Vulnerable people facing loan charge are being hounded for sums HMRC is 'well aware' they cannot pay, says MP

The tax adviser, who has asked to remain anonymous, told The Yorkshire Post, that several clients facing the loan charge have had suicidal thoughts, while one client suffered a stress-related heart attack and others have seen their marriages collapse due to the financial strain caused by the policy.

In the letter the tax adviser says: "It is not, and has never been, my intention to challenge the legal aspects of the loan charge legislation but to bring awareness of HMRC’s behaviour, which as each year passes and the number of suicides continue to rise, I can say is becoming more and more difficult to put into words. The loan charge policy was first announced in the Finance Bill 2017, a controversial retrospective tax to be brought in to counter tax avoidance, to penalise past users and deter possible future users from engaging on loan type structures.

“Prior to the policy being announced in the Finance Bill 2017, HMRC issued a consultation document named “Tackling Disguised Remuneration”, in their summary of responses they state that 90 per cent of respondents who either took time to comment on the proposed policy or who HMRC had met with themselves to discuss the policy, disagreed with the new measures. This should have instantly raised concern with HMRC that the policy needed to be reviewed.”

Instead the loan charge legislation was rushed through Parliament without much discussion, if any, being given to the fact HMRC were bringing in a retrospective tax to penalise individuals who have never been proven to have done anything illegal, the adviser says.

The letter continues: “The main concern in all of this, is of course the vulnerability of the individuals affected and the complete lack of support from HMRC. A survey done by the Loan Charge and Taxpayer Fairness All Party Parliamentary Group, highlighted how many individuals had in fact had suicidal thoughts. The financial burden along with the stigma attached to the loan charge, is glaringly obvious when looking at the results of this survey.

"During the past few months, there has been a significant rise in HMRC debt collectors appearing at individuals’ doors, similarly threatening calls to individuals has also risen. People are in despair, people are in vulnerable mental states and HMRC’s tactic is to pile the pressure on further. This behaviour needs to be addressed.”

"HMRC need to sit down with the professionals, with the LCAG (Loan Charge Action Group), with the APPG and work with them to reach an agreeable conclusion, there is a new Counter Avoidance Director in place, this is his chance to see things right, to stop working against the professionals in the industry and work with us to reach a solution. At no point in history has the introduction of a tax policy ever created such a devastating effect on human life.”

Mr Smith said: “This letter is yet more damning evidence of the reality of the Loan Charge and the way HMRC treat people facing it. It is clear, including from evidence sent to the Loan Charge and Taxpayer Fairness APPG, that far from receiving any support, many vulnerable people continue to be hounded for sums HMRC is well aware they cannot pay. With HMRC having confirmed 10 suicides and 13 suicide attempts, there urgently needs to be a change of approach.

“The picture painted by senior HMRC staff is so clearly at odds with the evidence from individuals and advisers, it’s high time that the Treasury stepped in and ordered a new approach to resolve the whole situation to the benefit of everyone.”

Steve Packham, Spokesperson for the Loan Charge Action Group said his group was urging the Government to wake up and instruct HMRC to find a resolution.

An HMRC spokesperson said: “Significant changes were made to the Loan Charge following Lord Morse's independent review in 2019 which reduced its impact.

“We take the wellbeing of all taxpayers very seriously and recognise that large tax liabilities can add significant pressures for some people. Taxpayers are supported by our trained advisers who, where appropriate, also encourage them to contact organisations such as Samaritans or Mind for specialised help.”

“We never forget that there’s a human story behind every unpaid tax bill. No-one is more aware of that than our settlement teams, who have supported more than 20,000 customers to settle their use of disguised remuneration schemes. This has secured more than £3bn for the UK’s essential public services.”

A spokesman for the Treasury Committee said the committee had covered the loan charge and the issue of disguised remuneration at its recent hearing with HMRC and in follow up correspondence.

In the hearing, the Conservative MP Danny Kruger said to Jim Harra, HMRC’s First Permanent Secretary and Chief Executive,: “Looking at some old debt, which is the loan charge, can you tell me, because I am unclear from HMRC’s public statements and from freedom of information requests and internal correspondence, whether you are pursuing the promoters of the schemes used by people who are subject to the loan charge?”

In reply, Mr Harra, said “Absolutely. Our counter avoidance strategy is two-pronged: we want to tackle both demand and supply. In recent years, increasingly, our focus has been on trying to throttle the supply from promoters. We have been given a series of powers in successive Finance Bills to enable us to do that. Most recently, in 2021-22 we were given new powers that enable us to act much more quickly against promoters than we were previously able to.”

Mr Harra also told MPs: “There is no sort of special deal that a taxpayer can reach; they have to settle their liability for tax in the standard way, but in terms of how we deal with them and support them, as I say, we have trained our staff to identify those who need extra support. Often the caseworker is able to supply that support, but where they think specialist support is required, there is a team of people to whom they can refer the taxpayer, who will, if that taxpayer is vulnerable, take responsibility to make sure that those vulnerabilities are addressed in the way that we deal with them. But it does not alter the tax bill, ultimately, that the person has to pay.”