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Loan charge has triggered “a mental health crisis”

MPs write to the Chancellor expressing “serious concern” about impact of controversial policy

The Loan Charge & Taxpayer Fairness All-Party Parliamentary Group (APPG) has written to the Chancellor, Jeremy Hunt, explaining that the Loan Charge policy has “triggered a new mental health crisis”.

The letter, which was sent to the Chancellor on 11th May, raises the APPG’s “serious concerns” about the ongoing impact of the controversial policy, which is linked to ten suicides so far.

And recently issued “discovery assessments” sent by HMRC have left some taxpayers “very distressed” and facing “significant and life-changing (and in most cases clearly unaffordable)” backdated tax bills.

As reported by the Yorkshire Post, the APPG’s letter criticised HMRC’s conduct, stating that it is “deeply concerned at the distress expressed” by constituents, “including several people reporting suicidal thoughts or actual suicidal intent”.

The letter also raises concerns that “punitive daily interest additions and penalties” mean that some people “will have no choice but to sell their home” to pay the tax bill.

As such, the body – which is one of the largest All-Party Parliamentary Groups, with over 250 members – is calling on the government “to change course and to seek a resolution” to the issue.


What is the Loan Charge?

The Loan Charge is a mechanism that was introduced to recover taxes from participants of disguised remuneration schemes. Many contractors who operated via these tax avoidance schemes did so unknowingly.

These schemes typically pay workers via a non-repayable loan, which is not subject to income tax or national insurance. 

In its recovery of these taxes, HMRC treats the value of all loans as income in one year, with contractors required to repay the full amount. This leaves contractors with considerable tax bills – many of which, the APPG says, are “clearly unaffordable”.

HMRC’s approach – recovering taxes from contractors, rather than the operators of tax avoidance schemes – has been a source of frustration and criticism since the policy’s introduction. As the APPG letter points out: “People were advised to use these schemes… by chartered accountants and accredited tax advisers”.

With ten suicides linked to the Loan Charge, the APPG’s latest letter suggests that this number may rise unless the government takes action.


APPG requests a meeting with Financial Secretary 

Responding to the Yorkshire Post report, a Government spokesperson said, “We never forget that there’s a human story behind every unpaid tax bill.

“HMRC takes the wellbeing of all taxpayers very seriously and recognises that large tax liabilities can add significant pressures for some people”.

However, in its letter, the APPG said that HMRC’s behaviour is “markedly different from the rhetoric given to MPs and Select Committees”, accusing the tax office of “grossly unfair” practice. This included continued contact with one taxpayer who had attempted suicide as a result of the Loan Charge.

As yet, the APPG hasn’t received a response from the Chancellor. But it has received a letter from Victoria Atkins, the Financial Secretary to the Treasury, in response to the open letter issued to the Prime Minister and Chancellor earlier in the year.

The APPG labelled this response “extremely disappointing”, noting it failed to “actually respond to the very serious points we made and the plea for the Treasury to engage on this issue and discuss a resolution”.

As a result, the group has requested a meeting with Atkins to discuss “how to resolve the situation”, as the current approach has led to “devastating outcomes” outlined in their previous correspondence.

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