Warning of multiple job losses if Sunak fails to act on loan charge

MANY jobs could be lost if Chancellor Rishi Sunak fails to order HMRC to accept new settlement proposals for thousands of people facing the loan charge, an MP has warned.

Labour MP Jon Cruddas has written to the Chancellor urging him to “seriously consider” the proposals put forward by the Loan Charge All Party Parliamentary Group (APPG).

In a statement on social media, Mr Cruddas said: “Changes to loan charge legislation could make all the difference for those on the verge of bankruptcy or facing the closure of their business.”

The loan charge was introduced in response to the Treasury’s concerns about “disguised remuneration schemes”, which involved individuals being paid through loans, usually via an offshore trust in a low or no-tax jurisdiction, which they did not have to repay.

Evidence collected by the APPG found that, in the vast majority of cases it examined, these arrangements were not entered as “aggressive tax avoidance”, but after professional advice.

A “substantial number” of people, especially in the public sector, did not know their pay involved loan payments, the MPs said.

The APPG has called on the Government and HMRC to offer a “genuine and reasonable” opportunity for those who used loan schemes, which would allow many people to reach affordable settlements.

It would also allow HMRC to collect some of the tax it claims it is owed, the MPs said.

The APPG, one of the largest in Parliament, has also called for a delay of the loan charge declaration from the end of next month to the end of January 2021, to allow a six-month period for such voluntary settlement agreements to be agreed.

In his letter to Mr Sunak, Dagenham and Rainham MP Mr Cruddas states: “As a member of the Loan Charge APPG, I fully endorse the settlement proposal which would provide an opportunity for those facing the charge to pay an income tax rate of 10 per cent on loan balances as a full and final settlement.”

“In light of the Covid-19 pandemic and its unprecedented impact on our economy, the Government should be looking at ways to mitigate the number of individuals facing bankruptcy and businesses closing down.

“A delay of six months could make all the difference, helping to avoid much of this damage which would undoubtedly lead to many job losses.”

A Government spokesperson said: “The Loan Charge was introduced to tackle disguised remuneration (DR) tax avoidance schemes.

“It is the view of HMRC that loans made through these schemes have always been taxable. The Government will continue to tackle this and other forms of tax avoidance vigorously.

“HMRC has to be fair to all taxpayers, and this includes those who have already settled their use of DR tax avoidance schemes with HMRC or have never used tax avoidance schemes in the first place.”

The spokesman added: “As set out in HMRC’s litigation and settlement strategy, they will only settle for an amount that is consistent with the law.

“The Government has already extended the deadline for individuals affected by the Loan Charge to submit their 2018/19 Self Assessment tax return to September 30, 2020.”

A delay of six months could make all the difference. Extract from MP Jon Cruddas’s letter to Chancellor Rishi Sunak.