Loan Charge APPG launches mini-inquiry into ‘How Contracting Should Work’.

The Loan Charge APPG has today announced a short inquiry on ‘How Contracting Should Work’ to take place in December 2020, reporting in January 2021.

The purpose of the inquiry is to examine how contracting and freelance working, an important model of working, should operate, be remunerated and taxed fairly and appropriately and to avoid tax avoidance schemes being promoted/used or actually existing at all. The APPG believes that this is of fundamental importance to avoiding another Loan Charge scandal and the best way ultimately to stop the promotion and use of disguised renumeration schemes as well as finally properly recognising contracting and freelancing in legislation.

The inquiry seeks written and oral evidence, from a range of sources, to establish what ‘best practice’ exists to organise, remunerate and tax contracting and freelancing. It will explore what model or models are appropriate and the basis on which people should be remunerated and taxed, to reflect the fact that people are not employees and starting from a principle that people should only be taxed as an employee if they are genuinely employed and receive employee rights and benefits and have an employment contract (that abides with employment law).

There will be an oral evidence session on Tuesday 15th December. 

This inquiry starts from the position (of the Loan Charge APPG) that tax avoidance schemes that seek to illegitimately avoid tax are wrong and that such schemes should be shut down and those promoting and operating them, pursued for mis-selling and the law changed to make them liable for tax deemed to be due if the schemes are found to be illegitimate.  However ultimately the best way to stop any unacceptable tax avoidance schemes is to properly structure, remunerate and tax contracting and freelancing.

The ‘How Contracting Should Work’ inquiry takes place at a time when the Treasury have announced new measures to seek to clamp down on promoters, something the Loan Charge APPG have previously and continually called for. The House of Lords Economic Affairs Committee Finance Bill Sub-Committee is scrutinising these measures, something we welcome.  So the Loan Charge APPG Inquiry will not look at or discuss promoters of tax avoidance schemes aimed at contractors and freelancers, other than to make clear that  one of the reasons for establishing ‘best practice’ for contracting and freelancing is to stop such schemes existing, as well as to propose how contracting and freelancing should (and should not) operate to ensure fairness and recognising it as a distinct way of self-employed working.

The inquiry will consist of examining written evidence and also one oral evidence session of sector representatives, professionals, advisers and commentators.

Written submissions are invited and must be received by 6pm on Friday 18th December. More details can be found in the Inquiry Terms of Reference.

The APPG Inquiry report will be published in January 2021. This will include recommendations which will be sent to Treasury Minister and all APPG members.

Commenting, the Loan Charge APPG Co-Chairs said:

Ruth Cadbury MP, Co-Chair of the Loan Charge APPG (Labour):

“During the course of our work, it has become clear that one of the issues that led to the Loan Charge Scandal is a lack of clarity over how contracting and freelancing should be structured, taxed and remunerated. This is partly the fault of unclear legislation and partly as a result of the many different and complex ways this important kind of working is paid.

“As well as highlighting problems, we also wish to examine best practice in the sector to establish how best to ensure contractors and freelancers are both paid and taxed fairly and also how best to avoid the ongoing mis-selling of unacceptable tax avoidance schemes. We look forward to receiving contributions and hearing from professionals and professional bodies as how best to do this”.

Sir Mike Penning MP, Co-Chair of the Loan Charge APPG (Conservative):

“As well as highlighting the injustice of the Loan Charge, the Loan Charge APPG also wishes to stop any repeat of the Loan Charge Scandal. As well as pursuing those who mis-sell schemes we also want to see proposals to properly structure contracting and freelancing.

“This important way of working is becoming more and more common in the increasingly flexible economy and will be crucial to getting the country back on track after the Covid-19 pandemic, so this is a key time to look at these issues and to come up with ways to avoid the heartache caused by the Loan Charge and the mis-selling of these kind of schemes”.

[Ends]

Notes to Editors

  1. The All-Party Parliamentary Loan Charge Group (Loan Charge APPG) consists of parliamentarians of all parties from both Houses of Parliament who have concerns about the nature and impact of the ‘2019 Loan Charge’ and also concerns about the wider context of fairness of tax legislation and HMRC’s conduct in enforcing it. See loanchargeappg.co.uk and Twitter @LoanChargeAPPG. The Loan Charge APPG is an officially registered Parliamentary Group, as described on the UK Parliament website www.parliament.uk/about/mps-and-lords/members/apg/.
  1. The Officers of the Loan Charge APPG are as follows:
  • Rt Hon. Sir Ed Davey MP, Co-Chair, MP for Kingston and Surbiton (Liberal Democrat)
  • Ruth Cadbury MP, Co-Chair, MP for Brentford and Isleworth (Labour)
  • Sir Mike Penning MP, Co-Chair, MP for Hemel Hempstead (Conservative)
  • Hon. Baroness Kramer, Vice-Chair (Liberal Democrat)
  • Rt Hon Sammy Wilson MP, Vice-Chair, MP for East Antrim (DUP)
  • Owen Thompson MP, Vice-Chair, MP for Midlothian (SNP)

The APPG’s Loan Charge Inquiry Report was published in April 2019 and can be found on the Loan Charge APPG’s website http://www.loanchargeappg.co.uk/wp-content/uploads/2019/05/Loan-Charge-Inquiry-Report-April-2019-FINAL.pdf