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Repeal retrospective elements of section 58, 2008 Finance Act

Comment 6th July 2010

Section 58 of the 2008 Finance Act attempted to close a perceived tax avoidance loophole, legitimately used and annually declared to HMRC by thousands of self-employed contractors over the last decade.  However, in a move that is unprecedented in UK Tax history, section 58 then back-dated this legislation under the guise of a 'clarification' to 2002.  The legislation is currently being challenged under the European Human Rights act with a hearing due at the Court of Appeal in November.  I propose that this insidious and pernicious legislation, introduced by the previous Labour government, be repealed immediately for the reasons given below.

Why does this matter?

As stated in the European Human Rights act, it is essential that people have certainty over existing financial arrangements and are free to enjoy the benefits thereof.  Furthermore, in UK legal and tax history, there has never been legislation that once enacted, has then been back-dated in this manner.  This runs counter to the respected British values of fair-play and playing by the (existing) rules.  Section 58 creates a dangerous precedent, whereby what is legal one year, can subsequently and retrospectively be deemed illegal the next.  This sends out a dangerous signal to anyone contemplating doing business or working in the UK.

On a personal level, thousands of self-employed contractors now face undue stress and uncertainty, culminating in possible bankruptcy, home repossession and family breakdown.  As well as affecting the contractors involved, the fall-out will impact on the state, whether that be by welfare requirements for those rendered bankrupt and homeless, or self-employed businesses fleeing the country.   In fact it is doubtful whether the relatively small amount of tax raised by these retrospective measures will result in a nett gain to the state, once legal and social security costs are accounted for.

This section of the 2008 Finance Act thus has no place on the UK Statute book.

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