Thousands are being targeted by harsh HMRC tax-collecting scheme linked to 10 suicides
Four years ago, Michael Squires received a letter that turned his life upside down.
A brown envelope containing a tax demand for £24,000 landed on his doormat.
It came out of nowhere and gave Mr Squires sleepless nights as he worried about where he would find the money.
“It’s a horrible anxious feeling, I knew that I had taken due diligence and I knew that I had done what I thought was right,” he said.
“So, you feel the system is against you, you feel like you can’t fight back. In a way, you know that you’ve been conned, and you feel stupid… and I felt that for quite some time.”
Mr Squires, a healthcare worker from Leicestershire, is not alone.
‘Unjust campaign is targeting wrong people’
Tens of thousands of people across the country are facing crippling tax demands from HMRC in a harsh campaign that has been linked to 10 suicides.
HMRC has been ruthlessly pursuing people with the “loan charge” which came into force in 2017 through a piece of legislation that targeted those who were paid their salaries through loan schemes. It made individuals liable for tax that their employers should have paid.
Tax lawyers described it as an unjust campaign that is targeting the wrong people and undermining the rule of law by overriding statutory taxpayer rights.
HMRC has been targeting workers who had their salaries paid into umbrella companies, which would pay individuals a loan that was typically not paid back. Many of those who signed up, including nurses, supply teachers and council workers, had little or no choice but to take on work through these schemes.
They were directed to the schemes by their work agencies, reassured that their tax and national insurance was being taken care of and that the schemes were HMRC compliant.
In many cases, they were mis-sold.
Tens of thousands in fear of bankruptcy
For years HMRC failed to act against these schemes, which resulted in widespread underpayment of income tax and national insurance. The courts have since ruled that the employers or agencies should have been paying tax to the exchequer. However, the loan charge legislation allowed HMRC to pursue individuals in lieu of the agencies or employers.
Five years ago HMRC started sending letters to individuals, explaining that these schemes were “disguised remuneration schemes”, imposing a tax liability on what it now classified as income and applying interest – then urging them to settle.
In some cases, the bills ran into the hundreds of thousands of pounds. Those who could or would not pay were warned that they would be hit with a loan charge, typically a much larger amount because the total sum was taxed in a single year, often applying a 45% tax rate on the income. It meant that in many cases people were paying back far more than they would have done if they weren’t part of the schemes.
HMRC threatened to take people’s possessions and sell them at auction if they didn’t find the money.
In some cases, the agency set up payment plans, but in others, people had little choice but to take out further loans.
Tens of thousands of people are still living in fear of bankruptcy, and they could be forced to hand over cash if and when they sell their homes.
The consequences have been devastating.
Warning of further suicides
Sky News has spoken to families whose lives have been torn apart. One woman told us that her marriage was breaking down, while others described dangerous mental health spirals.
HMRC has admitted that there have been 10 suicides linked to the loan charge.
It has referred cases of suicide to the Independent Office for Police Conduct (IOPC), which oversees certain serious complaints about the conduct of tax inspectors.
Campaigners have repeatedly warned of the risk of further suicides and have demanded that HMRC provide a 24-hour suicide prevention helpline.
Mr Squires said: “We are being pursued by a very big organisation who hasn’t warned us. I received a warning letter four years later that I may have been employed by a company involved in a scheme that wasn’t legitimate.
“So, we’ve had no warning. HMRC is not out of pocket. The umbrella companies aren’t out of pocket.
“The agencies that pushed it aren’t out of pocket. It’s only the end worker and we’re just normal people.”
Michael Squires says he felt like the system was against him
HMRC targeting individuals rather than scheme organisers
While some of those who engaged in loan schemes entered into them with the explicit intent to minimise their tax bills, a large number were simply trying to do the right thing.
In many cases individuals were advised by their work agencies to sign up to the umbrella companies to streamline their tax affairs, helping them to avoid the complicated process of setting up a limited company.
Others turned to the umbrella companies because they were worried about falling foul of new IR35 rules that apply to contractors operating as limited companies.
The NHS, local authorities and other public sector organisations all engaged workers who were part of these schemes.
Back in 2021 HMRC even admitted that it had at least 15 contractors on its own books who were part of “disguised remuneration schemes” between 2016 and 2020.
Read more from Sky News:
Asylum seekers moved from taxpayer-funded hotels – to other hotels
Warning about huge number of Facebook Marketplace scams
Toddler found starved to death – prompting questions for police
Keith Gordon, a tax barrister, said: “When the contractors were paid, the PAYE rules applied and were meant to ensure the tax was deducted from the salary before it was received by the workers.
“That PAYE was not paid. The workers suffered a deduction but that was just simply taken as fees by the promoters of the schemes which were running rather dubious tax avoidance of agents without contractors’ knowledge.”
He suggested that HMRC were targeting individuals instead of the organisers of the schemes because it was an easier way of recouping the money.
Mr Gordon continued: “Number one: The promoters have deeper pockets and might be able to fight back against unfair legislation.
“Number two: That would probably amount to admitting the revenue made a mistake in the first place.
“Number three: Some of these promoters are now insolvent because they’ve had plenty of years to wind up their affairs and become out of the reach of the tax authorities.”
Keith Gordon said HMRC is targeting individuals because it is easier
Loan charge has ‘no legal basis’
MPs and tax lawyers are calling for HMRC to rescind the policy – arguing that it amounts to a retrospective charge that overrides taxpayers’ statutory protections by effectively dismissing time limits on HMRC’s right to investigate tax affairs and by blocking individuals’ rights to fight their case in court.
It is also without any legal precedent.
The courts have repeatedly rejected HMRC’s interpretation that income tax can be applied on loans to individuals.
A 2017 Supreme Court ruling put the onus on the employer to deduct income tax before loans were advanced to an individual.
A 2019 parliamentary report concluded that “the loan charge is in defiance of the rulings of the court… no court case has given the legal basis for the loan charge”.
MPs are preparing to debate the loan charge in parliament today, where they will hear that tens of thousands of people were the victims of widespread mis-selling.
They will question why HMRC is not putting more energy into targeting the promoters and companies responsible for these schemes.
These companies made their money by charging individuals a fee to run the loan schemes. It meant that in many cases people had similar deductions to what they would have had if they were under PAYE.
David Davis, Conservative MP for Haltemprice and Howden, said: “The loan charge has been, frankly, a government-sponsored disaster for a very large number of people, ordinary decent people, nurses and other ordinary people who were faced with a work contract that denied them any employment rights, told them they had to accept and that was the basis on which they got the job.”
He added that HMRC should “go back to the promoters, go back to the contractors who insisted on these terms and say, ‘you can pay at least your share, if not the whole bill’, but they’re not doing that. And I’m afraid in my view, they’ve made a massive ethical error in not doing so”.
An HMRC spokesperson said: “The loan charge seeks to recover tax that has been avoided by disguising income as loans. It is our responsibility to collect the tax that people owe.
“We take the wellbeing of all taxpayers very seriously and recognise that dealing with large tax liabilities can lead to pressure on individuals.
“The support we have in place to help people settle their previous tax avoidance includes offering payment by instalments: these arrangements are based on what the taxpayer can afford, and there’s no upper limit over how long we can spread payments.
“Our message to anyone who is worried about paying what they owe is: please contact us as soon as possible to talk about options.
“Above all we want to prevent people getting into these types of situations and our message is clear – if a tax scheme sounds too good to be true, it probably is.”
It’s like The Godfather, one reformed drug trafficker tells me.
The mythical gangster film centred on an organised crime dynasty locked in a transfer of power.
Communities in Scotland currently have a front row seat to a new war of violence, torture, and taunts as feuding drug lords and notorious families grapple for control of Glasgow and Edinburgh.
There have been more than a dozen brutal attacks over the past six weeks – ranging from fire bombings to attacks on children and gun violence.
A firebomb attack in Scotland
Victims left for dead, businesses up in flames
Gangsters have filmed themselves setting fire to buildings and homes connected to the associates and relatives of their bitter rivals.
The main aim, they boast, is to “exterminate” the opposition.
The taunting footage, accompanied by the song Keep On Running by The Spencer Davis Group, has been plastered over social media as part of a deliberate game of goading.
A 12-year-old boy and 72-year-old woman were left for dead when teenagers wearing balaclavas burst into a home in north Glasgow.
Garages and businesses have gone up in flames. Shots were fired at an Edinburgh house.
Signals are being sent of who wants control of Scotland’s dark criminal underworld.
A firebomb attack that saw a man throw an incendiary device through a building window
The fire attack set to the song Keep On Running by The Spencer Davis Group
What’s caused the gang war?
The former director of the Scottish Crime and Drug Enforcement Agency, Graeme Pearson, explains how a “vacuum of leadership” is playing a part.
Last October, Glasgow-based cocaine kingpin Jamie Stevenson, known as The Iceman, was jailed after orchestrating a £100m cocaine shipment stashed in banana boxes from South America.
The mob leader was one of Britain’s most wanted, running his business like another on-screen criminal enterprise: The Sopranos.
The 59-year-old fugitive went on the run before eventually being hunted and apprehended by police while out jogging in the Netherlands.
Jamie Stevenson. Pic: Police Scotland
Pic: Crown Office
‘Old scores to settle’
But paranoia was running rife about how this notorious gangster could be brought down. Was there a grass? Was it one of their own?
It further fuelled divisions and forced new alliances to be forged across Scotland’s organised criminal networks.
It wasn’t until The Iceman case came to court that it was revealed an encrypted messaging platform, known as EncroChat, had been infiltrated by law enforcement.
It ultimately led to Stevenson pleading guilty.
Ex-senior drug enforcement officer Mr Pearson told Sky News: “It is a complex picture because you have got people who are in prison who still want to have influence outside and look after what was their business.
“On the outside you’ve got wannabes who are coming forward, and they think this is an opportunity for them, and you have got others have old scores to settle that they could not settle when crime bosses were around.”
Read more from Sky News:
Scientists find strongest evidence yet of aliens
Widow has ‘no regrets’ over helping husband’s suicide
Graeme Pearson
Mr Pearson describes a toxic mix swirling to create outbursts of violence unfolding in Scotland.
He concluded: “All that mixes together – and the greed for the money that comes from drugs, and from the kudos that comes from being a ‘main man’, and you end up with competition, violence, and the kind of incidents we have seen over the past four to six weeks.”
New wave of violence ‘barbaric’
Glasgow man Mark Dempster is a former addict, dealer, and drug smuggler who is now an author and respected counsellor helping people quit drinking and drugs.
He describes the “jostle for power” as not a new concept among Glasgow’s high profile gangland families.
Mark Dempster
“There is always going to be someone new who wants to control the markets. It is like The Godfather. There is no difference between Scotland, Albania, or India,” he said.
Mr Dempster suggests a shift in tactics in Glasgow and Edinburgh in recent weeks, with 12-year-olds being viciously attacked in the middle of the night.
“It is barbaric. When young people, children, get pulled into the cross fire. It takes it to a different level.
“At least with the old mafiosa they had an unwritten rule that no children, no other family members. You would deal directly with the main people that were your opposition.”
Police Scotland is racing to get control of the situation, but declined to speak to Sky News about its ongoing operation.
It has been suggested 100 officers are working on this case, with “arrests imminent”.
But this is at the very sharp end of sophisticated criminal empires where the police are not feared, there are fierce vendettas and, clearly, power is up for grabs.
UK
Laws may need to be bolstered to crack down on exploitation of child ‘influencers’, senior MP suggests
Laws may need to be strengthened to crack down on the exploitation of child “influencers”, a senior Labour MP has warned.
Chi Onwurah, chair of the science, technology and innovation committee, said parts of the Online Safety Act – passed in October 2023 – may already be “obsolete or inadequate”.
Politics latest: Follow live updates
Experts have raised concerns that there is a lack of provision in industry laws for children who earn money through brand collaborations on social media when compared to child actors and models.
This has led to some children advertising in their underwear on social media, one expert has claimed.
Those working in more traditional entertainment fields are safeguarded by performance laws, which strictly govern the hours a minor can work, the money they earn and who they are accompanied by.
The Child Influencer Project, which has curated the world’s first industry guidelines for the group, has warned of a “large gap in UK law” which is not sufficiently filled by new online safety legislation.
Official portrait of Chi Onwurah.
Pic: UK Parlimeant
The group’s research found that child influencers could be exposed to as many as 20 different risks of harm, including to dignity, identity, family life, education, and their health and safety.
Ms Onwurah told Sky News there needs to be a “much clearer understanding of the nature of child influencers ‘work’ and the legal and regulatory framework around it”.
She said: “The safety and welfare of children are at the heart of the Online Safety Act and rightly so.
“However, as we know in a number of areas the act may already be obsolete or inadequate due to the lack of foresight and rigour of the last government.”
Victoria Collins, the Liberal Democrat spokesperson for science, innovation and technology, agreed that regulations “need to keep pace with the times”, with child influencers on social media “protected in the same way” as child actors or models.
“Liberal Democrats would welcome steps to strengthen the Online Safety Act on this front,” she added.
‘Something has to be done’
MPs warned in 2022 that the government should “urgently address the gap in UK child labour and performance regulation that is leaving child influencers without protection”.
They asked for new laws on working hours and conditions, a mandate for the protection of the child’s earnings, a right to erasure and to bring child labour arrangements under the oversight of local authorities.
However, Dr Francis Rees, the principal investigator for the Child Influencer Project, told Sky News that even after the implementation of the Online Safety Act, “there’s still a lot wanting”.
“Something has to be done to make brands more aware of their own duty of care towards kids in this arena,” she said.
Dr Rees added that achieving performances from children on social media “can involve extremely coercive and disruptive practices”.
“We simply have to do more to protect these children who have very little say or understanding of what is really happening. Most are left without a voice and without a choice.”
Read more from Sky News:
Four killed as cable car crashes to ground near Naples
Two dead and five injured in shooting at Florida university
The researcher pointed to one particular instance, in which children were advertising an underwear brand on social media.
She said: “The kids in the company’s own marketing material or their own media campaigns are either pulling up the band of the underwear underneath their clothing, or they’re holding the underwear up while they’re fully clothed.
“But whenever you look at any of the sponsored content produced by families with children – mum, dad, and child are in their underwear.”
Dr Rees said it is “night and day” in terms of how companies are behaving when they have responsibility for the material, versus “the lack of responsibility once they hand it over to parents with kids”.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway