Loan charge: HMRC accused of ‘dangerous and sinister’ new tactics in tax crackdown linked to 10 suicides
HMRC has been accused of using “dangerous and sinister” new tactics in a tax crackdown that has already been linked to 10 suicides.
The government has recently come under pressure over the “Loan Charge” – controversial legislation which made tens of thousands of contractors who were paid their salaries through loans retrospectively liable for tax their employer should have paid.
The clampdown has been branded on par with the Post Office Horizon scandal as the unaffordable bills have been linked to suicides and bankruptcies, while one woman had an abortion due to the financial strain she was under, a debate in parliament heard last month.
HMRC has been criticised for going after individuals – including teachers, nurses and cleaners – rather than the firms that profited from promoting the schemes as tax compliant.
Politics Live: MPs return to Westminster after double by-election defeat for Sunak
However ministers have resisted pressure to overturn the policy, saying a review conducted by Lord Morse in 2019 resulted in a series of reforms to reduce the financial pressures of the some 50,000 people affected.
Crucially this included cutting the policy’s 20-year retrospective period so only loans received after December 2010 were in scope.
However it has emerged that HMRC have been pursuing people involved in loan schemes prior to 2010 through a different mechanism – a s684 notice.
This effectively gives HMRC the discretion to transfer a tax burden from an employer to an employee for the tax years excluded from the Loan Charge.
Conservative MP Greg Smith, co-chair of the Loan Charge APPG, said it “flies in the face” of what Lord Morse intended and risks more people taking their own lives because of the unaffordable bills.
Please use Chrome browser for a more accessible video player
Loan scheme causing tax turmoil
‘I could lose my home’
Sky News spoke to people who said they had experienced suicidal thoughts and feared becoming homeless after unexpectedly receiving the notices.
While the s684s don’t state how much tax is owed, one father-of-three said his bill could be as high as £250,000 as this is how much HMRC have previously tried to claw back from his time in a loan scheme pre-2010.
The IT consultant, who asked to remain anonymous, said he attempted to settle his tax affairs years ago but communication with the tax office “fizzled out” and following the Morse review he believed the “nightmare” was behind him.
Then in November he received a brown envelope containing an s684 and now he is worried HMRC is “going to absolutely hammer me” just as he is approaching retirement age.
“I have three children and in the worst case scenario I will lose my home.
“I can’t think of another government policy that has caused so much suffering. I fear this could really push some people over the edge.”
Wreathes to honour the suicides linked to the tax crackdown. There have now been 10 confirmed by HMRC
‘Dreadful landscape’
It is not clear how many people have been sent the notices.
The government previously estimated that 11,000 people would be removed from the Loan Charge by introducing the 2010 cut off.
While the Loan Charge is seen as particularly punitive because it adds together all outstanding loans and taxes them in a single year, often at the 45% rate, the notices mean HMRC can use its own discretion to turn off an employer’s PAYE obligations and seek the income tax that would have been due that year from the employee instead.
Rhys Thomas, director of the WTT tax firm, told Sky News: “There is considerable and understandable confusion amongst taxpayers that when the Morse review removed the loan charge for payments pre 9th December 2010, it was assumed that HMRC had no further recourse for those years.
“Where enquiries were outstanding for the earlier tax years, HMRC will seek to conclude these by utilising tools such as s684 notices.”
He called the situation a “dreadful landscape” as those in receipt of the notices only have 30 days to respond to HMRC over something “that has taken them 15 years to investigate”.
Click to subscribe to the Sky News Daily wherever you get your podcasts
There is no right to appeal the notices, so the only way to challenge HMRC is through a costly Judicial Review.
“It’s causing a huge amount of distress and anxiety; it’s hugely concerning and for lots of people it’s come as a surprise,” Mr Thomas said.
WTT is representing around 200 people who are challenging the notices, saying HMRC has not done enough to go after the core parties who should have collected the tax at the time.
A spokesperson for HMRC said the Morse Review “recommend we use our normal powers to investigate and settle cases taken out of the Loan Charge”.
They said they had been issuing the notices since May 2022, having won a case at the Court of Appeal over their use in relation to loan schemes, “so it’s not a sudden change”.
But campaigners disputed the use of the notices as “normal” and said it is another example of HMRC “abusing its power” to go after individuals rather than the companies that ran and promoted the loan schemes.
Money latest: The countries where retirement age is 58 – and those where it’s 67
‘We were mis-sold’
These became prolific in the 2000s and saw self-employed contractors encouraged to join umbrella companies that paid them their salaries through loans which were not typically paid back.
HMRC has argued those who signed up to the schemes are tax evaders who need to pay their fair share. But those affected claim they are victims of mis-selling as the arrangements were widely marketed as legitimate by the scheme promoters and tax advisers, and in some cases they had no choice but to be paid this way.
IT consultant Daniel (not his real name), from Stoke, said he did not stand to make any money from the scheme he joined in 2008 and was simply trying to avoid falling foul of complex off-payroll rules known as IR35.
His tax adviser said the scheme was HMRC compliant and the company said they “would sort out my taxes”, he added.
Loan Charge protest
He said he “did not hear a peep” from HMRC during his time in the scheme and his payslip looked normal as around 20% was being deducted from his salary each month – money experts say will have gone into the profits of those running the company rather than tax to the exchequer.
Now, he is expecting a £30,000 bill after receiving an s684 in November – cash the father-of-four “does not have”.
“If I felt like I had done something wrong I would accept it but I did not make one penny from this scheme, it was all to do with compliance and to make my life as simple as possible.
“This is causing so much stress and frustration. I have had plenty of sleepless nights.
“It feels like the Post Office scandal where we are the little people being backed into a corner and there’s nothing we can do and those who are really guilty are just laughing.”
Read More:
Post Office scandal: New concerns raised over second IT system used in branches
Buying a flat ruined my life’: Leaseholders plead for tougher legislation against home ownership ‘scam’
HMRC ‘abusing its powers’
The notices have renewed calls for the government to find a new solution to the Loan Charge scandal.
Keith Gordon, a tax barrister, said HMRC “is effectively responsible for this mess because they failed to warn employees that they did not like these schemes”.
Keith Gordon said HMRC is targeting individuals because it is an easier way of recouping the money
“Most people, if they got a whiff of HMRC dislike, would have left these schemes but they were sold it as being tax compliant. Why should the blame be on people who were at the very worst merely naïve?”
Campaigners fear the s684s will be used across the board instead of the Loan Charge, which Labour has said it will review if it wins the next election.
Steve Packham, of the Loan Charge Action Group, accused HMRC of being “downright reckless” in light of the 10 confirmed suicides, adding: “This is sinister and dangerous and is another example of how out-of-control HMRC is.
“The government must immediately order a stop to these notices and instead agree to find a resolution to the Loan Charge Scandal before there are more lives ruined.”
Greg Smith, co-chair of the Loan Charge Action and Taxpayer Fairness APPG. Pic: PA
A HMRC spokesperson said: “We appreciate there’s a human story behind every tax bill and we take the wellbeing of all taxpayers seriously.
“We recognise dealing with large tax liabilities can lead to pressure on individuals and we are committed to supporting customers who need extra help with their tax liabilities. We have made significant improvements to this service over the last few years.
“Our message to anyone who is worried about paying what they owe is: please contact us as soon as possible to talk about your options.”
Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK.
Rachel Reeves is fighting claims that she “lied” to the public about the state of the finances in the run-up to last Wednesday’s budget – in which she raised £26bn in taxes.
It follows a letter published by the Office for Budget Responsibility (OBR), the official watchdog which draws up forecasts for the Treasury, published on Friday.
In it, OBR chair Richard Hughes (who is already under fire for the leak of the budget measures) said he’d taken the unusual step of revealing the forecasts it had submitted to Rachel Reeves in the 10 weeks before the budget, and which is normally shrouded in secrecy.
The OBR sent this table revealing its timings and outcomes of the fiscal forecasts reported to the Treasury
Sir Keir Starmer congratulates Rachel Reeves after the budget
The letter reveals this timeline, which has plunged the chancellor into trouble:
17 September – first forecast
At this point, it was already known that the UK’s growth forecast would be downgraded. The chancellor was told that the “increases in real wages and inflation” would offset the impact of the downgrade. The deficit forecast by the end of the parliament was £2.5bn.
20 October – second forecast
By this point, that deficit had turned into a small surplus of £2.1bn – i.e. the productivity downgrade has been wiped out and “both of the government’s fiscal targets were on course to be met”.
31 October – third forecast
The final one before the Treasury put forward its measures. The finances were now net positive with a £4.2bn surplus.
But the accusation is that Rachel Reeves was presenting an entirely different picture – that she had a significant black hole which needed to be filled.
13 October
Ms Reeves tells Sky’s deputy political editor Sam Coates the productivity downgrade has been challenging but added: “I won’t duck those challenges. Of course we’re looking at tax and spending.”
👉 Click here to listen to Electoral Dysfunction on your podcast app 👈
27 October
With the Treasury now aware the deficit had been wiped out, the Financial Times was briefed about a “£20bn hit to public finances.”
4 November
Ms Reeves gave a dawn news conference in Downing Street, setting the stage for tax rises. She says she wants people “to understand the circumstances we are facing… productivity performance is weaker than previously thought”, adding that “we will all have to contribute”.
10 November
Ms Reeves tells BBC 5Live that sticking to Labour’s promises not to raise taxes would require “things like deep cuts in capital spending”. The stage seemed set for the nuclear option – the first income tax rise in decades.
13 November
After headlines about a plot to oust Prime Minister Sir Keir Starmer, the Financial Times reported that the chancellor had dropped plans to raise income tax because of improved forecasts [which we now know hadn’t changed since 31 October], putting the black hole closer to £20bn than £30bn.
Please use Chrome browser for a more accessible video player
Budget 2025: ‘It’s sickening’
Please use Chrome browser for a more accessible video player
‘You’ve broken a manifesto pledge, haven’t you?’
The prime minister’s spokesperson has insisted Ms Reeves did not mislead voters and set out her choices, and the reasons for them, at the budget.
But the issue has had enormous cut-through, with newspapers giving it top billing.
The Sun’s Saturday front page headline – “Chancer of the Exchequer – fury at Reeves ‘lies’ over £30bn black hole” – will not have been pleasant reading for ministers.
She now has questions to answer about the chaotic run-up to the budget – of briefing and counter-briefing, which critics say now makes little sense.
Tory leader Kemi Badenoch said on Saturday: “We have learned that the chancellor misrepresented the OBR’s forecasts. She sold her ‘Benefits Street’ budget on a lie. Honesty matters… she has to go.”
Economist Paul Johnson, former director of the respected Institute for Fiscal Studies (IFS), told The Times the chancellor’s 4 November news briefing “probably was misleading. It was clearly intended to have an impact and confirm what independent forecasters like [the National Institute of Economic and Social Research] and the IFS had been saying”.
“It was designed to confirm a narrative that there was a fiscal hole that needed to be filled with significant tax rises. In fact, as she knew at the time, no such hole existed.”
Read more on budget fallout:
Reeves accused over forecasts
Hospitality ‘needs a lifeline’
Ms Reeves is doing a round of morning interviews on Sunday in which she’ll be grilled over which of her budget measures will generate economic growth (which the government claimed was its number one priority), why they have been unable to tackle rising welfare spending and now about why markets and voters were left confused by dire warnings.
She may claim that she never personally said there was a specific £30bn black hole or that the extra headroom generated by the tax rises will ensure she does not have to come back for more next year.
In an interview with The Saturday’s Guardian, Ms Reeves said she had “chosen to protect public spending” on schools and hospitals in the budget.
She confirmed an income tax rise had been looked at, and insisted that OBR forecasts “move around” after the Treasury has submitted its planned measures. There are plenty more questions to come.
Meanwhile, Sir Keir will use a speech on Monday to support Ms Reeves’ budget decisions and set out his long-term growth plans.
He will praise the budget for bearing down on the cost of living, ensuring economic stability through greater headroom, lower inflation and a commitment to fiscal rules, and protecting investment and public services.
Sir Keir will say “economic growth is beating the forecasts”, but that the government must go “further and faster” to encourage it.
Politics
Lammy says justice reforms will reduce victims’ suffering – as right to jury trial set to go in some cases
Victims will be put “front and centre” in reforms to be announced this week, the justice secretary has said, amid reports jury trials will be scrapped in some cases.
Sky News understands ministers have already been briefed on the changes, which would see a judge decide most cases on their own except for murder, rape or manslaughter – or those in the “public interest”.
The Ministry of Justice (MoJ) said the reforms would speed up justice and save victims from “years of torment and delay”.
Nearly 80,000 cases are currently waiting to be heard in crown courts, but a bid to limit the right to jury trial is likely to be divisive.
Shadow justice secretary Robert Jenrick said Mr Lammy should “pull his finger out” to cut the backlog rather than “depriving British citizens of ancient liberties”.
“The right to be tried by our peers has existed for more than 800 years – it is not to be casually discarded when the spreadsheets turn red,” said Mr Jenrick.
Full details are expected in the coming days, but in a statement today Mr Lammy said he had “inherited a courts emergency; a justice system pushed to the brink”.
“We will not allow victims to suffer the way they did under the last government, we must put victims front and centre of the justice system,” he added.
Mr Lammy said thousands of lives were on hold due to the case backlog, a “rape victim being told their case won’t come before a court until 2029. A mother who has lost a child at the hands of a dangerous driver, waiting to see justice done”.
He said he wanted a system that “finally gives brave survivors the justice they deserve”.
The justice secretary will reportedly go further than a review recommended. Pic: PA
.However, it’s been reported Mr Lammy will go further than a review conducted by Sir Brian Leveson.
The retired judge backed the move for juries only in the most serious cases, but also proposed some lesser offences could go to a new intermediate court where a judge would be joined by two lay magistrates.
The Times said Mr Lammy had suggested in an internal memo he would remove the lay element from many serious offences that carry sentences of up to five years.
There are fears such a move could increase miscarriages of justice and racial discrimination.
Read more from Sky News:
Reeves fighting ‘lie’ claims as Starmer set to back budget
Your Party co-founder refuses to enter conference hall
Please use Chrome browser for a more accessible video player
Work and pensions secretary speaks to Sky about justice reforms
Speaking to Sky News’ Politics Hub programme this week, work and pensions secretary Pat McFadden did not deny the changes were on the way.
The MoJ has laid the ground for the reforms by saying the court backlog could hit 100,000 by 2028 under the current system.
It said just 3% of cases are currently decided by a jury, with more than 90% already dealt with by magistrates alone.
Politics
Your Party votes to be led by members rather than single MP – avoiding Corbyn-Sultana battle
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment3 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024