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.
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.
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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.
HMRC threatens to auction off people’s property
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.
HMRC ‘aren’t out of pocket’
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.”
Image: Michael Squires says he felt like the system was against him
HMRC targeting individuals rather then 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.
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.”
Image: 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.”
An elderly British couple who were detained by the Taliban earlier this year have been freed.
Barbie Reynolds, 76, and her husband Peter, 80, were detained by the Taliban’s interior ministry on 1 February as they travelled to their home in Bamyan province, central Afghanistan.
In March, they were moved to a maximum security prison in Kabul where they had been held without charge since.
They were safely released from detention on Friday and flown to Doha following mediation led by Qatar.
Image: Peter Reynolds was visited by Qatari diplomats last month
Sky Correspondent Cordelia Lynch was at Kabul Airport as the freed couple arrived and departed.
Mr Reynolds told her: “We are just very thankful.”
His wife added: “We’ve been treated very well. We’re looking forward to seeing our children.
“We are looking forward to returning to Afghanistan if we can. We are Afghan citizens.”
Asked by Lynch if they had a message for family and friends, Mrs Reynolds replied: “My message is God is good, as they say in Afghanistan.”
Image: Peter and Barbie Reynolds after their release
Image: Qatari and British diplomats with Barbie and Peter Reynolds on the flight to Doha
Prime Minister Sir Keir Starmer welcomed the news in a statement thanking Qatar.
“I welcome the release of Peter and Barbara Reynolds from detention in Afghanistan, and I know this long-awaited news will come as a huge relief to them and their family,” he said.
“I want to pay tribute to the vital role played by Qatar, including The Amir, His Highness Sheikh Tamim bin Hamad al Thani, in securing their freedom.”
Richard Lindsay, the UK’s special envoy to Afghanistan, told Lynch it remained “unclear” on what grounds the couple had been detained.
He said they were “very relieved to be going home and delighted to be reunited with their family”.
Asked about the state of their health, he said: “I am not a doctor, but they are very happy.”
He added the British government’s travel advice to the country was clear. “We advise British nationals not to travel to Afghanistan. That remains the case and will remain the case,” he said.
Abdul Qahar Balkhi, a spokesperson at the Taliban government’s foreign ministry, said in a statement posted on X that the couple “violated Afghan law” and were released from prison after a court hearing.
He did not say what law the couple were alleged to have broken.
Image: Pic: Sarah Entwistle
Image: Pic: Reynolds family
Qatar, the energy-rich nation on the Arabian Peninsula that mediated talks between the US and the Taliban before the American withdrawal, helped in releasing the Reynolds.
Mirdef Ali Al-Qashouti, acting charge d’affaires at the Qatar Embassy in Kabul, told Lynch that Qatari officials ensured the couple were kept in “comfortable” conditions during talks.
He told Lynch the Reynolds’ release was because of “continuous efforts by my government to keep our policy in helping releasing hostages and our mediation and diplomacy”.
“Throughout their eight months in detention – during which they were largely held separately – the Qatari embassy in Kabul provided them with critical support, including access to their doctor, delivery of medication, and regular communication with their family,” a Qatari official told Reuters news agency.
Hamish Falconer, minister for the Middle East, Afghanistan and Pakistan, said in a statement: “The UK has worked intensively since their detention and has supported the family throughout.
“Qatar played an essential role in this case, for which I am hugely grateful.”
The couple have lived in Afghanistan for 18 years and run an organisation called Rebuild, which provides education and training programmes.
They have been together since the 1960s and married in the Afghan capital in 1970.
Their son, Jonathan, told Sky News in April his parents had “never heard one accusation or one charge”.
He said the British government had offered to evacuate them when the Taliban took over, to which they replied: “Why would we leave these people in their darkest hour?”
Mr and Mrs Reynolds are now on their way home, where they will be reunited with their family.
Donald Trump has told Sir Keir Starmer he should use the military to stop migrants crossing the Channel.
The US president made the suggestion while stood alongside the prime minister for a typically wide-ranging news conference on Thursday afternoon, bringing his state visit to Britain to an end.
Speaking at Chequers, Sir Keir‘s country retreat, Mr Trump warned illegal migration is “going to destroy […] countries from within” and said “it doesn’t matter if you call out the military” to deal with small boats.
He talked up his own record of stopping people crossing the US-Mexico border.
Sir Keir instead pointed to his government’s migrant return deal with France, with the first deportation of a man who arrived via small boat taking place on Thursday morning.
Further flights are scheduled to take place this week and next, starting Friday, while exchange arrivals to Britain via the legal route agreed with the French are due in the coming days.
It’s the “biggest disappointment” of his presidency that he hasn’t managed to end the war, Mr Trump admitted.
He said he thought it would be the “easiest” to solve because of his relationship with Mr Putin.
Sir Keir said the Russian president has “shown his true face”, and more “pressure” is required to make him stop.
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4:11
Rigby to Trump: Was Putin’s Alaska invite a mistake?
Trump reignites war of words with Khan
While disappointed with Mr Putin, Mr Trump spared his harshest rhetoric for Sir Keir’s friend Sadiq Khan.
Speaking on Air Force One on his way back to the US, where he touched down in the early hours of Friday, he said he asked for the London mayor to be banned from attending the state banquet at Windsor Castle on Wednesday.
“I didn’t want him there,” the president said. “I asked that he not be there.”
He claimed Sir Sadiq had wanted to be at the event, adding: “I think the mayor of London Khan is among the worst mayors in the world, and we have some bad ones.”
Sky News understands the mayor didn’t seek or expect an invitation. A source close to Sir Sadiq said the capital is a “global success story” and “record numbers of Americans are choosing to make London their home”.
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1:57
Will both sides be happy with Trump’s state visit?
The Trump-Starmer news conference also covered the war in Gaza, the sacking of Lord Mandelson as Britain’s US ambassador, energy policy, and a newly signed UK-US tech deal.
Speaking about the situation in Gaza, Mr Trump said: “Simply I want all hostages to be released now.”
He said he disagreed with the UK’s plan to recognise a Palestinian state at the UN within days, should Israel not improve the humanitarian situation in Gaza.
Trump claims not to know Mandelson
Also asked by Beth Rigby if he has sympathy with Lord Mandelson, who was sacked by Sir Keir over past links to paedophile financier Jeffrey Epstein, the president simply said: “I don’t know him.”
That’s despite the president being pictured shaking hands with the Labour peer in the Oval Office after announcing a trade deal with the UK back in May.
There had been concerns that the Epstein issue could cast a shadow on the president’s second state visit to the UK, not least because Mr Trump was also close to Epstein, although they fell out before his conviction in 2009.
Image: Lord Mandelson pictured with President Trump in the Oval Office in May. Pic: Reuters
Image: Pic: AP
Energy policy
Mr Trump urged Sir Keir to exploit the UK’s North Sea oil and gas resources, dismissing wind power as a “very expensive joke”.
The UK government has ruled out new oil and gas licences in the North Sea, focusing on renewables and building nuclear power stations.
Despite their differences, Mr Trump said the bond between the US and Britain is like no other, and he described the prime minister as a “tough negotiator”.
The pair signed a technology prosperity deal, offering major investment by US tech firms in the UK, that will help to develop artificial intelligence (AI) capabilities.
Sir Keir also hailed the prospect of £150bn flowing into the UK from big US companies such as Palantir and Blackstone, part of a wider £250bn package that officials say will benefit both sides.
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1:27
Kimmel was ‘fired for bad ratings’, says US president
Jimmy Kimmel controversy
Meanwhile, Mr Trump also commented on US late-night chat show host Jimmy Kimmel, whose programme has been pulled from schedules after his remarks about the fatal shooting of conservative activist Charlie Kirk.
The president claimed the show, Jimmy Kimmel Live!, was suspended because he “is not a talented person” and had “very bad ratings”.
Two of the most important Labour-affiliated unions are set to nominate their choice for who should replace Angela Rayner as the party’s deputy leader.
Unison and GMB will pick their candidate on 25 September – two days ahead of the deadline for nominations for Labour affiliates and local party branches.
Bridget Phillipson, the education secretary, is seen as the government’s choice of candidate in the race, which has effectively turned into a de facto confidence vote on Sir Keir Starmer’s leadership.
She is up against Lucy Powell, who was sacked as Commons leader in the recent reshuffle and has become the candidate for MPs who are unhappy with the party’s direction after a difficult first year in government.
Ms Phillipson has already secured the backing of the two unions – Community and the Union of Shop, Distributive and Allied Workers.
Will unions want to say ‘sod you’ to PM?
There are question marks over who Unison, GMB and Unite will back in the race, triggered by Ms Rayner quitting as deputy leader, deputy prime minister and housing secretary over underpaid stamp duty on a second home.
While Ms Phillipson may be boosted by having the backing of Number 10, the level of discontent in the Labour Party and wider union movement is at such a level that Ms Powell’s “outsider” status may benefit her.
One union source told Sky News that while they felt Ms Phillipson was the “better candidate”, “the temptation to vote Lucy to give a ‘sod you’ to government is a lot”.
They added: “Number 10 need to start fearing the party. They’ve had it too easy.”
Another union insider said there was a “sense among union leaders that they wish this wasn’t happening”.
They questioned how important a role the unions would play in this contest due to the tight timetable, making it harder for them to mobilise behind a candidate.
“Most unions feel this is not a hugely impactful moment either way,” they said.
“Many of their members will be feeling quite grumpy at how things are going with the government, but at the same time, union leaders won’t want to get on the wrong side of Number 10 over something that is not going to make a meaningful difference in the long term.”
There are questions over the extent of Unite’s involvement and interest in the race.
Although the union is Labour’s biggest supporter, Sharon Graham, its general secretary, has sought to turn its focus away from internal party politics and on to industrial disputes.
On the first day of the Trades Union Congress in Brighton, she told Sky News she’d be “looking very much at their track record – have they backed workers? That’s what I’ll be looking for”.
Image: Sharon Graham said she’ll be looking at which candidate has backed workers
How will the race play out?
In order to proceed to the next stage of the contest, the two candidates must each secure nominations from at least 5% of constituency Labour parties, or at least three organisations affiliated that to the party. At least two of these must be trade unions which make up 5% of fully paid-up affiliated party members.
The deadline to secure the necessary support is Saturday 27 September.
The Labour Party’s annual conference begins the next day, where the candidates who have secured the required backing will be able to make their pitches directly to members in a final hustings.
Ms Phillipson, who has spoken of growing up in a working class area of Sunderland before going on to high office, said she was the person to take on Reform and secure a second term for Labour.
Speaking at a hustings event last week, she told members: “You can use this contest to look backward, to pass judgment on what has happened in the last year, or you can use it to shape positively what happens in the run-up to the next election.”
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0:30
Bridget Phillipson to stand for Labour deputy leader
‘Unforced errors’ cost government
Her message comes in contrast to that of Ms Powell, who has pitched herself as the “shop steward” of the parliamentary party willing to deliver criticism to the prime minister if necessary.
She said Labour’s mistakes in office over welfare and winter fuel payments had given the impression that it is “not on the side of ordinary people”.
In an interview with the BBC, Ms Powell praised the government’s “many achievements”, but added: “Some of the mistakes that we’ve made, or some of the unforced errors, have given a sense that we’re not on the side of ordinary people.”
Although Ms Powell secured fewer nominations from MPs than Ms Phillipson, recent polling by Survation suggests she is ahead with members on 47%, compared with 30% for her rival.