- HMRC pressures taxpayers with debilitating loan charge demands
- Thousands facing bankruptcy due to exorbitant repayment requests
- Recipients share harrowing stories, revealing immense emotional and financial strain
The tax authorities, HMRC, have levied debilitating demands on tens of thousands of individuals nationwide for taxes that their employers failed to pay.
HMRC has levied debilitating tax demands against tens of thousands of individuals for taxes their employers neglected to pay. A comparison has been made between this injustice and the Horizon scandal.
Amidst the depths of his misery, Mark perceived this as the most logical course of action.
For a number of years, he had been receiving correspondence from HMRC requesting payment of taxes that his employers had failed to remit.
The monetary amounts were immense, and the emotional and financial strain was intolerable.
Mark has companions. Thousands of individuals nationwide are confronted with onerous tax obligations imposed by HMRC.
This campaign has caused individuals to approach bankruptcy, caused devastation to families, and has been associated with ten suicides.
At least thirteen individuals have made self-harm attempts. Many have struggled with dread and shame, frequently concealing the truth from their families as they made gradual efforts to mend.
Since Mark received his initial letter from HMRC seven years ago, “a steady stream of letters has continued.”
It apprised him of the imposition of a charge known as the Loan Charge. The policy was implemented in 2017 via a legislative measure specifically targeting individuals, frequently agency workers, whose wages were disbursed via umbrella corporations.
Certain corporations were engaged in tax avoidance schemes whereby employees were remunerated with loans rather than salaries.
Although these appeared as deductions on employees’ paystubs, they were promoters’ money. Because these were loans, the companies did not pay the required national insurance and taxes.
Over time, HMRC and the Treasury understood the magnitude of the uncollected tax revenue and endeavoured to retrieve it from individuals rather than corporations.
The schemes above were considered illusory compensation, prompting former chancellor George Osborne to introduce the Loan Charge in his 2016 budget. Parliament passed the legislation that held individuals accountable for taxes their employers should have paid.
This generally affected personnel employed by the agency, such as supply teachers, nurses, and council staff. Many were coerced or compelled to accept employment through these organisations without realising they were reimbursed with loans. They were frequently mis-sold.
An initial chuckle was my reaction
Mark was requested to reimburse £60,000 from his employment as an IT contractor.
“I believe my initial thought was to chuckle.” “Because it was manifestly absurd,” he explained.
“At the time, I was quite naive and believed I could simply call HMRC and discuss the matter with them.” As soon as they all realised their error, they would either leave the table in laughter or stand up—absolutely not what transpired there.
“When I contacted them, they replied, ‘No, you owe that amount of money, and your due date is that day.’ I believe they gave me an absurdly short amount of time to find that amount of money.'” It was thirty days.
I began to realise at that moment that this situation was, in fact, exceptionally grave.
Mark continued, “Since that moment, I have been subjected to the persistent pressure of experiencing the repercussions of this loan charge.” This pressure remains unabated.
“I make an effort to ignore it. There have been both excellent and bad days for me. There are times when I forget entirely that it exists. Additionally, there are days when the situation is extraordinarily oppressive and burdensome.”
HMRC even inquired about Mark’s whereabouts while his companion was hospitalised undergoing treatment for breast cancer. As an effort of remorse, the agency mailed a cheque for £150.
Although some participants in loan schemes did so specifically to reduce their tax liabilities, the majority were merely attempting to do the right thing.
Recruitment agencies often advise individuals to join umbrella companies to circumvent the complex procedure of establishing a limited liability company.
Others, including Mark, resorted to umbrella companies out of concern that they would be subject to the new IR35 regulations devised by Gordon Brown and penalised contractors operating as limited companies.
“A cloud looms over you”
The last straw for Dylan* was a message delivered around this time last year on Easter Saturday.
“No one was available to listen to the phone.” “Neither the HMRC office nor the number on the letter could be reached,” he explained.
Dylan was discovered shortly after that by his mother. The overdose of her son was reported.
“Absolute exhaustion and fear” was how he characterised his experience.
“There is a cloud enveloping you.” Even if you have a positive experience, the knowledge that this is hovering over your head can still linger and somewhat sour the situation. That is how the majority of us live. He stated, “I am also experiencing it, and it is abhorrent.”
Dylan stated that HMRC’s subsequent contact with him while he was recuperating in the hospital “added to the distress and trauma they inflicted upon me.”
Although he is currently in an improved position, he finds it difficult to relive the traumatic event while seated at the letter-covered dining room table.
One from his recruitment agency reassures him that the organisation through which he was being paid complies with HMRC regulations.
As he put it, each letter, email, and phone call you receive is equivalent to death by a thousand wounds. It never stops chipping away, and I feel bothered when you fear what’s to come.
He stated, “It altered the person I was.”
“Since receiving these letters, I have been contemplating suicide for a short time. I was slicing some food when I suddenly realised I was holding a knife, which I had been doing on my wrist. And I reasoned that it was now time.
“I found it peculiar that I was not frightened.” I felt simply at ease. Merely completing the task would be a relief, and the reason for this is that my son has requested something. “That was merely the thing that unexpectedly astonished me.”
The affair encountered a perplexing development for both Mark and Dylan.
In addition to the brown envelopes sent by HMRC, they began to receive letters from offshore corporations demanding repayment of the loans, which they mistook for their wages.
The original umbrella corporations sold the loan books to third parties. An intricate web of individuals owns a significant number of these businesses.
Mitigating the intended audience
The ramifications of the Loan Charge have been catastrophic. Tax attorneys have characterised it as a discriminatory campaign that undermines the rule of law by superseding statutory taxpayer rights and targets the wrong individuals.
HMRC’s failure to intervene against these schemes for years led to extensive underpayment of national insurance and income tax.
Since then, the courts have determined that the exchequer should have received tax payments from the employers or agencies. On the other hand, the Loan Charge legislation overturned that provision, permitting HMRC to pursue individuals rather than agencies or employers and to investigate a taxpayer’s tax affairs for up to twenty years.
According to tax barrister Keith Gordon, the PAYE regulations were implemented when the contractors were remunerated. They aimed to guarantee that the tax was withheld from the workers’ salaries before receipt. The PAYE in question remained unpaid.
The workers incurred a deduction, but the scheme promoters simply absorbed that as fees. They were engaging in questionable tax evasion through agents in the contractors’ absence.
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It appeared to him that HMRC was opting to pursue individual targets rather than the scheme organisers, most of whom are based offshore, due to the perceived simplicity of the recoupment process.
“First and foremost, the promoters have more financial resources and may be able to oppose unjust legislation,” Mr. Gordon continued. Second, that is tantamount to acknowledging that the revenue generation was erroneous.
Furthermore, certain promoters have reached an advanced stage of insolvency, having allowed ample time to conclude their operations and evade the tax authorities’ jurisdiction.
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