The Association of Independent Professionals and the Self Employed (IPSE) has written to the Chancellor urging him to rethink the Government’s retrospective loan charges on contracting professionals who were persuaded by scheme providers to make use of Employment Benefits Trusts (EBT) many years ago.

IPSE points to a direct link between the introduction of IR35 in 2000 and the increased uptake of EBTs by contracting professionals who were being pushed by the legislation back into the very forms of salaried employment they’d actively eschewed in favour of working independently.

Contractors under this pressure were told by EBT providers at the time that these schemes were fully tax compliant. Many affected by IR35 and who had received this advice believed them to be a “safe harbour” from what they perceived as unfair, complex legislation designed to re-categorise them as “disguised employees”, a designation they could not agree with.

Other contractors were encouraged to use EBTs by unscrupulous parties in the supply chain, including rogue umbrella companies and recruiters. IPSE knows of a number of nurses, for example, who were told to use the schemes in a manner that led them to believe that they had no choice. All the scheme providers gave assurances from “professionals”, including tax advisors and barristers, that the arrangements were completely legal.

Under the retrospective loan charge policy, contracting professionals who used these schemes many years ago are facing very substantial back-charges. As IPSE’s Deputy Director of Policy, Andy Chamberlain, explained, their lives “have been made a misery” through extended tax investigations. Many are facing dire prospects, including the loss of their homes and the cancellation of their retirement plans.

Instead, Chamberlain says: “IPSE believes the emphasis of the government’s compliance activity on these schemes should focus on the scheme providers and the barristers who signed them off. Although there are examples of scheme providers being penalised, IPSE believes more should be done. We are not aware of any barristers being retrospectively prosecuted, which seems inconsistent with the retrospective approach taken with taxpayers.”

IPSE insists that IR35 lies behind the creation of these schemes and that similar schemes will continue to arise, causing appalling strain on hardworking families, unless and until a solution to off-payroll tax legislation is found. Reaching back in time to demand payments from already-beleaguered contracting professionals who are simply striving to make an honest living by working independently, Chamberlain states, is simply unfair.

IPSE has urged the Government to reconsider its approach to this issue and work with the trade body to build a fairer tax system that can take full account of modern ways of working.

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