Mis-selling victims are being pushed to bankruptcy and suicide while rich promoters face no action, Loan Charge Action Group tells Sir Keir Starmer

A campaigning group is calling on Labour Party leader Sir Keir Starmer to demand the Government finds a “fair resolution” to a policy which critics believe could lead to bankruptcies and suicides.

At least 115 Parliamentarians have signed a letter to the Prime Minister calling for a “fair resolution” to the loan charge saga.

The Loan Charge Action Group has welcomed Sir Keir’s commitment to work with campaigners to prevent controversies like the loan charge happening again.

Sir Keir made the comments to Keith Gordon, the tax barrister, in a letter which has been seen by The Yorkshire Post.

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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.

Sir Keir Starmer has said he acknowledges the loan charge’s impact on people’s livelihoods.

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.

At least 115 Parliamentarians have signed a letter to the Prime Minister calling for a “fair resolution” to the loan charge saga.

In its letter to Sir Keir, the action group states that it is very pleased that the Labour leader has made a statement in which he recognises the loan charge’s impact on people’s livelihoods.

The letter states: “In addition to looking at how to prevent another loan charge scandal, we hope that you will also work with the Loan Charge & Taxpayer Fairness All Party Parliamentary Group to address the profound injustice of the loan charge scandal itself and back their calls for a fair resolution to the matter that avoids the many bankruptcies and the serious - and very real - risk of further suicides if there is no further change to the loan charge.

“People facing the loan charge are victims of mis-selling. People were told, in writing, by professional advisers and by the promoters of these arrangements that these schemes were tax law compliant and QC approved. Some people even asked HMRC about them and HMRC did not tell them not to use them at the time, despite their claims that they “were always clear” that they did not work .”

The letter continues: “The loan charge has been a spectacular failure in stopping the promotion and operation of schemes.

“The loan charge doesn’t tax scheme promoters and operators at all - it simply targets individuals who used these arrangements in good faith, having been mis-sold and/or advised to do so by professional advisers.

“The biggest irony is that the loan charge not only has not stopped the schemes you refer to, but that it doesn’t actually apply to schemes being promoted and entered into from April 2019 onwards. “

In addition to unfairly targeting those who were mis-sold the schemes and causing bankruptcies and suicides it does nothing to tackle the ongoing operation of schemes and those who promote them, the letter states.

It added: “We urge you and your frontbench to raise these issues in Parliament rather than in any way support a policy that undermines the rule of law and targets ordinary people, pushing them to bankruptcy and suicide, whilst hugely rich promoters and scheme operators face no action whatsoever.”

Mr Gordon said he looked forward to working with Labour's front bench team ’“to reinstate fairness within the system”.

He added: "I have long been prepared to work with any MP of any political affiliation in order to resolve this issue. I am glad that the Labour front bench now seems prepared to address the unfairness caused by the loan charge and the wider problems within the tax system that the loan charge has highlighted."

Responding to the action group letter, a Labour spokesperson said: “Labour backed measures for an independent review of the loan charge scheme which would have examined how the policy was working in practice, but incredibly this was voted down by the Conservatives.

“Ministers cannot ignore the distressing cases where lives have been ruined and they must ensure HMRC approaches this issue in a fairer and more effective manner, while pursuing the architects of the schemes.”

The Yorkshire Post understands that the Shadow Treasury Team has been in touch with the Loan Charge Action Group to organise a meeting.

In June, the Chancellor Rishi Sunak said the policy had “already been through” a lot of scrutiny and been amended and adjusted.

Last month, Prime Minister Boris Johnson told MPs he was acutely aware “as are all colleagues around the house” of the pain suffered by all those that entered into loan charge schemes.

He added: “And I think, alas, they were misguided to do so, but I think that the line taken by the Treasury, I am afraid, is right on this.”

A Government spokesperson said: “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.”

The statement added: "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 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.

"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.

"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 on GOV.UK shows how the government is tackling tax avoidance promoters.

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