Loan Charge Action Group

[Calmbeforethestorm]

Using your MP

Dont just write to your MP, go and see him, and get him to write to the Treasury minister in charge of HMRC.

It cant be fair that they can go back 20 years,this normally only applies to fraud cases, they should not ne allowed to go back further than 6.The original legislation against Disguised Remuneration is in the Finance Act of 2010, its just taken this long to get to the loan charges as the final sledgehammer to crack the nut.

it seems to be working.

Pity they cant use a similar approach to sort Brexit one way or the other.!

[DeadDOTAS]

Can you all please go here and vote with "no" ?
https://www.theyworkforyou.com/wrans...914#g146722.r0


Many thanks!

[Scotslaw]

My letter to my MP

Here's what I wrote to my MP:

Dear NAME,

I have written to you before and you have kindly responded to my emails as well. So I am hopeful that this email will receive your attention in a similar fashion.

I work in financial services as a contractor and have been since DATE. It has not been an easy X years, I have to admit. There have been times of steady work, but also gaps in between contracts. A prime example is a gap of more than LONGEST GAP HERE months in 20XX.
In the X years since I started contracting, I have had XX months of gaps in contracts (an average of X months per year). It is a stressful existence, but of course, it's a risk I choose to take. I am proud to be a part of UK's skilled flexible workforce, which is essential for the public and private sectors.

I decided at the outset to work through a limited liability company to be tax efficient. This is an important counterbalance to the risk I take being self-employed and for not being eligible for any employment rights or benefits.

The reason I write to you today is twofold, but in both cases pertains to HMRC policies and legislation.

1. 2019 Loan Charge legislation:

The first reason is a new legislation HMRC is currently putting through the Parliament, pertaining to Employee Benefit Trusts. This targets people who are currently, or who at any point in the last 20 years used a tax saving arrangement involving disbursing income in the form of loans through a trust.
I was approached in 20XX by a company who sold me (or in hindsight, who mis-sold me) a service which promised me a legal and compliant means of taking home in excess of 85% of my income net of tax. I was promised that it was not only legal, but also that leading tax council (Robert Venebles QC) had personally attested and would continue to do so through his consultancy, the legality and legitimacy of the arrangement.

I was enticed by the prospect of a higher take-home income and being assured of the lawfulness, proceeded to use the arrangement for X months. I was soon alerted by a friend to the fact that such arrangements were considered ineffective by HMRC. This prompted me to conduct research in the matter and resulted in my concluding my association with the arrangement immediately from that point on.

I ensured that my accountant declared my income correctly in my self assessment and followed all the rules that applied, as I didn't want to fall foul of HMRC regulations. Furthermore, I ensured that I no longer subscribed to that or similar arrangements.

A couple of weeks ago I was made aware of HMRC's upcoming legislation which looks to retrospectively tax income derived through arrangements such as the one I used briefly in 20XX. I have done my calculations and have concluded that the arising tax liability will result in significant changes to my life for the remainder of this tax year.

I am one of the lucky few who will be able to walk away from this with only 'minor injuries'.

I only used the arrangement briefly and that too quite recently. However there are thousands of contractors similar to me, who have been using such arrangements for significantly longer periods of time, some for 20 years. There will be thousands if not tens of thousands of contractors who will be pushed into bankruptcy and some even to suicide as a result of being hit with a massive tax bill. To put it into perspective, some can expect a tax bill of hundreds of thousands.

Whilst it may be easy for the public in general and politicians to dismiss those impacted as 'tax dodgers', the truth is that those impacted believed they were acting lawfully (which they were) and aren't by any stretch super rich. They are just average middle class people who are now faced with the prospect of losing everything including their homes and families.

The promoters of such schemes on the other hand are facing no civil or criminal liability. A large number of such tax avoidance schemes continue to operate today and continue to ensnare unsuspecting contractors with their false promises.

HMRC have been aware of these schemes and promoters for decades now, and still allow them to operate with impunity. Punitive measures are instead being taken, and that too, with retrospective effect, against the victims of these unscrupulous schemes.
I would be very disappointed if this new legislation to retrospectively tax money which was not subject to tax in the past, passed through parliament unchallenged. This has a distinct ring of fascism and is not representative of the Britain that I am proud to call my country.
I would be in support of HMRC making it illegal to operate and use such schemes going forward. Even then, the operators/promoters of the schemes should be always have maximum liability and any unsuspecting victims they ensnare less so, especially if wilful misinformation or misguidance of the victim is evident.

Please find more information on the Loan Charge and the impact it is having on people over here:
https://www.hmrcloancharge.info/

This document provides the victims' perspective:
https://drive.google.com/file/d/1D0k...LAgsvtC/view?u

I request you to wholeheartedly support Vince Cable in his opposition to this draconian approach planned by HMRC. Please also raise this with your peers in the House of Commons and raise awareness of the impact it will have.


2. IR35 legislation for the private sector

The second thing I would like to bring to your attention is another HMRC legislation aimed at freelancing contractors. In 1999, HMRC introduced the IR35 legislation which aimed to increase the tax liability of temporary or contract employees who operated through limited companies. Basically HMRC wanted contractors' day-rate earnings to be subject to income tax by considering it as salary rather than the salary + dividend structure used in such cases.
Last year HMRC made it extremely restrictive for public sector organizations to employ anyone on a contract basis by transferring IR35 assessment liability to the employer. As a result, all public sector employers classed 100% of their contract-based opportunities as falling within IR35. HMRC claims that this legislation has been very effective in meeting its objectives and IR35 compliance has improved significantly in the public sector. The truth is that the public sector has become naturally unattractive for contractors in comparison with the private sector and it has diminished their ability to attract the best talent.

HMRC's next port of call is to make similar 'reforms' to the private sector. This effectively will kill the skilled contract labour market as it will no longer be financially viable for contractors like me to take the risk of self employment.
HMRC believe that all earnings should be taxed fairly and equally. I agree with that sentiment. However HMRC has chosen to disregard that there are a multitude of non-taxed employment rights and benefits associated with permanent employment which contractors don't receive. These include, but are not limited to, holiday pay, sick pay, company subsidies, free training, maternity/paternity leave, pension contributions, job security etc.
Permanent employees receive these non-financial benefits free of tax. Contractors get paid extra because we don't receive any of these (and to compensate for the risk of gaps in employment). Contractors also have to incur additional expenses related to running a limited company (accountancy fees, filing fees, professional insurance, to name a few).

HMRC's proposal is that contractors be taxed in the same way as permanent employees, so it will make it extremely unattractive for skilled people to take up a contracting profession. It will lock us in permanent roles and will also reduce the mobility of a highly talented and skilled workforce.

HMRC's objective seems to be short sighted and detrimental to the economy in general. Today as a contractor, I earn more than I would have earned through a similar job as a permanent employee. However between corporate tax, personal income tax, dividend tax and NICs, I end up paying a lot more taxes (more than double) in absolute terms than I would have through permanent employment. By forcing people like me into permanent employment, HMRC will only reduce the country's tax income. So this legislation is also extremely detrimental to HMRC's own selfish interests.

I would request you to challenge and oppose the IR35 changes proposed for the private sector as well. HMRC's consultation is live at the moment here:
https://www.gov.uk/government/consul...private-sector


I would like to conclude by thanking you for your patience today Ian, in reading through my extremely long email. And I would appreciate a chance in the future, to meet with you in person and talk about these and other matters I consider important.

Yours sincerely,
NAME

[malvolio]

Very well written, except you potentially shoot your self in the foot by stating "I decided at the outset to work through a limited liability company to be tax efficient.". That might be the case but it won't gain any sympathy from HMG...

Still, it will be interesting to read the MP's reply.

[Scotslaw]

Litigation against HMRC an option?

I was wondering if it's an option to proactively litigate against the retrospective nature of HMRC's Loan Charge legislation.
Is this something the Big Group is doing?
I don't think many judges would agree with penalizing citizens for past actions which were not against the law of the time.
More importantly, all the victims would have definitely acted differently at the time if the actions in question were illegal.

By the way, a citizen's right to sue the government, granted by the EU, will be taken away by the Brexit bill which keeps on getting defeated by the Lords:
https://www.independent.co.uk/news/u...-a7887506.html


HMRC's argument that people who used loans in the past should now pay their fair share is weak. They imply that the loan charge or the settlement offer is simply a 'correction' where people are simply paying the tax they dodged.
Most, if not all, of the people who used trustee loans, would have chosen to instead use the LTD/salary+dividend OR legit umbrella route to take home >70% instead. Assuming a 15% fee retained by the trustee, that's only a 10-15% extra tax HMRC should even consider avoided, NOT the 45% they are eyeing through the charge.

[GreenMirror]

One group has proof that HMRC lied to parliament.

They were told not to litigate as no court will find against HMRC.

And HMRC had the right intention.

[Scotslaw]

Very well written, except you potentially shoot your self in the foot by stating "I decided at the outset to work through a limited liability company to be tax efficient.". That might be the case but it won't gain any sympathy from HMG...

Still, it will be interesting to read the MP's reply.

Thanks...
I went on to explain why tax efficiency is important to me (and contractors in general) in the following sentence:

This is an important counterbalance to the risk I take being self-employed and for not being eligible for any employment rights or benefits.

I would have lost credibility otherwise, whilst talking about IR35.

[Scotslaw]

One group has proof that HMRC lied to parliament.

They were told not to litigate as no court will find against HMRC.

And HMRC had the right intention.

The judiciary should absolutely find against the HMRC if they are found to go contrary to case law or basic rights...

https://www.judiciary.uk/about-the-j...tional-reform/

Being the government should have no bearing on the outcome of a judicial process.

[GreenMirror]

The judiciary should absolutely find against the HMRC if they are found to go contrary to case law or basic rights...

https://www.judiciary.uk/about-the-j...tional-reform/

Being the government should have no bearing on the outcome of a judicial process.

I agree with that. So do most people.

Should and reality are lucky to be in the same room let alone shake hands.

To vote against finance bills is effectively a vote of no confidence in the government. Effectively HMRC is the government.

Which means we all need to double our efforts.

[malvolio]

Thanks...
I went on to explain why tax efficiency is important to me (and contractors in general) in the following sentence:

This is an important counterbalance to the risk I take being self-employed and for not being eligible for any employment rights or benefits.

I would have lost credibility otherwise, whilst talking about IR35.

Fair enough, but I would prefer to argue (in fact I have argued) that MyCo is there for the liability protection and to enable me to manage my gross income across periods where I am earning and not earning, as well as being a vehicle for pensions provision in later life. We're already seen as serial tax avoiders, so let's try to keep tax efficiency, right as it is, out of the frame.