MPs and journalists have been reporting a sudden “PR offensive” from HMRC following 75 MPs protesting about the Loan Charge in Parliament. HMRC have written a short – and misleading – letter to all the MPs and have now published an online briefing claiming to explain the policy, when it deliberately omits concerns and the fact that no proper impact assessment was done, meaning HMRC and Government have failed to predict the actual and damaging impact of the policy.
The letter from HMRC’s CEO Jon Thompson to MPs and the “briefing” on the government website omits key facts as well as mis-representing the reality of the Loan Charge and HMRC’s own actions and failures. Unlike the picture being painted, schemes were and still are legal and many people were forced to use them; the motivation was fear of the confused IR35 legislation, not saving tax. Users paid the correct amount of tax due at the time and properly submitted tax returns where required. HMRC knew and did nothing for decades, yet now are claiming that people must pay tax going back 20 years even though they never challenged people’s tax returns at the time.
HMRC are also trying to cover up their haphazard approach to identifying individuals who used such arrangements and years of inaction as well as the fact that no proper impact assessment was done – indeed the impact assessment done was deeply flawed in failing to predict the dire consequences of the policy both on individuals but also on contracting in the UK and so the economy.
The lack of a proper impact assessment has been exposed by the fact that the impact assessment states “this package is not expected to have a material impact on family formation, stability or breakdown”. This is patently not true – many people have experienced severely detrimental impacts on family stability including relationship and marriage breakdown.
A LCAG survey has revealed that a huge 68% of Loan Charge victims are facing mental health issues including depression and anxiety with 49% facing the loss of their home and 31% facing divorce or relationship breakdown. A shocking one in every four Loan Charge victims has experienced suicidal thoughts, something HMRC has brushed under the carpet. With the Loan Charge Action Group (LCAG) having to field calls from suicidal people, they asked HMRC to set up a 24-hour helpline, yet HMRC failed to do this and only offered people help to “settle their tax affairs” during office hours!
The LCAG surveys also show that over a half, 51% of people affected, are facing bankruptcy, and nearly a third, 31% are facing a loss of career. The Treasury and HMRC have failed to predict the cost of the bankruptcies to the taxpayer and the fact that many people will never work again and therefore never pay any tax in the future. None of this was in the impact assessment – nor was the fact that it will decimate contracting in the UK and damage the NHS, with doctors and nurses caught up. So the Government quietly pushed through a policy whilst failing to predict its true consequences, which is the worst sort of policy-making and one that has angered many commentators and MPs.
75 MPs from across the political spectrum have signed up to a parliamentary motion proposed by Stephen Lloyd MP to exempt all those who used schemes before the goal posts were moved last year with the 2017 Finance Bill. The Loan Charge Action Group is calling on the retrospective element of the Loan Charge to be dropped, to avoid the disastrous consequences that will otherwise occur and to give certainty to self-employed people and businesses going forward.
Richard Horsley, Spokesperson for LCAG said:
“Now this ill-considered and unfair policy is on the political radar, with 75 MPs already expressing their opposition to it, it’s notable that HMRC are engaged in slick but cynical PR to try to defend the Loan Charge.
“The reality is, however, as our letter to MPs shows, they continue to ignore the reality of the policy and are trying to hoodwink MPs by brushing this under the carpet. As many MPs have now agreed, there needs to be an urgent review of the Loan Charge to avoid disastrous consequences for individuals and damage to the economy and NHS”.