2019 tax charge retro law

[user1481978145]

Hi - new to Mumsnet but very long time lurker, so please go easy.
Is anyone aware of the new tax charge to be introduced in 2019 for contractors/freelancers? I've just been made aware of it and am panicking like mad.

Can anyone knowledgeable give me the lowdown on it?

This might be better in legal matters as there are some very knowledgeable people there.

I am also interested in finding out about this as it will affect DH. From what I can gather contractors will be taxed at source meaning their hourly rate will in effect decrease. I'm pretty clueless other than that so watching with interest.

Hi IamCrazy - I think that's changes to IR5 legislation. This one (as far as I can tell) is a retrospective law designed to tax contractors who entered into umbrella arrangements and were paid in loans. If the loans are outstanding in April 2019 then those who used them will be retrospectively taxed on it. I can't quite get my head around retro legislation, surely it cannot be right!

There is some information here.

It is not retro legislation. Before April 16 these arrangements were ok, from April 16, new ones cannot be set-up.
The government is giving contrators 3 years to re-pay these loans (which is ok if they are 'genuine'). If these are 'fake' loans to avoid tax and thus employees cannot repay them, they will be taxed as employment income from 2019.

It's basically closing a tax avoidance loophole for contractors.

This isn't a standard thing for contractors.If you worked like this then you must have been aware of what you were doing.

Sorry, but you're right to be concerned and in my opinion this is outrageous.

Let me explain - In the early 2000s these loan schemes were being pushed by accountants as a way of saving tax because the half-thought-out IR35 rules made everyone panic. The important thing about this is that AT THAT TIME this was all legal. These schemes could even be registered with HMRC - who did nothing. You might have a view that it's immoral, but the important thing is that it was legal. Move forward to 2016 and the HMRC have now decided that this wasn't legal after all. They've jumped in their Back to the Future time machine and changed the law retrospectively.

It's a bit like the government changing the speed limit on your street from 30mph to 20mph overnight, and then sending you tickets for all the times in the past you drove at 25.

Now the view of these schemes has changed - I think most people recognise it's not ok anymore - but this is hardly 'fair' as Mr Hammond might say. The thing to remember is, they're looking at any loans since 1999 and they're going to be treating ALL the money paid out under those loans (if they are still outstanding) as income. This will be added to your 2018-19 tax return as one lump sum of income that will push many people into the maximum tax band.

Believe me, a lot of people don't know this is coming and their circumstances may have changed dramatically in the last 20-odd years, they may be retired, not working, anything. The taxman doesn't care - he's going to treat that money you had as income, add your NI onto it, and interest too - and just in case you don't feel cr*pped on enough you'll have until Jan 2020 to pay.

This is going to wipe out a lot of people, and there isn't anything you can really do about it apart from prepare for the worst. About the only way to avoid this is to jump under a bus. Sadly I can see people taking that option - Fairness. Don't make me laugh.

I feel so sorry for those not able to pay, but what's just as worrying is the precedent - if the taxman decides he can turn back time when it comes to this then where does it end - your pension? your ISA? Don't bet against it.

I know nothing about the loan schemes, but there has been an even more clear-cut case of retrospective legislation against people using a different tax avoidance scheme that involved receiving income via offshore trusts. It was an extreme example of avoidance, so won't get much sympathy here, but people entered it on the understanding that it was arguably legal, and the worst that could happen is that they might lose in court (against HMRC) if any dispute got to that point. Instead what happened is that government merely changed the law with retrospective effect.

European human rights law usually forbids changing the law so as to make things that were legal at the time illegal with hindsight, however there is an exception that governments can do this for tax law when the change is to "clarify" ambiguous legislation.

Anyway, this thread from another forum might be the right place to follow this up.

forums.contractoruk.com/accounting-legal/63073-loans-ebts-other-trusts.html

Sorry, that thread started in 2011 so may not be quite the same thing. (But is ongoing so may have incorporated the 2016 changes.) In any case, I think that's the best forum for this.

Fair enough. I think people using that forum - unlike the OP - will be aware of this issue though. FWIW, a better bet for the latest details is probably this one

forums.contractoruk.com/hmrc-scheme-enquiries/

My husband's accountant advised us to use one of these schemes, explaining it would release us from the burden of running a limited company.
My husband has been unable to work for the last three years after being hit by a drunk driver. He was left partially blind and unable to work.

The expected bills for this will push us into bankruptcy.

...for anyone caught up in this. There is a group trying to find a means of settling with HMRC, i.e. a resolution that suits both sides.

It's NOT a means of avoiding the tax, rather it focuses on an equitable settlement.

If you are caught up in this. It's worth joining.
www.wttbiggroup.co.uk/

So basically people have been taking loans instead of income from their employers so as to avoid tax. They have been given 3 years to repay these loans or they will have to pay the same tax as every other employee does.

No excuses, pay your TAX

The thing is, as an employee, your employer pays the tax via PAYE. In this case, the employers are long gone and it's easier to chase the little guy at the end of the chain.

A lot of the users of these schemes were, at best, dumb or, at worst, greedy, but they are not Jimmy Carr. There are no massive reserves available to pay these bills and so, in a lot of cases, people will be bankrupted etc.

Oh, and my husband? He worked, for one of these companies, at HMRC.

www.parliament.uk/edm/2017-19/1239

there has been an early day motion presented at parliament.

I too am in the same position as thousands of free lancers whop are going to have their ruined by HMRC.

May I suggest you join "Loan Charge Action Group".
They are working hard to challenge this immoral move by HMRC.

They have a wealth of information regarding this issue.
In addition it would be great if everyone would sign the petition below.
We all require 10,000 signatures to get this heard in parliament.

petition.parliament.uk/petitions/218582

Apologies for the misspelling in my previous post.

Before you make your comment about "No excuses, pay your TAX".
I suggest you do a little more research before coming out with comments as such. People who took out these loans were assured that we were paying out tax.
Why don't you have a look at this link FYI.

There is a team called "Loan Charge Action Group" who are helping thousands of contractors / freelancers who are affected by the loan charge.
Anyone affected should sign up to this team as they are lobbying to get this retrospective charged quashed.
Their web site also offers counselling for people who are suffering from depression / anxiety and in some cases suicidal thoughts as a result of HMRC immoral move to destroy peoples lives.

May I also suggest that all affected and non affected people sign the EDM petition to get up to 10,000 signatures in order to get this discussed in parliament and hopefully reverse this outrageous law of 20 years retrospective taxation.

petition.parliament.uk/petitions/218582

Loan Charge Action Group:

www.hmrcloancharge.info/

Hi, you are not alone. This is affecting tens of thousand contractors / freelancers across the UK which is going take many into bankruptcy.
There have been cases whereby people have taken their own life.
It is very disturbing. On the plus side it would appear that 45 MP's have now signed the EDM petition for this decision to be overturned.
The "loan charge action group" are making good headway which is why it is important to join them. It is run by people who are in the same boat as all of us who are affected by the retro tax and they are a non profit but any donation helps to fight the cause.
If anyone on here is affected I would strongly suggest you get in touch with them.
I would also suggest you get onto twitter as this is where many have joined and making big news which is read by media, MP's etc.
It is making big news on there which is great.
The more support the better.
Link to them on twitter: #HMRCHumanCost

Below is the recommended this to action:

1. Set up a Twitter account if you do not already have one (it can be anonymous)
2. Like, retweet and reply to the tweet.
3. All replies must contain #HMRCHumanCost and the link to the article.
4. In order that we all remain on message, replies and tweets must contain the following 3 themes. These can be in your own words but they do have to convey these 3 points:

• The 2019 Loan Charge is retro and HMRC are complicit.
• The Law must be amended so that the 2019 Loan Charge is not retro and should take effect from the date of assent of the Finance Act 2017.
• Highlights of the devastation the 2019 Loan Charge will cause if the law is not changed.

It is important that Tweeters write responses and not just retweet messages. If all messages are just retweeted Twitter will block accounts because they will think it is spam. LCAG account will respond in a timely manner to all replies using the #HMRCHumanCost hashtag so that conversations happen and then it will not be seen as Spam by twitter. Replies can include as many relevant people using @ as possible to get the message out into bigger circles. Please include MPs, the Press, High Profile figures and relevant popular groups and parties. Anyone you can think of who is influential and will help us raise awareness.

Good luck

Signed. This does not affect me directly but any retrospective law is absolutely unacceptable and I will always oppose it. People have the right to look at the law as it is at the time and rely on it, otherwise what is the point of having it. Anything else smacks of a third world dictatorship.

This new law is not fair. My husband worked all over the world as a contractor and missed the first 5 years of his sons life trying to provide for our family. Eventually he managed to land a permanent job in the UK. He and now about 30 of his friends all x army are being hit by this new law coming out next year. They were all under the same managing company who paid all their employees this way. Which was legal back then. Its going to hit us so hard that we will be looking at bankruptcy. We have no saving and we both work full-time to make ends meet.

Changing of tax rules retrospectively is disgraceful. I thank my lucky stars that I avoided these schemes in my time and chose the old boring PAYE.