An overweening and secretive government organisation, a group of people who, over the years, have been subjected to bullying and harassment by lawyers and debt collectors, unscrupulous businesses unwilling to own up to their responsibility in the destruction of many lives…. If you think that this sounds familiar you would be right.
And yet the subject of this article is not the appalling suffering visited upon hundreds of sub-postmasters and mistresses, but about the 50,000+ individuals being pursued by HMRC under a piece of legislation – the Loan Charge (see explainer below) – introduced to retrospectively recover unpaid taxes from people who had signed up to ‘disguised remuneration’ schemes, either through the behest of an employer, or sold to them by a promoter of tax avoidance schemes.
You may feel less sympathy for this group than for the postmasters and mistresses caught up in the Post Office scandal – inevitably anything labelled ‘tax avoidance’ is likely to attract negative commentary. There is actually a great deal of hypocrisy underlying this attitude, for how many of us will have been seduced at different times by the promise of tax-free interest earned on a personal ISA, or have looked to reduce the amount of tax that we pay through claiming deductible expenses?
Disguised remuneration schemes were often mis-sold
In the case of those now being pursued by the taxman for the large amounts of money that they are accused of owing in back tax, many were unaware that their employers had signed them up to loan schemes that allowed the employing organisation to reduce their share of tax. Many others were mis-sold schemes by unscrupulous promoters who have subsequently disappeared into the woodwork. Neither employers nor promoters have been targeted by HMRC. It is, of course, much easier to go after the ‘little people’.
As Sara Britcliffe MP said of this group during the Parliamentary debate on the loan charge on 18 January: “These are ordinary workers. These are our constituents. They are not fat cats; they have not got offshore bank accounts. These are ordinary members of the public who desperately need our help…..We should be going after the disputed tax from those who promoted and operated the schemes and who made huge amounts of money doing so…. We should be protecting ordinary workers from abuses of power and pursuing those opaque and monied bodies that sought to game the system.”
Victims are driven to desperation
The two comprehensive reports by the All-Party Parliamentary Loan Charge and Tax Fairness Group (APPG) in 2019 and 2021, detailing the human suffering caused by the loan charge, make for grim reading.
Of those responding to the APPG’s surveys, most do not have the funds to pay the taxman the very large sums demanded and have been driven to desperation. There have been 10 reported suicides and a number of attempted suicides, and more than 60 families have lost their homes or been made homeless. Nearly three-quarters of those responding to the APPG’s surveys continue to live in fear of losing their home.
As was the case in the Post Office scandal, family relationships have broken down, and there is one report of a woman deciding to have an abortion, fearing that she and her partner did not have the money to raise a child.
A social care worker is quoted in the report as saying: “I face the prospect of losing our house or being made bankrupt through no fault of our own. I had no idea when I joined an umbrella company that I was doing anything that would be later deemed less than honest.” That small word ‘later’ carries a lot of baggage.
The ‘little people’ are fighting back
The loan charge is highly unusual and deeply disliked by most Parliamentarians for its retrospective character, reaching back 20 years into the past, leading to the size of the sums demanded by HMRC. The circumstances surrounding the loan charge were often suspect, with some contractors, for instance, arguing that they were forced into joining a scheme in order to secure work with a particular organisation.
Yet again this seems to be a case of the ‘little people’ vs an aggressive, opaque and powerful organisation – while the real culprits in the tax avoidance game are the offshore companies and Amazons of this world who are costing the Exchequer billions of pounds in lost tax annually.
But the ‘little people’ are fighting back, determined to received justice. Campaign groups have been formed around the country, bringing the issue to public attention, gaining the support of MPs and attracting a lot of attention on social media. Watch this space.
What is the loan charge? – Explainer
The 2019 loan charge is an anti-tax-avoidance measure, introduced in the 2016 Finance Act to address the tax loss to the Exchequer from a variety of ‘disguised remuneration’ schemes. Under such schemes, individuals were paid in the form of loans, replacing part or all of their salary.
Usually these loans were provided not by the employer, but by an ‘umbrella’ company or third party such as an ‘employee benefit trust’ funded by the employer; and critically, the loans were structured so that they were unlikely ever to be paid back. This was done because loan proceeds, unlike salary, are not normally income, and therefore are not subject to income tax or National Insurance (employee or employer).
