MPs Say HMRC’s IR35 Could Have a Devastating Impact on Society Dec 17, 2018Views: 213
HM Revenue & Customs (HMRC) introduced the 2019 Loan Charge in order to recover unpaid taxes from individuals who have used disguised employment schemes since the 6th of April 1999. The new rule that will become applicable in April 2019 has received a lot of criticisms.
In a debate last month regarding the 2019 Loan Charge between MPs in the House of Common revealed that most consider it to be unfair that could have serious consequences.
The retrospective tax will consider all loans received by individuals through a disguised scheme as taxable income. The loan amount will be treated as if all the income has been received in the tax year 2018/19 subjected to an additional tax charge.
The recordings of the meeting reveal that while most MPs agree that unpaid taxes should be recovered, but most disagree with the approach taken by HMRC in this regard.
‘Catastrophic’ Effect on Tax Payers and Family
According to Steven Baker, a Conservative MP for Wycombe, the Loan Charge will have a catastrophic effect on the society if implemented. It could result in a large number of bankruptcies, suicide attempts, divorces, and also lead to unemployment, mental illnesses, loss of houses, and more. In short, the Loan Charge could cause misery and doom for a lot of families in the UK.
Experts predict that nearly 50,000 individuals will be affected by the Loan Charge. They will be required to pay the tax due by 31st January 2020. HMRC have recently announced that individuals should settle unpaid before 5 the April 2019 to avoid the tax charge.
MPs have raised the question as to why HMRC turned a blind eye to the tax avoidance schemes for all those years. The tax body has always been notified of any employment scheme as per the Disclosure of Tax Avoidance Schemes (DOTAS) rules. A case number would be assigned to the scheme that was considered as an implicit approval by the taxation body.
Jim Fitzpatrick, MP for Poplar and Limehouse, asked why HMRC had not written a single letter to users of loan schemes over the past 20 years. Why had the tax body not taken any action when it received annual tax assessment returns?
Despite being aware of the tax avoidance schemes, the taxation body did not take any action. Taking action now after all those years of implicit approval, which has resulted in the build up of significant liability, is unfair.
Loan Charge represents a continuation of unfair practices started due to IR35 off-payroll working rules. This piece of legislation has never worked and should be scrapped to avoid further problems.
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