HMRC's loan charge has caused 'widespread anxiety and distrust', MPs say

Attempts by HMRC to claw back unpaid taxes have caused “widespread anxiety and distrust”, MPs have warned.

Haltemprice and Howden MP David Davis has warned of the consequences of HMRC's loan charge
Haltemprice and Howden MP David Davis has warned of the consequences of HMRC's loan charge

The Treasury sub-committee said while it was right for the Government to protect public funds from tax avoidance, their inquiry has found it is “too difficult” for people to find out their rights surrounding the new “loan charge”.

The loan charge is a measure to claw back unpaid taxes by people who used “disguised remuneration schemes” and avoided paying income tax or national insurance on payments.

HMRC estimates that about 50,000 people have used these schemes over the past two decades.

MPs have previously claimed that the stress of facing a large unexpected tax bill has driven some people to take their own lives.

Some taxpayers fell foul of the new anti-tax avoidance measures after previously having taken professional advice to engage in the schemes.

HMRC said such schemes “are tax avoidance measures that seek to avoid income tax and national insurance contributions by paying scheme users their income in the form of loans. The loans were never intended to be repaid, so they are no different to normal income and are taxable.”

Earlier this month, former Brexit secretary and Haltemprice and Howden MP David Davis claimed four suicides had been linked to the way HMRC has dealt with chasing unpaid taxes relating to the loan charge.

Mr Davis urged the Treasury to consider people’s mental health as it implemented the policy.

John Mann, Treasury sub-committee chair, said: “Setting aside the policy, HMRC’s administrative approach to the payment of large unexpected tax bills has been sensible. The delay, however, in clarifying payment terms for those wanting to settle their past use of such schemes has caused widespread anxiety and distrust.”

An HMRC spokesman said: “We know that some people are facing large tax bills, often as a result of using tax-avoiding loan schemes over a number of years, so we have responded by providing affordable payment arrangements and enhanced practical support.”