Young professional fears for family's future after being hit with £60,000 tax bill due to the loan charge

He told The Yorkshire Post: “This is the first thing I think about in the morning and the last thing at night, and it is having a huge impact on my family’s wellbeing especially as I am trying to support my family with the cost of living crisis. I have no idea where to turn.”

The loan charge, announced by Government in 2016, was designed to tackle tax avoidance schemes where individuals receive income in the form of loans that are not repaid to avoid income tax. A review was announced by the Government in 2019 after thousands of people were hit with large and unexpected tax bills. Changes were made to the loan charge following Lord Morse's review in 2019 which reduced its impact, although critics, including members of the Loan Charge & Taxpayer Fairness All Party Parliamentary Group, believe the policy is still flawed and punitive.

The man said: “As a young professional, I was advised by a potential contract employer in 2013 to join an LLP (limited liability partnership) in order to ensure that I had the relevant insurances.”

He added: “I also completed due diligence through my independent chartered accountant and was assured at every stage that this was fully compliant. From 2013 to 2018 inclusive I worked for a variety of companies before taking up permanent employment which was fully PAYE. After having a contract ended early in 2018 and having a mortgage, I decided that I needed to go permanent. Since then I have been in full employment and am now married and raising a young family. I have not received any letters, investigations or assessments relating to the above from HMRC in any of my tax matters to date. At the time the loan charge was being discussed in the news, I absolutely did not think this applied to me as the payments were never loans.“At the end of February this year, out of the blue, I received a tax assessment for over £60,000 for the tax year ending April 5, 2019 to be paid in March 2023. I have absolutely no idea no idea how this is going to be paid, as I am supporting my wife on maternity leave and our new born child.”

He added: “Upon researching the issue, it seems that there is a groundswell of opinion regarding the unfairness of a retrospective tax charge which has resulted in unfortunate instances of suicide. I am desperate to try and find a solution. I have written letters to HMRC which they appear to have interpreted as an appeal, which they were not. With months between replies, I have no idea where I currently stand. I managed to beg and borrow a small part of the life changing amount that they requested (£20,000) before their deadline in February 2023, where they said they would try to collect the remainder from the LLP. They appear to have sent the money back to me and have opened investigations into other tax years. I can completely understand the need to make a settlement that is fair for everyone involved, however if they stay their current course, especially with late payment interest building, I have a real fear we will be made homeless.

He added: “I am not trying to appeal but simply agree a fair amount to pay. I also cannot understand why late payment interest is being levied, where HMRC failed in their statutory obligation to inform users of any suspicion that the arrangements were not compliant nor to collect the tax in the first place. The LLP in question has never appeared on HMRC’s known tax avoidance enablers list.”

An HMRC spokesperson said: “We take the wellbeing of all taxpayers very seriously and recognise the large tax liabilities can add significant pressures for some people.“We will not make people sell their home to fund a loan charge or disguised remuneration tax bill. We never forget that there’s a human story behind every unpaid tax bill and taxpayers are supported by HMRC’s trained advisers.”

The spokesman stressed that anyone who is worried about paying what they owe should contact HMRC to talk about options which include paying by instalments. HMRC can agree an affordable and sustainable instalment plan based on customers’ specific circumstances and for as long as they need,the statement added.

The statement added: “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

“HMRC issues discovery assessments as a normal part of our compliance work to enable us to recover any loss of tax from customers, not just those involved in avoidance. These assessments come with important safeguards, including appeal rights. The discovery assessment letter also provides information for customers who are concerned about paying the tax that is due. We can also refer customers for free debt advice that is independent from HMRC. Individuals can do this whether or not they have exercised their right to appeal the assessment.

“If customers want debt advice, they should call the loan charge helpline on 0300 322 9494. We will refer them to an independent debt advice organisation that understands how the loan charge affects them and the options they have.

“HMRC look to the employer to pay in the first instance but will consider other options when collection from the employer is not possible. This includes when the employer no longer exists or is based offshore. Approximately 80 per cent of the £3 billion HMRC have brought into charge through Disguised Remuneration settlements between Budget 2016 and the end of March 2022 has been from employers. However, liability for tax is always that of the individual and the overall principle remains that an individual is ultimately responsible for their own tax affairs.”

According to HMRC, the estimated tax gap from marketed avoidance sold primarily to individuals, has fallen from an estimated £1.5 billion in 2005-06 to £0.5 billion in 2021-22.

The statement added: “A hardcore of avoidance promoters remain but we are determined to drive them out of business. To undermine these promoters, by the end of July 2023 we have published details of 41 promoters, nine directors, and 45 tax avoidance schemes, helping protect thousands of individuals. We have also issued 15 stop notices, between August 2022 and the end of July 2023, legally requiring a promoter to stop promoting a tax avoidance scheme. Since 2016 we have successfully prosecuted more than 20 people over avoidance schemes.”