'Dangerous' loan charge has caused suicides, breakdowns and divorces, MPs tell Government
A major cross-party group of Parliamentarians has called for a new independent inquiry into a “cruel and dangerous” tax policy after it was revealed that four more people have attempted to take their own lives while facing the loan charge.
Greg Smith MP, Co-Chair of the Loan Charge and Taxpayer Fairness All Party Parliamentary Group (APPG) made the comments after a Freedom of Information Request showed the scale of the anguish caused by the loan charge, which has already been linked with 10 suicides. The latest figures, revealed in response to an FOI request submitted by Sky News, showed that HMRC has made 17 referrals to the Independent Office for Police Conduct over the suicide attempts of 14 people, up from the 13 referrals of 10 people previously known about in October 2023.
Mr Smith said: “It is distressing to hear that four more people have tried to take their own lives facing the cruel and unfair Loan Charge.
"This dangerous legislation has caused suicides, breakdowns and divorces and yet Government Ministers have shamefully broken their promise to review it and instead announced a sham review that is about how to encourage people to settle the Loan Charge demands. The worrying reality is that without the truly independent review that Ministers promised, there remains the risk of further suicides and suicide attempts. The Loan Charge and Taxpayer Fairness APPG will continue to call for an independent inquiry into the whole Loan Charge Scandal. This would look at why the obvious suicide risk of this unfair legislation was recklessly ignored by HMRC and the Treasury.”
The loan charge, first announced in 2016, was designed to tackle historical use of contrived tax avoidance schemes that seek to avoid charges of income tax and National Insurance by disguising remuneration as a form of non-taxable payment, typically a loan.
There was an outcry when thousands of people on modest incomes were hit with life-changing bills due to the charge, after they acted on professional advice. Changes were made to the loan charge following a review in 2019 which reduced its impact, but the APPG still believes the policy is flawed. Earlier this year, Exchequer Secretary to the Treasury James Murray commissioned Ray McCann, the former President of the Chartered Institute of Taxation, to lead a fresh review into the loan charge after a long-running campaign from hundreds of MPs.
However, the announcement caused dismay among some MPs and campaigners, with Mr Smith stating the review is not a review at all as it will “not change the position people are in, nor review the legislation and whether it was fair and justified”.
Steve Packham, spokesperson for the Loan Charge Action Group said his group has been continually warning HMRC and Government about the serious risk of suicides since 2018, “but this has been recklessly ignored”.
"Treasury Ministers have clearly stated that people facing the Loan Charge are victims of mis-selling yet they have refused to hold a genuine review into the Loan Charge Scandal and have refused to pursue those responsible for the mis-selling, despite saying this should happen. Until and unless the whole Loan Charge Scandal is investigated and resolved, there remains a risk that more lives will be ruined and Treasury Ministers would be responsible.”
In a letter to the APPG, Mr Murray said “the independent review of the Loan Charge is focused on pragmatic solutions to bring closure for the unsettled and unpaid loan charge populations”.
He said that, like many other MPs, he had been impacted by meeting people whose lives have been affected by the Loan Charge.
He added: “I believe the most important outcome of any review must be to bring the Loan Charge to a close for those people who still owe substantial amounts of money but can see no way to resolve their debts. I do not think it is right for people affected by the Loan Charge to have to wait years for any progress on bringing this matter to a close. I have ensured that the review has a focused remit, allowing it to report by this summer. The Government will respond by Autumn Budget 2025.”
The review into the loan charge is independent of the Treasury and HMRC, the Exchequer Secretary to the Treasury James Murray said in a letter to MPs.
He added: “As set out in the terms of reference, the reviewer will have the final say on what is included in his report. The terms of reference also make clear that it will be for the reviewer to decide what arrangements are needed to engage with stakeholders during the review.”
"Alongside the review, the Government has published a consultation on a comprehensive package of measures to close in on promoters of marketed tax avoidance, whose contrived schemes deprive vital public services of funding and leave their clients with unexpected tax bills.”
A spokesman said that HMRC takes the wellbeing of all taxpayers seriously and it is committed to identifying and supporting customers who need extra help with their tax affairs.
HMRC has made significant improvements to this service over the last few years, the spokesman added.
"Where customers aren’t able to pay the tax in one go we offer flexible payment terms that take into account their personal circumstances,’’ the spokesman added.