As another suicide is linked to the controversial tax recovery policy
The government has been urged to find a resolution to the Loan Charge injustice by the All-Party Parliamentary Loan Charge and Taxpayer Group (APPG), with a tenth suicide linked to the controversial tax recovery mechanism.
The connection between the suicide and the Loan Charge was confirmed in correspondence between Jim Harra, the Chief Executive Officer of HMRC, and Harriet Baldwin MP, the current chair of the Treasury Select Committee, in early January, as reported by the Yorkshire Post (paywalled).
The news follows the publication of an open letter to Rishi Sunak and Jeremy Hunt in November 2022, sent by the APPG and signed by 120 MPs, which warned of “a real risk of more suicides, as well as many families facing hardship” as a direct result of the Loan Charge.
The APPG had urged the government and HMRC to review the Loan Charge, “not just out of compassion, but also commonsense”, calling it “a significant problem, as well as being a wholesale failure as a policy”.
About the Loan Charge
The Loan Charge was introduced as part of a crackdown on tax avoidance and evasion aimed at contractors who had worked through disguised remuneration schemes.
Disguised remuneration schemes avoid income tax and national insurance contribution payments to HMRC. The Loan Charge seeks to recover these taxes from the scheme participants rather than the scheme operators, however, which has been a source of controversy since its introduction.
How much a scheme participant owes is calculated by adding together the value of all the loans they received. This sum is then treated as income in one year and taxed at the prevailing rates of income tax and national insurance.
The way the rule is applied has left many thousands of contractors facing significant backdated tax bills, with HMRC estimating as many as 50,000 people are affected and that £3.2bn is recoverable.
The significant tax bills have reportedly led to 10 suicides, and the policy is now under increasing scrutiny, with the government mounting pressure to review it.
Contractors are still exposed without SEB
Having recently abandoned its pledge to introduce a Single Enforcement Body (SEB), experts have argued that the government has left contractors and freelancers exposed to the threat of tax avoidance schemes.
The SEB included plans to introduce regulatory reform to the umbrella sector as well as unifying the three bodies which monitor compliance with employment law and regulations.
Specialists have said the failure to regulate the umbrella industry has been responsible, in part, for the proliferation of tax avoidance schemes in the sector.
Abandoning the government’s manifesto pledge was labelled a “short-sighted move” which leaves contractors at risk – and rogue operators of tax avoidance schemes unpunished.
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