Alistair Carmichael, MP for Orkney and Shetland, has challenged the Treasury to change their approach on the retrospective nature of changes to rules around Loan Charges. The loan charge scandal centres around HMRC advising individuals that a method of accepting loans was lawful, when they later decided it was not. HMRC are now seeking back payment, meaning many now face bankruptcy after following the rules as HMRC told them they were.
Speaking in the House of Commons, Mr. Carmichael said:
HMRC are allowed to go back to 1999 to look at tax records. The records they can look at include records included in otherwise closed years. If that is not retrospective, then I do not know what is. I wonder what word he would use with my constituent who tells me that he started a business in the Oil and Gas industry, living in Orkney, but working across the globe, doing everything the Government would want him to do. How does he find himself facing bankruptcy before his 29th birthday?
Responding on behalf of the Government, the Paymaster General and Financial Secretary to the Treasury, the Rt. Hon. Mel Stride MP, said:
I think there is a very important principal that lies right at the heart of this whole debate around loan charge, and that is that individuals should pay the tax that is due, and if they enter into relationships which basically mean that they disguise income as a loan that they have no intention of ultimately paying. That money is often routed through a low tax jurisdiction overseas, via a trust, then brought back into the UK by way of payment, this Government believes that this approach is wrong that tax should be paid
Speaking after the exchange, Mr. Carmichael added:
“It is obvious that all people ought to pay the tax they are due, but that is not what is at issue in this case. The loan charge debacle is around people who have followed the rules as HMRC laid them out or as they were advised by their accountants, only to find later that those rules were changed. This is clearly wrong.
“Either the Minister is not listening, or he is ignoring the reality of his policy. Thousands of people across the country face bankruptcy, including my own constituent. HMRC cannot simply ignore that, and the Minister ought to review whether his policy is, in fact, the right one.”