‘You feel like you can’t fight back’: How thousands are being targeted by a harsh HMRC tax-collecting scheme linked to 10 suicides

Published

10 months ago

January 18, 2024

admin

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.

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.”

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.”

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.”

UK

UK economy grows by 0.1% between July and September – slower than expected

Published

9 mins ago

November 15, 2024

admin

UK economy grows by 0.1% between July and September - slower than expected

The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).

However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.

The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.

And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.

Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.

“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.

“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.

The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector.

The UK’s GDP for the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.

The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.

It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.

The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.

The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.

Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.

The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.

UK

Meeting the deeply radical anti-tax group that is ‘growing in popularity’

Published

9 mins ago

November 15, 2024

admin

Meeting the deeply radical anti-tax group that is 'growing in popularity'

“If you are a member of something, it means you’ve accepted membership. Anything with ‘ship’ on the end, it’s giving you a clue: it’s telling you that’s maritime law. That means you’ve entered into a contract.”

This isn’t your standard legal argument and it is becoming clear that I am dealing with an unusual way of looking at the world.

I’m in the library of a hotel in Leicestershire, a wood-panelled room with warm lighting, and Pete Stone, better known as Sovereign Pete, is explaining how “the system” works. Mr Stone is in his mid-50, bald with a goatee beard and wearing, as he always does for public appearances, a black T-shirt and black jeans.

With us are six other people, mainly dressed in neat jumpers. They’re members of the Sovereign Project (SP), an organisation Mr Stone founded in 2020, which, he says, now has more than 20,000 paying members.

As arcane as this may sound, it represents a worldview that is becoming more influential – and causing problems for authorities. Loosely, they’re defined as “sovereign citizens” or “freemen on the land”.

Their fundamental point is that nobody is required to obey laws they have not specifically consented to – especially when it comes to tax. They have hundreds of thousands of followers in the UK across platforms including YouTube, Facebook and Telegram.

Increasingly, they are coming into conflict with governments and the law. Sovereign citizens have ended up in the High Court in recent months, challenging the legalities of tax bills and losing on both occasions.

In October, four people were sentenced to prison for the attempted kidnapping of an Essex coroner, who they saw as acting unlawfully. The self-appointed “sheriffs” attempted to force entry to the court, one of them demanding: “You guys have been practising fraud!”

The Sovereign Project is not connected to any of those cases, nor does it promote any sort of political action, let alone violence.

Instead, they are focused on issues like questioning the obligation to pay taxes, as Mr Stone explains, referencing the feudal system that operated in the Middle Ages.

“Do you know about the feudal system when people were slaves and were forced to pay tax?” he asks.

“Now, unless the feudal system still operates today, and we still have serfs and slaves, then the only way that you can pay taxes is to have a contract, you have to agree to it and consent to it.”

Another member, Karl Deans, a 43-year-old property developer who runs the SP’s social media, says: “We’re not here to dodge tax.”

Local government tends to be a target beyond just demands for tax. Mr Stone speaks of “council employee crimes”.

I ask whether, considering the attempted kidnapping in Essex, there is a danger that people will listen to these accusations of crimes by councils and act on them.

“Well that’s proved,” Mr Stone says. “We only deal with facts.”

Evidence suggests this approach is becoming an issue for councils across the UK, as people search online for ways to avoid paying tax.

Sky News analysis shows that out of 374 council websites covering Great Britain, at least 172 (46%) have pages responding to sovereign citizen arguments around avoiding paying council tax. They point out that liability for council tax is not dependent on consent, or a contract, and instead relies on the Local Government Finance Act 1992, voted on by Parliament.

But the Sovereign Project’s worldview extends beyond council tax. It is deeply anti-establishment, at times conspiratorial. Stone suggests the summer riots may have been organised by the government.

“The sovereign fraternity operates above all of this,” he says. “We look down at the world like a chessboard. We see what’s going on.”

He explains that, really, the UK government isn’t actually in control: there is a shadow government above them.

“These are the people who control government,” he explains.

“A lot of people say this could be the crown council of 13, this could be a series of Italian families.”

Professor Christine Sarteschi, an expert in sovereign citizens at Chatham University, Pittsburgh, says she’s worried about the threat sovereign citizens may pose to the rule of law, especially in the US where guns are readily available.

“The movement is growing and that’s evidenced by seeing it in different countries and hearing about different cases. The concern is that they will become emboldened and commit acts of violence,” she says.

“Because sovereigns truly believe in their ideas and if they feel very aggrieved by, you know, the government or whomever they think is oppressing them or controlling them… they can become emotionally involved.

“That emotional involvement sometimes leads to violence in some cases, or the belief that they have the power to attempt to overthrow a government in some capacity.”

Much of this seems to be based on an underlying and familiar frustration at the state of this country and of the world.

Mr Stone echoes some of the characteristic arguments also made by the right, that there is “two-tier policing”, that refugees arriving in the UK are “young men of fighting age”, that the government is using “forced immigration to destroy the country”.

Another SP member, retired investment banker David Hopgood, 61, says: “I firmly believe it is the true Englishman – and woman – of this country – that has the power to unlock this madness that’s happening in the West.

“We’ve got the Magna Carta – all these checks and balances. We just need to pack up, go down to Parliament and say: It’s time to dismiss you. You’re not fit for purpose.”

The members of the Sovereign Project are unfailingly patient and polite in explaining their understanding of the world.

But there is no doubt they hold a deeply radical view, one that is apparently growing in popularity.

UK

Wes Streeting ‘crossed the line’ by opposing assisted dying in public, says Labour peer Harriet Harman

Published

9 mins ago

November 15, 2024

admin

Wes Streeting 'crossed the line' by opposing assisted dying in public, says Labour peer Harriet Harman

Wes Streeting “crossed the line” by opposing assisted dying in public and the argument shouldn’t “come down to resources”, a Labour peer has said.

Speaking on Sky News’ Electoral Dysfunction podcast, Baroness Harriet Harman criticised the health secretary for revealing how he is going to vote on the matter when it comes before parliament later this month.

MPs are being given a free vote, meaning they can side with their conscience and not party lines, so the government is supposed to be staying neutral.

But Mr Streeting has made clear he will vote against legalising assisted dying, citing concerns end-of-life care is not good enough for people to make an informed choice, and that some could feel pressured into the decision to save the NHS money.

He has also ordered a review into the potential costs of changing the law, warning it could come at the expense of other NHS services if implemented.

Baroness Harman said Mr Streeting has “crossed the line in two ways”.

👉 Click here to listen to Electoral Dysfunction on your podcast app 👈

“He should not have said how he was going to vote, because that breaches neutrality and sends a signal,” she said.

“And secondly… he’s said the problem is that it will cost money to bring in an assisted dying measure, and therefore he will have to cut other services.

“But paradoxically, he also said it would be a slippery slope because people will be forced to bring about their own death in order to save the NHS money. Well, it can’t be doing both things.

“It can’t be both costing the NHS money and saving the NHS money.”

Baroness Harman said the argument “should not come down to resources” as it is a “huge moral issue” affecting “only a tiny number of people”.

She added that people should not mistake Mr Streeting for being “a kind of proxy for Keir Starmer”.

“The government is genuinely neutral and all of those backbenchers, they can vote whichever way they want,” she added.

Prime Minister Sir Keir Starmer has previously expressed support for assisted dying, but it is not clear how he intends to vote on the issue or if he will make his decision public ahead of time.

The cabinet has varying views on the topic, with the likes of Justice Secretary Shabana Mahmood siding with Mr Streeting in her opposition but Energy Secretary Ed Miliband being for it.

The Terminally Ill Adults (End of Life) Bill is being championed by Labour backbencher Kim Leadbeater, who wants to give people with six months left to live the choice to end their lives.

Under her proposals, two independent doctors must confirm a patient is eligible for assisted dying and a High Court judge must give their approval.

The bill will also include punishments of up to 14 years in prison for those who break the law, including coercing someone into ending their own life.

MPs will debate and vote on the legislation on 29 November, in what will be the first Commons vote on assisted dying since 2015, when the proposal was defeated.