Former members of armed forces have expressed suicidal thoughts after facing 'cruel and unfair' loan charge, says campaigning group

The Loan Charge Action Group has called on the Prime Minister and Chancellor to "change course" over the loan charge, a policy which has left thousands of people with unexpected tax bills after taking professional advice.

Last week, the former Brexit secretary David Davis became the 118th Parliamentarian to sign a letter which warns the Prime Minister and Chancellor that thousands of people are facing bankruptcy due to the loan charge.

The open letter, which has been sent on behalf of the Loan Charge & Taxpayer Fairness All Party Parliamentary Group (APPG), claims the loan charge will have a devastating impact on thousands of UK families. Seven suicides were reported to the APPG in the last Parliament.

Labour leader Sir Keir Starmer has also said that HMRC has "urgent questions to answer" over its handling of the loan charge, in a letter seen by The Yorkshire Post.

Sir Keir has also revealed that he has ordered his Shadow Treasury Ministers to work with loan charge campaigners to prevent this type of controversy arising again.

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.

Following a public outcry, after thousands of people on modest incomes faced large and unexpected tax bills, the Government commissioned a review into the policy in 2019.

The review has not ended the controversy. The APPG letter calls on the Prime Minister and Chancellor to find a "fair resolution” to the loan charge saga.

Evidence uncovered by the Loan Charge All-Party Parliamentary Group found that, in the vast majority of cases, these arrangements were not entered as aggressive tax avoidance and were often a condition of employment, especially in the public sector.

A substantial number of people, especially in the public sector, did not know or understand that their pay arrangements involved loans, the APPG found.

The Loan Charge Action Group has highlighted the case of a former soldier from Barnsley, who said he was left in despair after being affected by the loan charge.

The man, who has asked to remain anonymous, said: "At my lowest ebb I was 18 hours away from jumping from my local motorway bridge and ending it all, I only stopped as a result of my accountant explaining that all I would do is make the problem worse as I would leave all of these problems for my wife and daughters."

The man said he settled with HMRC on post 2010 loans resulting in him having to re-mortgage his house for the next 10 years.

He added: "I had only just paid it off one year before and I must also pay 50 per cent of my disposable income to HMRC every month now until I retire."

He added: "I paid a lump sum of £25,000 before the September deadline and I now have to pay out just short of £1,000 a month to HMRC and mortgage payments for the next 10 years and then a further eight years of payments to HMRC."

Steve Packham, a spokesperson for the Loan Charge Action Group said: “This is yet another case that shows the cruel and unfair reality of the loan charge, yet another example of someone who has considered taking their own life due to a policy that has caused at least seven suicides.

"This is not the first former member of the armed forces that has expressed suicidal thoughts due to the loan charge.

“There are numerous ex veterans who face the loan charge, people who risked their lives serving their country, yet this Government and HMRC are hell bent on ruining their lives with this policy.

"This is something that should outrage people and we urge the Armed Forces Minister to take an interest and press the Prime Minister and Chancellor to change course before more lives are ruined”.

When questioned by The Yorkshire Post in June, the Chancellor Rishi Sunak said the loan charge had “already been through” a lot of scrutiny and been amended.

Responding to concerns about the loan charge, a Government spokesperson has told The Yorkshire Post: “The loan charge was introduced to ensure those who used disguised remuneration tax avoidance schemes paid their fair share of income tax and national insurance contributions. It is only right that we continue to tackle these type of avoidance schemes as they deprive our public services of vital funding."

“We encourage anyone who is worried about paying the loan charge to contact HMRC so they can help. HMRC are committed to working with taxpayers to enter manageable payment plans to spread their tax liability and ensure that they are affordable.”

Sir Amyas Morse led an independent review into the policy in 2019 and concluded that it was right that the loan charge remain in force, the spokesman added.

"The Government recognised concerns around its impact, which is why it accepted all but one of the recommendations made, leading to significant changes in legislation.

"Sir Amyas Morse made clear in his report that his recommended changes to the loan charge policy applied to both individuals and employers, unless otherwise specified, as Finance Act 2017 did not draw a distinction between the two.

"HMRC will take action against schemes marketed as enabling contractors to pay less tax than they should. Contractors who are worried that they have been offered such a scheme can contact HMRC.

"Around 20 promoters have moved out of promoting altogether in the last six years due to HMRC activity." the statement said.

In November 2020 HMRC launched an awareness campaign “Tax Avoidance – Don’t get caught out” targeted at contractors in the IT, medical and oil and gas industries where promoters are particularly active.

The spokesman added: "This campaign advises taxpayers how to spot avoidance schemes, including those promoted by umbrella companies, explains the risks involved and where people can get more information to enable them to make informed choices if they want to leave an avoidance scheme.

Draft guidance, which is available at GOV.UK, shows how the Government is tackling tax avoidance promoters, the statement added.

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