-Committee Meeting
During the Treasury sub-committee meeting, MP Simon Clarke asked whether it’s right to call the rule retrospective legislation. Mr. McCann replied that it’s not retrospective legislation, but the effects of the legislation are retrospective. The legislation does not make income taxable during the year it was received, instead later, causing hardships for the taxpayer, which is indeed unfair.
He also criticized the Government’s decision to give excessive powers to HM Revenue & Customs (HMRC) while addressing the issue at hand. The implication of the Loan Charge in regards to the laws of the country makes any criticisms made against the legislation valid.
Upon the question regarding the tax body’s view regarding the Loan Charge, Mr. McCann stated that CIOT objects to the legislation since it negatively impacts the certainty of the taxpayer. While the parliament has the right to occasionally take measures as egregious as the retrospective legislation when required, he added that the legislation should not be allowed to pass ‘willy-nilly’ without any kind of reproach.
Mr. McCann also stated that it was not easy to express sympathy for disguised loan schemes. The blame goes in part to those who have used these kinds of arrangements. They chose to close eyes to the fact they are getting tax advantages and also national insurance benefits by opting to go along with the promoters who had made claims that can be best described as ‘outlandish’.
When asked by Wes Streeting MP why these disguised remuneration schemes were popular, Mr. McCann replied that they were readily available and accessed. HMRC knew about such schemes and called it as ‘plug and play’ in which you just sign, pay the fees, and you are in. The explicit approval by the tax body was also the reason for the popularity of the scheme. No fixes were set in place to prevent contractors to use such schemes.