Survey results reveal human cost of the 2019 Loan Charge

    Contractor filling out survey

    Survey results have revealed the human cost of the 2019 Loan Charge

    Nearly one in three taxpayers facing the 2019 Loan Charge have no possible means to settle their tax liability, according to a survey of 1,768 individuals carried out by a cross-party group of MPs looking into the controversial levy.

    The recipients reported feeling criminalised and being misled by HMRC, with many suffering anxiety-related health problems.  Almost half said they would choose voluntary bankruptcy in place of the 5-year settlement plan being offered by HMRC.

    The damning survey results, published on Friday, came at the end of a torrid week for HMRC, in which they were reprimanded by MPs for their handling of the Loan Charge after it emerged that as many as six people may have taken their own life as a direct result of facing considerable tax bills under the charge.

    The Loan Charge All-Party Parliamentary Group (APPG) and the HMRC chief executive and permanent secretary, Sir Jonathan Thompson, exchanged a heated series of letters in which the committee of MPs accused Sir Thompson of avoiding their requests into how aware HMRC has been of the Loan Charge suicides, and Sir Thompson appeared to criticise the APPG for making claims on social media that the Loan Charge may be repealed, therefore discouraging taxpayers from contacting HMRC to make settlement plans.  The APPG were incandescent with Thompson’s response and wrote to him again on Friday calling his response “disgraceful”.

    “You have either sought to mislead by ignoring facts you know about or you have no idea what is going on with regards your organisation’s liaison with people facing the Loan Charge.  Either conclusion is damning”, the letter, signed by APPG chair Sir Edward Davey and vice-chairs Ruth Cadbury and Ross Thomson, said.

    The APPG also wrote to Chancellor of the Exchequer Philip Hammond, whose Spring Statement last week was something of a damp squib, requesting an immediate halt to settlements and a delay to the Loan Charge to allow for a “genuine Independent Review” to take place, citing the suicide risk and HMRC failures to both deal with the quantity of Loan Charge enquiries, and also treat taxpayers fairly and in a dignified manner.  Mr Hammond is yet to reply.

    Ross Thompson, vice-chair of the APPG, asked Prime Minister Theresa May to personally intervene in Prime Minister’s Questions two weeks ago, only to be assured in a response by Treasury Minister Mel Stride that “the Government does not agree that the charge should be delayed” and that implementation would continue as planned, regardless of the findings of the Treasury’s own impact assessment.  He has since written another letter to the Prime Minister urging her once again to intervene.

    “When a Member of Parliament raises a case where a person has committed suicide these concerns should not be simply dismissed”, he wrote.  “Unfortunately, the response I received from the Financial Secretary to the Treasury did just that.”

    The APPG reported that over 60 of their survey participants made a direct or strongly implied statement that they intend to end their life, either as a means to spare their families financial pain or simply to end the trauma associated with the Loan Charge.  At least 80% of respondents have dependents.  40% of participants said they had seriously considered suicide and 78.5% said they were either sure or uncertain that they would lose their home.

    It should be noted that surveys of this kind will carry a natural bias: people who are more deeply affected are much more likely to participate.  The numbers are still troubling, however.  The APPG have called the suicide risk attached to the Loan Charge a “public health emergency”, and in an editorial on Monday, the Financial Times called on the Government to “act to alleviate the distress being caused” by the Loan Charge.

    Of the 1,768 anonymous respondents to the APPG survey, which was carried out over ten days at the end of February, 40.5% work in the IT sector, 37.1% in Financial Services and 11.6% in Oil & Gas.  Three quarters are in their 40s or older and said they will “see their hopes for comfortable, financially planned retirement destroyed”.  82.5% said the disguised remuneration arrangements that they used that led to their liability under the Loan Charge were presented to them as HMRC-compliant.

    Paul Lewis, presenter of BBC Radio 4’s Money Box, said “This survey of more than 1700 people affected by [the Loan Charge] is truly appalling … Many things HMRC says about it are contradicted by the evidence here.”

    The head of the House of Lords Economic Affairs Committee, Michael Forsyth, believes the Government should be doing more to pursue the developers of tax avoidance schemes, although HMRC second permanent secretary Jim Harra told the Commons Public Accounts Committee in March that 75% of the expected tax yield from the Loan Charge will come from “employers” – who were the scheme promoters themselves under most disguised remuneration arrangements.

    Lord Forsyth accused the Treasury of being “tin-eared” on the matter.  “Ordinary people are being ruined — these are not fat cat people advised by financier lawyers,” he told the Financial Times on Monday. “Parliament has a duty and a responsibility to deal with this.  The Treasury and the chancellor have been tin-eared and have just turned a blind eye to what is happening.”

    The Financial Times reported that a Government spokesman said HMRC had launched investigations into “more than a hundred promoters of tax avoidance schemes, including many who sold loan schemes”, but a Treasury minister has recently been accused of breaking the Ministerial Code for repeatedly making misleading claims apparently connecting a series of recent HMRC convictions with Loan Charge promoters, when in fact none of the convictions had anything to do with the Loan Charge.

    Financial Secretary to the Treasury Mel Stride, the Minister responsible for HMRC and one of the key proponents of the Loan Charge, told Andrea Jenkyns MP that “more than 20 individuals have been convicted for offences relating to arrangements which have been promoted and marketed as tax avoidance schemes, resulting in over 100 years custodial and more than 7 years suspended sentences being ordered overall” when asked about Loan Charge convictions, to which the Loan Charge APPG responded that none of the convictions cited by the minister were related to loan arrangements.  He had previously mentioned on Money Box 15 prosecutions that also had no relation to the disguised remuneration arrangements that the Loan Charge targets.

    The APPG were intending to quiz Mr Stride on the number of Loan Charge scheme promoters that have actually been prosecuted, and his previous misleading claims, at an oral hearing of the committee on March 4th, but he failed to attend along with Ruth Stanier from HMRC, sparking fury from the group of MPs.

    On Monday, Labour and Tory backbenchers Richard Burden and Jo Johnson became the latest MPs to support an Early Day Motion calling for revisions to the Loan Charge including repealing its retrospective scope, whilst Angela Smith became the first Independent Group MP to support the motion, taking its supporters to 134.  The Loan Charge APPG has also recently welcomed Labour backbenchers Ruth Smeeth and Alex Sobel into its ranks, taking its members across all parties to 89.

    The Loan Charge APPG inquiry report is expected in the next few days.

    19th March 2019.