“There is not a day goes by when I do not contemplate suicide. I know that the feeling is getting stronger and stronger daily.”
>Wait for next fiscal event is agony for loan charge victims
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These words give you an insight into how it feels to be caught up in the living hell of the loan charge scandal. The man who expressed these dark thoughts does not wish to be named. The sentiments are painfully familiar to anyone who has studied the impact of the loan charge.
The loan charge has been denounced as an “outrageous and retrospective” policy which has brought the prospect of financial chaos to honest, law-abiding people.
The Loan Charge Action Group has described the charge as “a shocking changing of the law that overrides established statutory protections for individuals”.
Critic say it undermines the rule of law by taking away a citizen’s right to challenge HMRC in court, over sums that have never been legally proven to be due.
All these claims have been rejected by the Treasury, which states that the charge is designed to tackle tax avoidance and ensure everyone pays their fair share.
The charge was introduced in response to the Treasury’s concerns about “disguised remuneration schemes” which involved individuals being paid through loans, usually via an offshore trust in a low or no tax jurisdiction, which they did not have to repay.
According to the Treasury, the loan charge means people paying themselves through loans will have to contribute their “fair share” to pay for public services.
The Treasury says it builds on more than 20 years of HMRC action to challenge these schemes.
As a result of the charge, workers on modest incomes have been hit with large, unexpected tax bills dating back to 1999. Many of these people are not wealthy “tax dodgers” but entered into new pay arrangements after being told by professional advisers that they were legal. Some had no choice because their employers, including many public sector employers, insisted on using trust-loan arrangements.
The loan charge victim who was quoted at the start of this column, said he is now potentially liable for in excess of £150,000 which he does not have.
He said: “I have no understanding of tax law and trusted the accountant (and) that what he advised was all fine.”
He had no desire to avoid his responsibilities as a taxpayer. Now he feels desperate.
“Every day I sob, I have been under a psychiatrist for anxiety and depression,’’ he says. “My marriage is under strain, my children look at me as if they do not know me anymore. My business has failed due to my inability to concentrate on anything else.”
Another loan charge victim told me he had been directed into this form of remuneration by the end client and their agent, a Government entity.
He said: “I was assured that the method was entirely legal by both the agent and payroll provider. All my tax years were closed. Then, in 2017, I got a letter from HMRC stating that I owed an estimated amount of tax for 2012 - 2013.
“Last month, I received a letter stating I owe £55,000 and they will let me pay it off over five years.
He added: “I am not a high earner, I have absolutely no clue what to do next. I know I cannot afford the £900 a month (to pay off the charge) so I have to prepare for HMRC to push me to insolvency. Although they say they will not make people bankrupt...they technically don’t.
“They pass the debt on to a debt agency and it is they who go through the process and make you bankrupt.”
More than 200 MPs have called for a suspension and independent review of the policy, but, so far, Boris Johnson’s Government has been unmoved. HMRC has said that its team is there to support anyone who feels stressed about a large tax bill.
It is time to draw back the curtains. If the Treasury and HMRC are so confident about the robust processes surrounding the drafting and implementation of the loan charge, they will surely welcome a public inquiry. A public grilling of the figures behind the charge would help to shore up confidence in Government, which has been so badly shaken by this controversial policy.