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It seems as though the constant pressure from campaign group ‘No to Retro Tax’ may have paid off as 18 MP’s from 5 political parties call on the Government to repeal the retrospective element of section 58 of the 2008 Finance Act.

Hundreds of IT contractors have been affected by the legislation which has threatened many with bankruptcy. The legal cases against scheme providers have been going on for over 5 years and the contractor’s fight against retrospection has caused untold stress and in some cases has resulted in contractors losing their homes and their families.

Much of the outcry has resulted from the fact that the arrangements the contractors used to manage their tax affairs were debated and approved by Parliament in 1987. It was not until 2008 that the then Labour Government decided that the contractors were guilty of ‘abusive tax avoidance’ and their punishment should be that the legislation introduced would be ‘treated as always having had effect’. Consequently HMR&C determined that tax owed would go back many years and would be subject to both interest and penalties, resulting in six figure tax bills for some contractors.

In a rare display of inter-party co-operation the 18 MP’s have sent a letter to George Osborne highlighting their concerns over the use of retrospective tax legislation. All accepted that tax avoidance should not be tolerated and that those using avoidance schemes should be penalised; their challenge is that retrospective changes to law are ‘against natural justice and people should be judged under the law as it stood at the time’.

It’s hoped the Government will use this year’s budget to amend the retrospective nature of Section 58 and that future closures of tax loopholes will follow more traditional lines.

Lisa Keeble is the Managing Director for Contractor Umbrella Ltd, one of the UK’s Most Respected and Compliant Umbrella Companies.

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