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Lib Dems pledge to review IR35 and abandon Loan Charge

A review of the Off-Payroll rules has been pledged by the Liberal Democrats, should they come into power following next month’s General Election. The party’s manifesto, ‘Stop Brexit: Build a Brighter Future’, also pledges to end retrospective tax changes such as the controversial Loan Charge, helping to ensure the fair treatment of individuals and firms.

A review of the Off-Payroll rules would come at the perfect time for contractors, with Government nearing its planned April 2020 private sector implementation date, in spite of widespread evidence of the legislation’s failings in the public sector.

A proposed hard line approach to corporate tax evasion and avoidance by international tech giants and large monopolies underpins a manifesto which aims to end the taxman’s increasingly aggressive pursuit of contractors as a means of closing the tax gap.

Manifesto addresses key sources of contractor ire

“There’s little more that you want from a party manifesto, from a contractor’s perspective,” notes ContractorCalculator CEO Dave Chaplin. “The Off-Payroll rules threaten incontrovertible damage to the private sector, yet the current Government seems intent on looking the other way when presented with the facts. A considered review of IR35 and these devastating proposals is just what is needed.”

Meanwhile, the Loan Charge, has been a source of contention within Parliament for months. Introduced by the Conservatives, the legislation permits HMRC to impose tax bills on individuals for historical engagement in tax avoidance schemes stretching as far as 20 years ago. Engagement in such schemes proliferated in 2000, as contractors joined in an effort to avoid punitive taxation at the hands of the newly-introduced IR35 rules.

Though a review into the Loan Charge has been announced, the multiple known suicides incited by tax bills resulting from the legislation suggest that an immediate repeal is necessary.

Pledge to tackle large-scale tax avoidance could benefit contractors

While the Liberal Democrats have pledged to address draconian measures targeting contractors for tax, the shortfall should be more than made up by a proposed clampdown on corporate tax evasion by international corporations, which the party claims will include:

  • Setting a target for HMRC to reduce the tax gap and investing in more staff to enable them to meet it
  • Reforming place of establishment rules to stop multinationals unfairly shifting profits out of the UK

Such a pledge seems like apt timing, with HMRC’s application of its powers having recently come under intense scrutiny during a series of Lords Select Committee hearings.

“This manifesto promises to give HMRC a much needed kick up the backside,” comments Chaplin. “Having spent the past two decades targeting the low-hanging fruit and scapegoating contractors as tax avoiders, it’s about time HMRC was tasked with addressing serious, and ultimately far more gainful, instances of avoidance and evasion.”

Published: 21 November 2019

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