IR 35 again

Pressure is mounting to force the government to amend Section 58 of the Finance Act 2008, a retrospective tax which could affect thousands of contractors.

Around 60 cross-party politicians met in Parliament on Wednesday to hear the campaign team 'unveil new evidence which casts doubt on the reasons given by HMRC for acting retrospectively'.

The MPs are being urged by the ‘No to Retrospective Taxation’ (NTRT) campaign - representing around 3,000 consultants, freelancers, IT professionals, healthcare workers and property developers – affected by s58, to amend it in the next Finance Bill.

The NTRT wants the legislation to be amended so that it only applies from March 2008 – the date the new rules were first announced – and not retrospectively.

Alistair Cliff Renshaw, NTRT chairman, said: ‘The evidence presented in parliament raises serious questions about HMRC’s conduct in persuading MPs to pass unannounced retrospective legislation.

‘HMRC told MPs the tax arrangements were aggressive and abusive – despite parliament making a considered and deliberate decision to allow them to exist.

‘They told MPs that they had never accepted the tax arrangements worked, but did not tell MPs that they had actively accepted claims for relief.

‘HMRC told the minster only a small number of people would be affected – but we now see that thousands face bankruptcy simply for following the law as it stood at the time.

‘It is clear parliament was misled into passing Section 58 retrospectively when there was no case for doing so and that MPs would not have acted retrospectively had they known the full facts.

‘I am pleased that there was such a high turnout of MPs at our meeting and that HMRC’s conduct in this unfortunate affair is coming under much closer scrutiny.’

The campaigners claim HMRC knew about the arrangements for over 20 years before recommending legislation to shut them down – 'in clear breach of their own principles for closing tax loopholes'.

The MPs at the meeting were informed that the minister at the time, Jane Kennedy, who announced s58 on Budget Notice 66 (BN66) had since 'stated in writing that she was told by HMRC that only a very small number of people would be affected, and certainly not the thousands that have been impacted'.

You have to suspect that, whatever HMRC frustration led to the imposition of s. 58 retrospectively, behind it all at the time was a view that the tax schemes involved could well stand up to scrutiny by the Courts. The “new evidence” now uncovered by campaigners, argued to show that HMRC were misleading the debate at the time, perhaps goes to confirm that.

This has been a long-running saga. Mark Cawthron, CCH corporate tax specialist, said: 'These historic tax schemes may not have been – in the current buzzword – in any sense “moral”, but there remains that fundamental principle.

Should not taxpayers be taxed on the law as it stands at the time, and not as the government later decides it would prefer it to have been?'