MPs who voted the loan charge through parliament did not realise its implications, according to George Bull, senior tax partner at RSM.
Mr Bull suggested MPs did not appreciate that the charge would hit the subcontractors when the real gripe with the taxman seemed to be with the people controlling the arrangements.
With the loan charge, which was approved by parliament via the 2017 Finance Bill, HMRC was authorised to pursue individuals and companies that engaged in "disguised remuneration" schemes going back to 1999.
Members of such schemes were paid via loans rather than salary, and so did not pay tax. The loans were also never intended to be repaid, leading to HMRC treating the issue as 'tax avoidance'
The loan charge means people are expected to either repay the loans or pay income tax on them dating back 20 years.
A charge for those loans will be added on 5 April 2019 unless contractors have come to a settlement arrangement with HMRC, with all outstanding loans added together and taxed as income in one year.
There have been claims the loan charge hits less wealthy people disproportionately but HMRC has disputed this.
Mr Bull said: "As the days go by it becomes abundantly clear that too many MPs did not understand the nature of the legislation they were enacting.
"Of course, from HMRC’s perspective the loan charge is very neat way of collecting a large amount of tax in situations where former legislation didn’t work, where the courts were not generally on the taxman’s side and where historical enquiries had not been dealt with adequately.
"But that is to disregard the fundamental flaw in the legislation. HMRC’s real gripe seems to be with those who were administering and controlling the arrangements. However, that group is totally different from the subcontractors who will shortly have to bear the charge."
HMRC expects to receive £3.2bn from the loan charge, but only about 25 per of that will come from individual taxpayers.
The taxman will also collect missing national insurance contributions from the employers retrospectively, while it is pursuing the administrators for facilitating the schemes.
Meanwhile some MPs have tried to stop the loan charge from being enforced.
More than 100 MPs signed an early day motion tabled by independent MP Stephen Lloyd following the charge, while the Liberal Democrat MP Sir Ed Davey tabled a motion signed by 38 MPs asking HMRC to examine the retrospective nature of the loan charge.
HMRC has repeatedly stated that the charge is not retrospective because, while it may relate to income going back as far as 1999, the loans have technically not been repaid in this tax year, so it is a matter for the current tax year.
Neither Sir Ed nor Mr Lloyd were MPs during the period when relevant legislation went through parliament and so did not have a vote on the issue.
Sir Ed said: "The measure was rushed through with very little debate, so there was certainly a failure of parliamentary scrutiny."
Nicky Morgan, chair of Treasury Select committee, who was a member of the government party that voted through the legislation, and a cabinet minister when the 2016 Budget was introduced, has also been critical of the loan charge.
She said in recent weeks applying a law introduced in this year’s finance bill to tax matters from years ago removed the principle of certainty, namely that a taxpayer is entitled to know what the law is and how it applies to them, when they file their tax return.
Last week HMRC referred itself to the police following the death by suicide of someone that had faced a loan charge bill.
david.thorpe@ft.com
