The government’s controversial lending policy could face judicial review for violating European Union (EU) law as 85% of the £ 180,000 to fund a new lawsuit has now been brought.

The guideline introduced in November 2017, is geared towards the reimbursement of taxes that HM Revenue & Customs (HMRC) says were avoided by individuals between December 9, 2010 and April 5, 2019 by participating in credit-based compensation systems.

Participants in such schemes would be remunerated for all or part of the work they performed in the form of tax-free loans in lieu of a salary normally paid to them by an Offshore Employee Benefits Trust (EBT).

Government loan fee policies have sought to limit the use of these systems, with HMRC believing that since the loans should never be repaid, they should be reclassified as income and taxed accordingly.

As a result, tens of thousands of individuals – including a significant number of IT service providers – have faced life changing tax bills related to their past use of loan programs.

As reported by Computer Weekly, a campaign group and the bipartisan group have repeatedly raised concerns about the ability of those caught under the policy to repay the money requested by HMRC All-Party Parliamentary Group (APPG) loan fee from MPs.

This in turn has led to calls for everyone retroactive elements of the policy to be abolished, and has seen The MPs are making failed attempts to change the finance law in this direction.

After Publication of an independent review of the policy in December 2019, the original 20-year period was shortened by about 11 years, resulting in an estimated 11,000 people falling out of scope.

The policy has also undergone a crowdfunded judicial review attempting to repeal the policy on human rights grounds. That lawsuit was dismissed by the High Court, but is on appeal.

A separate crowdfunded judicial review of the directive on the basis that it violates EU law is now being taken by a group of individuals affected by the loan fee, with links to the Credit Burden Action Group Campaign team.

The group, which has come together under the Loan Charge Judicial Review EU (LCJREU) banner, has set out its plans to simultaneously challenge the policy in both England and Scotland by showing that it violates EU law.

“There are four fundamental rights under EU law and one of those rights is the ‘freedom of movement of capital‘ which LCJREU is trying to prove is being undermined by the loan fee,” LCJREU said in a statement.

“In the event of success, EU law overrides national law and the enforcement of the loan fee would be null and void.”

The challenge is based on a joint position paper from Exchequer Chambers ‘legal review specialist Richard Clayton QC and Monckton Chambers’ EU legal specialist Nik Grubeck.

According to the couple, a loan fee challenge based on arguments from EU law has a “better than 50% better chance of success”, prompting LCJREU spokesman Andrew Earnshaw to declare the challenge as the “last and best hope” for those who are caught in the crisis scope of policy.

The group has already secured 85% of the £ 180,000 required to open a judicial review process.

“We believe LCJREU is the last and best hope to legally challenge the loan fee and we urge people facing the loan fee to deposit and fund it to make it possible,” Earnshaw said in a statement.

“This is the only judicial review that, if successful, would stop the loan fee enforcement. Other judicial reviews can only challenge certain related decisions, but would leave the loan fee unchanged. Therefore, we urge everyone faced with the loan fee to contribute to LCJREU to make this challenge possible. “