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UK – MPs debate Loan Charge and Off-Payroll legislation, but water leak forces early closure of Parliament

05 April 2019

MPs met yesterday in Parliament to debate and voice their concerns about Off-Payroll rules as well as the impact of the Loan Charge on their independent contractor constituents, however a conclusion to the debate was abandoned due to a water leak in Parliament.

The Loan Charge, first announced in 2016, targets those who used so-called disguised remuneration schemes to avoid tax as far back as 1999. HMRC aims to recover losses from the arrangements as contractors have to either settle their tax affairs or face penalties by the deadline, which is set to come into force today.

HMRC says the Loan Charge policy is expected to bring in £3.2 billion and it is estimated that 75% of this will come from employers, and 25% from individuals.

During yesterday’s debate there were calls to delay the implementation of the deadline but the water leak occurred before any resolution was agreed upon.

Earlier this week, The All-Party Parliamentary Group on the Loan Charge published their Loan Charge Inquiry report. The report documents the history of loan arrangements and the reasons people entered into such schemes, and examines the conduct of HMRC and the Treasury.

The group wrote an urgent letter to MP Mel Stride following the debate yesterday, requesting a six month suspension of the charge.

While many MPS criticised the Loan Charge, many also called for a change in leadership within the HMRC as well as the establishment of an independent review led by an experienced tax judge.

Dave Chaplin, CEO and founder of contracting authority ContractorCalculator, commented, “Clearly there is now unanimous cross-party consensus that the Loan Charge breaches the rule of law and is retrospective. For years the victims of these schemes have been sitting on Loan Charge Death Row, and both HMRC and the Treasury have no compelling reasons why they should not now be set free.”

“The Loan Charge is having a devastating impact on some contractors who are the victims in all of this, unwittingly having entered such schemes believing they were legitimate. MPs have told of constituents losing their homes, facing bankruptcy and losing their livelihoods and, in some cases, tragically, their lives,” Chaplin said.

MPs also raised issues concerning Off-Payroll rules including public sector non-compliance, challenges to HMRC’s Check Employment Status for Tax tool, the impact of the proposals on workforce mobility, and the need to align employment status in tax and employment law.

Julia Kermode, Chief Executive of the Freelancer & Contractor Services Association, commented, “I was pleased to hear MPs debating the loan charge and the Off-Payroll legislation in Parliament yesterday. Both are highly contentious topics and are having a devastating impact on the flexible workforce.”

“The Government should take note of the impact the reforms have had on our public services and think twice before rolling out the same legislation into the private sector when we will see even more damage being done as the flexible economy along with UK plc will be hard hit,” Kermode said.

Last year’s fall budget announced the delay of Off-Payroll working rules to the private sector until April 2020.

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