Suspend loan charge to ease torment of people facing hardship, Government is urged

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. There was an outcry when people on modest incomes who had acted on professional advice received life changing tax bills in connection with the loan charge. In 2019, changes were made to the policy following a review, but critics still believe it is flawed.

The tax professionals’ letter states: “A fresh approach is needed, from the new Government and from HMRC, that must be directed to take one. Affected taxpayers simply cannot afford to pay the sums HMRC are demanding of them, which often involve life-changing sums, typically multiples of their current annual earnings if indeed they are still earning. This has resulted in serious financial hardship, often with devastating consequences for affected taxpayers’ lives and livelihoods. Sadly.. this has led to a number of suicides and there are frequent reports of others who are suicidal.”

The letter says it would be pointless for HMRC to continue pursuing these individuals for the taxes believed to be due from them.

It added: “Not only would it cause yet further hardship and misery for those affected, but the current deadlock between HMRC and affected individuals, and HMRC’s continued pursuit of them, would only continue to generate negative publicity for both HMRC and the Treasury under the new Government. We are therefore very heartened by your new approach to us and others that sought to engage with the previous Government, but who were ignored.”

The tax professionals said that it was essential, in light of this forthcoming review, that all HMRC-related activity linked to the loan charge is suspended.

The letter added: "Not suspending these would render any review meaningless, because HMRC could and would continue to pursue those affected (and would likely do so more promptly and more rigorously, knowing that it may be mandated to change its approach following the review). We and other sector professionals remain committed to working with the Government with regards to the much needed fresh review and resolution that must then follow, in the interests of all.”

In reply to a question about the loan charge from Sarah Dyke, the Liberal Democrat MP, James Murray, the Exchequer Secretary to the Treasury, said: “I know that the loan charge is a very important matter for many members and their constituents.

"Within my first two weeks in office, I had my first meeting with campaigners to discuss the loan charge. The Chancellor and I have been considering this matter since taking office and will provide an update in due course.”