2019 Loan Charge — [Mr Charles Walker in the Chair]

Part of the debate – in Westminster Hall at 3:19 pm on 20th November 2018.

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Photo of Janet Daby Janet Daby Labour, Lewisham East 3:19 pm, 20th November 2018

Thank you for allowing me to speak in this debate, Mr Walker.

In 2000, the Government introduced legislation called IR35, which sought to class many freelancers as employees. It was designed to target “disguised employment” and the Government wanted to close a loophole that allowed companies to employ people without collecting NICs or paying other associated taxes. Unfortunately, “disguised employment” was not well defined. When people were engaged on very different terms to permanent employees, it was not clear whether they were subject to IR35. In that grey area, third-party scheme providers began to offer a service whereby contractors became employees of a third-party company, which was then engaged by the agency or client company. Remuneration was paid in the form of loans, which were often made by an offshore third party.

Those arrangements were marketed as HMRC-compliant and seemed to offer the certainty that many were looking for. The Government now claim that the arrangements did not work and, although they were within the law, were not in tune with what Parliament intended. That has led to a series of measures designed to recover the funds, which were not originally deemed taxable, in spite of the fact that the people affected legitimately completed tax returns, paid their dues and disclosed the arrangements to HMRC.

Many within the schemes have yet to be informed of the amount that they are due to pay, including my constituent Nick, who was involved in one of them. To say that Nick is worried about that is an understatement. I have met him, and he said that he is

“facing personal ruin, most likely bankruptcy with the loss of the family home”.

He feels that that will affect him and his family. He continued:

“While I have recently moved out of financial services…bankruptcy would make me ineligible to work for any financial services company again therefore severely limiting my potential employers” and employment. To say that causes a great deal of stress is an understatement. Although he is grateful to have the support of his wife and family, there are days when he feels hopelessly overwhelmed by that looming over him.

Given the vast sums of money involved, and the various reasons and backgrounds behind people becoming involved in such schemes, we need a sense of the role of the companies who provided the contracts. They clearly played a role. I would also like to know from the Minister whether the time-to-pay arrangements will provide the people affected with any kind of practical support.