'Robust' assurances over tax affairs have bitter ring for health worker - Greg Wright

MPs of all parties have raised concerns about the loan charge.MPs of all parties have raised concerns about the loan charge.
MPs of all parties have raised concerns about the loan charge.
LET me introduce you to Jennifer, the sort of tireless, selfless health worker this country needs more than ever.

She is far from wealthy and has always been keen to pay her taxes because she knows the money raised supports the acute health services where she works.

Jennifer is also one of thousands of people affected by the loan charge, which has left honest people on modest incomes with life-changing bills.

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Jennifer said she is being asked to stump up £99,777 in connection with the charge, which she hopes she can persuade HMRC to allow her to settle over 10 years.

“I have been an NHS nurse since 1987, and over that time have risen to a level of seniority,’’ she said.

“I was head hunted to a role at a prestigious organisation in 2012 and was engaged as an interim. It was recommended that I use an umbrella company for ease, as the post would shortly become substantive.

She added: “It was always my intention to return to NHS substantive work, having already served 26 years, and thought this to be the easiest option.

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“Unfortunately, while performing this role, I was admitted to ITU with sepsis and during my recuperation the post was advertised and I was unable to apply. After several months of sickness I needed to work and was again headhunted to another interim post. I am now employed at an acute NHS Hospital and have worked substantively since April 2017.”

She said: “Following some correspondence from HMRC I asked the umbrella company if their scheme was legal and was assured that it was.”

Jennifer didn’t know it at the time, but her life was about to be changed by the loan charge. The charge, announced by the 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.

When faced with the looming threat of the charge, did Jennifer’s umbrella company warn her about the risk to her financial wellbeing? Far from it. They provided assurances which have not stood the test of time.

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An email from the provider - which has been forwarded to me - said: “I understand a notice of assessment letter can be quite alarming, however, please rest assured that we have always invested heavily into the legal aspects of tax law to ensure we are operating as we should.”

The email continues: “We regularly consult with leading barristers to ensure that we are acting as we should, and the barrister is new each year to ensure that there is no complacency on their part. It is as a result of this repeated checking that we are confident the planning is sufficiently robust to be able to withstand any and all scrutiny from HMRC.”

This email, which would have reassured even the most sceptical observer, was sent in March 2017. A year later, in the final message sent to Jennifer by the umbrella company, the tone had changed.

The email said: “The purpose of this email is to bring to your attention all the options that are available to you concerning the loan charge legislation introduced by HMRC, which will take effect from April 2019.

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“As a recipient of a third party loan you will be caught by this punitive legislation and should take remedial action to mitigate your liability without delay. At the time the loans were made, they were within the tax legislation and not taxable. However, the new ‘Loan Charge’ legislation has been made retrospectively and you will be subject to the full force of this legislation when it takes effect in 2019.”

And so it proved. Jennifer is furious that she has faced a large, unexpected bill, when the directors behind the umbrella company have apparently faced no sanction.

HM Revenue & Customs is, however, holding a consultation exercise on ways to tackle future use of disguised remuneration tax avoidance.

MPs across the political divide have raised concerns about the loan charge.

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There is a simple question that all the promoters of these umbrella schemes must answer.

The loan charge was announced by the Government in 2016, so why on earth were you still confident of your “robust” planning processes a year later?

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Thank you

James Mitchinson

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