Budget speech offers perfect platform to announce scrapping of loan charge: Greg Wright

The evidence of harm collected by the All-Party Parliamentary Loan Charge & Taxpayer Fairness Group (APPG) is compelling. As the follow up letter from the MPs states, there have been 10 reported suicides linked to the loan charge. Mr Murray met two people who had attempted to take their own lives because of the anguish caused by life-changing tax bills.

One story particularly moved me. During the meeting, a man broke down when he explained that his teenage son’s suicide note had described how his father had “been distant” with him, something that he attributes to his pre-occupation with attempts to resolve the financial problems caused by the loan charge. Three other witnesses also broke down while giving testimony.

The loan charge, announced by the Tory 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. The policy was amended after a review in 2019, which reduced its impact, but critics still believe the policy is flawed because it punishes people who had been trying to do the right thing.

To quote the APPG letter: “They all used the schemes because they wanted to be compliant with the law. All of these people had taken and then followed professional advice, from either their work agencies or trusted advisers. The individuals cannot possibly pay the sums being demanded. They simply do not have the money HMRC is demanding of them.”

These people never received much of what HMRC claims should have been due in tax, because they paid a large part of their remuneration in fees to the promoters and operators of the schemes, on the basis that these individuals were ensuring compliance and paying the right amount of tax. This faith in their professional advisers was to prove horribly misplaced.

The Government has said it acknowledges that the loan charge is a “very important matter for many individuals”. Ministers have been considering the issue since taking office and have pledged to provide an update in due course. HMRC said it recognises that dealing with large tax liabilities can lead to pressure on individuals and it is committed to supporting customers who need extra help.

Many of the people who gave evidence to Mr Murray would be regarded as traditional Labour voters. They included two social workers, a nurse who helped save lives during the pandemic and an ex-RAF pilot. In short, they provide services which the country cannot do without.

Labour can show it has broken with the past by suspending the loan charge and ordering a review which is independent of the Treasury and HMRC. Perhaps the Budget speech would be the perfect platform to announce the scrapping of this controversial policy? Such an intervention would ease the anguish faced by thousands of honest, law-abiding people.

Greg Wright is the deputy business editor of The Yorkshire Post