Finance (No.2) Bill

Written evidence submitted by an individual who wishes to remain anonymous (FB24)

Finance (No 2) Bill.

1. Introduction  - I am an IT contractor who worked for several years through an umbrella company that remunerated me partly via loans that will fall under the proposed "2019 Loan Charge".

2. Background – the loan scheme I took part in was (and still is) openly marketed as an entirely legal means of tax efficient contracting. Like thousands of other contractors, I naively assumed that all umbrella companies worked that way. The loans themselves were declared to HMRC via tax returns. At no point did I seek to disguise from HMRC the method by which I was paid. It was only relatively recently that I discovered that HMRC consider that such schemes "do not work". (I don’t know if this phrase means that they are in fact illegal, but I guess if they were already categorically illegal, there would be no need for the 2019 Loan Charge.) Having discovered HMRC’s views on such schemes I immediately stopped using it and have submitted full details of the scheme to HMRC.

3. Impact - The 2019 Loan Charge in its currently proposed form will almost certainly bankrupt me. I am a typical contractor with a reasonable but not enormous income, a mortgage and a family. Whilst I am already saving every spare penny towards the likely bill in 2019, it is impossible for me to earn enough to pay all of the retrospectively applied tax at once.

4. Recommendation - Retrospectively applying a tax to income received in prior years and then applying that tax as if the income had been received in a single year, seems a massively disproportionate measure. It also seems counter-productive – how will making people insolvent help HMRC recoup the tax? At the very least the charge should be applied over several years to give ordinary people a chance to actually pay without needlessly facing ruin.

5. Additional points – the loan schemes in question are still being openly marketed to naïve contractors. HMRC has known about and effectively tolerated such schemes for years and done nothing serious to shut them down . Surely when the kitchen is flooding, the first step is to turn the tap off .

January 2018