The government’s controversial loan fee policy could face judicial review for violating European Union (EU) law, now that 85% of the £ 180,000 needed to fund a new court challenge were raised.
The policy, introduced in November 2017, aims to recover taxes that HM Revenue & Customs (HMRC) claims individuals avoided paying between December 9, 2010 and April 5, 2019 by participating in compensation-based compensation programs. ready.
Participants in such plans would be remunerated for some or all of the work they did in the form of tax-free loans, instead of a salary, which would typically be paid to them through an offshore employee benefit trust (EBT). .
The government’s policy on borrowing charges has sought to suppress the use of these schemes, with HMRC believing that since the loans were never intended for repayment, they should be reclassified as income and taxed accordingly.
As a result, tens of thousands of individuals – including a significant number of IT contractors – found themselves at the end of their lives with life-changing tax bills due to their past use of loan programs.
As previously reported by Computer Weekly, concerns about the ability of those caught within the scope of the policy to repay the sums of money that HMRC is seeking have been repeatedly raised by a campaign group and the parliamentary group. multiparty loan charges (APPG) of deputies.
This, in turn, has led to calls for the removal of all retrospective elements of the policy and has seen MPs make failed attempts to have amendments made to the finance bill in this direction.
Following the publication of an independent review of the policy in December 2019, the initial 20-year period it covered was reduced by approximately 11 years, resulting in the exit of approximately 11,000 people from its scope.
The policy was also the subject of a mob-funded judicial review, which sought to overturn the policy on human rights grounds. This challenge was dismissed by the High Court, but is under appeal.
A separate crowd-funded effort to judicially review the policy on the grounds that it violates EU law is currently being undertaken by a group of people affected by loan fees, with links to the Loan campaign team Charge Action Group.
Regrouping under the Loan Charge Judicial Review EU (LCJREU) banner, the group presented their plans to legally challenge the policy in England and Scotland simultaneously, showing that it violates EU law.
“In EU law, there are four fundamental rights and one of those rights is the ‘free movement of capital’, which LCJREU seeks to prove is compromised by loan fees,” said LCJREU declared in a press release.
“If successful, EU law takes precedence over national law and the application of loan charges would be invalidated.”
The challenge is raised on the basis of a common opinion shared by legal experts Richard Clayton QC of Exchequer Chambers, specializing in judicial reviews, and European law specialist Nik Grubeck of Monckton Chambers.
According to the two men, a challenge to the loan fees based on arguments of European law has “more than a 50% chance of success”, prompting LCJREU spokesman Andrew Earnshaw to declare the challenge as the “last and best hope” for those caught in the trap. scope of the policy.
The group has already secured 85% of the £ 180,000 needed to initiate judicial review proceedings.
“We believe LCJREU is the last and best hope to legally challenge loan fees and urge people facing loan fees to participate and fund it, to make it happen,” Earnshaw said in a statement.
“This is the only judicial review that, if successful, would end the execution of the loan charge. Other judicial reviews can only challenge certain decisions made about it, but would leave the borrowing costs in place. We therefore urge all those facing loan fees to contribute to LCJREU to enable this challenge to come true. “