I go to bed wishing I didn’t wake up, says contractor affected by loan charge - Greg Wright

When George Osborne delivered the 2016 Budget speech to roars of approval from the Government benches, he left nobody in doubt about his determination to shut down disguised remuneration schemes to help repair Britain’s finances.

Half a decade later, no informed observer can claim that this policy has been a success. Far from it.

Analysis by TaxWatch, the investigative think tank, of HMRC’s latest figures on the users of marketed tax avoidance schemes indicates that the number of users of disguised remuneration schemes has increased dramatically, despite the Government introducing the loan charge in an attempt to close them down.

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To quote Mary Aiston, Director of Counter-Avoidance at HMRC, in 2019 to 2020, the estimated amount of tax the UK lost to marketed tax avoidance was around £0.5 billion, which is the same figure recorded in 2018 to 2019.

When George Osborne delivered the 2016 Budget speech to roars of approval from the Government benches, he left nobody in doubt about his determination to shut down disguised remuneration schemes to help repair Britain’s finances.When George Osborne delivered the 2016 Budget speech to roars of approval from the Government benches, he left nobody in doubt about his determination to shut down disguised remuneration schemes to help repair Britain’s finances.
When George Osborne delivered the 2016 Budget speech to roars of approval from the Government benches, he left nobody in doubt about his determination to shut down disguised remuneration schemes to help repair Britain’s finances.

Ms Aiston confirmed that the tax avoidance market continues to be dominated by disguised remuneration avoidance schemes, often targeted at contractors and agency workers. These schemes are frequently operated by umbrella companies, who do not comply with their obligation to deduct taxes under PAYE on payments made to their workers. A small group of persistent promoters are behind most of the tax avoidance schemes marketed to the UK public, according to HMRC.

Ms Aiston added: “We are continuing our efforts to squeeze the hard core of promoters out of the market, adopting a two-pronged approach involving choking the demand for these schemes and disrupting their supply. We are doing this through a mixture of a targeted educational campaign to would-be users of avoidance schemes and tough enforcement action against promoters.

“We also continue to use our data to identify people who might have entered tax avoidance schemes so we can alert them to the risks and help them exit these schemes as quickly as possible.”

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After adjusting the figures for the total number of individuals using marketed schemes to take into account the changing nature of the market, TaxWatch calculates that in 2013-14, there were 13,200 people on disguised remuneration schemes, rising to 32,670 in 2018-19 and 28,000 in 2019-20. That is an increase of 110% between 2013-14 and 2019-20, according to TaxWatch.

TaxWatch put these figures to HMRC, who confirmed that between 2013/14 and 2019/20 it had seen a large increase in the numbers of avoidance uses from disguised remuneration schemes.

HMRC told TaxWatch: “During 2019 to 2020 we made over 500 interventions into promoters and enablers of tax avoidance across a range of different taxes and reporting obligations.”

TaxWatch Executive Director, George Turner believes there has been little progress in tackling these schemes, adding: “HMRC have had remarkable success at closing down schemes marketed to high net worth investors, but attempts to close down disguised remuneration schemes have been a failure.”

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The consequences for the people who face the loan charge can be horrific. Many victims had no choice. They just wanted to work, so they could feed their families.

A man affected by the loan charge told me: “I got caught up in the loan charge as a contractor, as it was a condition of the agency that I was working through. The agency’s own accountants confirmed that it was all ‘above board’ and compliant, as did an independent accountant that I had used in the past.

“I go to bed wishing I didn’t wake up. I take anti-depressant medication, which helps, but the worry, guilt and sleepless nights never ever go away.”

The only effective deterrent is to fling the wealthy promoters behind these schemes in jail. As Taxwatch states, criminal law could be applied to the promoters of schemes and “there is no impediment for HMRC to arrest promoters located in the Crown Dependencies”.

At the very least, the “reprehensible” individuals promoting these schemes today should be charged with fraud. They must learn to fear the slamming of the prison door.

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