‘My dad thought he was a criminal – he wasn’t’

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The government has been urged by the daughter of a man who took his life to stop the controversial tax policy which she says played a part in his death.

George Osborne
Then chancellor George Osborne introduced the loan charge in his 2016 Budget

Treasury minister Jesse Norman has said that schemes are highly contrived and has so far resisted calls to suspend the loan charge.

The courts repeatedly rejected HMRC’s case that the loans were taxable. However, in 2017 a Supreme Court decision ruled on another point: that when the pay was diverted, it was a taxable event. That meant the schemes were no longer effective for tax purposes.

The Treasury has said it is too late to go after the promoters of the schemes, many of whom made large profits, or the accountants who recommended them.

At the 2016 Budget, then chancellor George Osborne brought in the loan charge to recoup tax going back 20 years from individuals who had benefited from the schemes.

Last year, thousands of freelancers and agency workers received letters from HMRC telling them they’d been involved in tax avoidance schemes it viewed as “disguised remuneration”, encouraging them to get in touch and settle their affairs voluntarily.

For many freelancers and agency workers it was the first time they had been told their pay arrangements might be problematic.

They were required to add up all their loans from trusts going back to 1999, declare them and make an offer to HMRC to settle the underpaid tax.

If they failed to do so, then in April this year the loan charge would kick in and tax would be payable by the end of January 2020, at the individual’s highest tax rate which can be up to 45%.

The typical sum owing, according to the Loan Charge Action Group – is about £120,000 each.

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Many who used the scheme had been assured it was legal

Many of the contractors were IT professionals. Others, far from being wealthy “tax dodgers”, were agency nurses, NHS workers, even social workers.

Many of them were assured by their accountants when they entered new pay arrangements in the late 1990s or early 2000s that they were perfectly legal.

Thousands got paid net of tax and fees via payment services companies that they were directed to by the agencies that employed them. Typically, about 18% of their pay would be deducted.

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The MPs say the attraction of the schemes wasn’t lower tax as much as a wish to avoid the hassle and paperwork of running their own limited company.

Others had no choice because their employers, including many public sector employers, insisted on trust-loan arrangements as a condition of employment.

HMRC said: “We know that facing a large tax bill can be stressful, and our teams will make sure that anyone who needs extra help receives support from a named contact who is trained to support people who are anxious or stressed.”

In the summer of 2018 the Loan Charge Action Group (LCAG) wrote to HMRC asking for a dedicated helpline, warning there would be suicides. When HMRC didn’t respond they set up their own helpline – which is staffed by trained counsellors and takes distressed calls every day.

Boris Johnson
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Prime Minister Boris Johnson has called for an independent review

During the Conservative leadership contest, at hustings in Carlisle on 29 June, Boris Johnson said the policy needed an independent review.

“The real culprits in this matter if I may say so are not so much the individuals themselves who have decided to use the loan charge as a way of minimising their tax exposure. It’s the people who advised them that that was a sensible thing to do.”

“It seems superficially unjust to me that they should then be retrospectively pursued for what they were told was an entirely legal option. It needs a proper independent review.”

However, since Boris Johnson entered 10 Downing Street, there has been no change as the August deadline draws near.

‘Losing hope’

Gayle told the Today programme: “People are losing hope. This is real life and those in a position to halt this are silent. They’ve gone very quiet.

“The Prime Minister would be the obvious first person who is in a position to instruct the Treasury. There is a lot of hope that people would come in and make some changes, make an announcement. But there is silence. Nothing – just nothing.”

Asked why this should be on the top of the Prime Minister’s priority list, she answered:

“Because he can save lives. By halting it he can save lives. I can’t bring my dad back, no-one can and I would hate to think how he would be coping right now if he was still waiting, still dealing with this. I can’t even imagine.”

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