The Tory’s ‘draconian’ tax avoidance clampdown linked to seven suicides ’caused serious distress’, a damning report has found.
The loan charge was introduced in the 2016 Budget to address tax lost from what the Treasury called a variety of “disguised remuneration” schemes.
Under such schemes freelancers and self-employed contractors were paid via a third party with loans, replacing part or all of their salary.
Due to loans not incurring income tax, the Government decided that participants had been avoiding paying and demanded income tax to be paid on the full amounts received over that duration of time, in some cases dating back to 1999.
An estimated 50,000 people were affected by the charge, which has been connected to a number of deaths from people who struggled with the bills.
One woman, whose father took his own life, previously told the BBC he had become ‘consumed’ by the charge and was convinced he would go to prison over it.
Have you been affected by the loan charge scheme? If so contact Mirror online at webnews@trinitymirror.com
(Image: Handout)
The way the Government handled the scheme has now been slammed by watchdog Sir Amyas Morse.
“The foundation of our tax system is fairness and where this is undermined through avoidance schemes it is right that these are tackled,” he said.
“However, in doing so, the government and HMRC must act proportionately and responsibly.
“As my review makes clear, the design and delivery of the loan charge didn’t get the balance right between tackling tax avoidance and protecting the rights of taxpayers and, in some cases, has caused serious distress to the individuals affected.”
The Government on Friday accepted a number of recommendations in a report by Sir Amyas and agreed to reduce the tax bill of 30,000 people caught up in the loan charge.
But campaigners say reforms to the loan charge do not go far enough, and labelled a new cut-off date “meaningless”.
Sir Amyas’ report said HM Revenue and Customs (HMRC) should only chase tax repayments from those involved in the scheme up to 2010 – a roll-back of 11 years from the initial 1999 cut-off that the Treasury has accepted.
Sir Ed Davey, acting leader of the Liberal Democrats , said any retrospective demands for tax payments should be abolished entirely.
Mr Davis said: “At last we have the news that the draconian loan charge legislation is to be significantly amended in Parliament next year.
“There are welcome and significant changes, yet I still believe there remain injustices which will need further changes, including the removal of all aspects of retrospection.
“This is an understandable attempt at a compromise. But Sir Amyas Morse has recommended a seemingly arbitrary and meaningless cut-off point at which the loan charge should not apply.”
The Government said the changes, which HMRC has largely accepted, would reduce bills for 30,000 people – more than 60% of those impacted.
Financial Secretary to the Treasury Jesse Norman said: “There have been important public concerns about this policy, and that is why we commissioned this report and have responded so quickly to it.
“The changes we are making go to the heart of Sir Amyas’s concerns about the fairness and application of the loan charge, which he accepts in principle.”
- If you need to speak to someone, Samaritans are available 24/7 by calling 116 123 or emailing jo@samaritans.org
