MPs seek new debate on tax charge

MPs seek new debate on tax charge

The impact of the loan charge could return to the parliamentary agenda, as a cross party group of MPs has requested a debate.

The All Party Parliamentary Group has asked for a backbench debate on the issue, after HMRC issued a report yesterday (March 26) hitting back at criticism of its handling of the tax charge.

The loan charge relates to payments being sought by HMRC from individuals who took part in "disguised remuneration" schemes where they were paid via loans, which are not taxed, rather than income, which would have been taxed.

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In the finance bill currently working its way through parliament the government declared these schemes to be illegitimate for tax purposes, leading to HMRC seeking tax on income dating as far back as 1999.

The issue has already been the subject of two parliamentary motions. In particular, MPs criticised HMRC for applying the tax retrospectively, and warned it will predominantly hit low earners.

But the tax office hit back, saying a written ministerial statement in 2004 and legislation in 2011 had made it clear the schemes were not legitimate.

Sir Ed Davey, MP for Kingston and Surbiton and chair of the APPG, said hundreds of his constituents were affected.

He said: "The Treasury report fails to deal adequately with the widely held view that the loan charge represents a change in tax law for past years and offends against the rule of law.

"The loan charge is retrospective in many aspects and sets a dangerous precedent."

Sir Ed had previously tabled an amendment to the government's latest finance bill asking for HMRC to review its policy.

He said the documents released by HMRC yesterday "were not the sort of review he had in mind".

The request for a backbench debate will be decided by a committee of other MPs, and there will not be a vote at the end of any debate.