Today we had an important and urgent debate in the House of Commons about the issue of the Loan Charge. The Loan Charge is effectively a tax which applies to loans dating back as long ago as 1999.
HMRC regards the loans payed over this time as tax avoidance schemes. From 1999 and 2017, companies used these loans were used to avoid income tax and national insurance, and were paid to employees in the same way as salaries.This was perfectly legal, until 2017, when the government changed this legislation to apply a retrospective charge that it expects those who benefited from these schemes to pay, whether or not they were aware of it at the time.
HMRC expects to receive payments of around £50,000 on average per person. Although there is scope for restructuring payments for those on the lowest incomes, many of those effected will be expected to pay in one lump sum. When you consider that the average UK income is £28,000, you get an idea of the devasting impact these Loan Charges can have on people’s lives.
I went to the debate to speak up for my constituents and for all the other people who have to deal with this issue. The Treasury and HMRC are arguing that the implementing of the Loan Charge is legal and necessary. I and many of my colleagues who spoke at the debate are completely opposed to this view. The Loan Charge amounts to a retrospective tax that criminalises people who were not doing anything illegal at that time, and in some cases, were not even aware of that they were being drawn into these schemes. The Loan Arrangements have been legal and have been widely used across public and privet sector organisations. They have been visible and even reported to HMRC during this time.
It is right that we take action to clamp down on tax avoidance and ensure money owed to the Treasury is collected, but the introduction of these Loan Charges seems to be an attempt by HMRC to maximise income from taking the assets from the softest targets who lack the resources to fight back, whilst overlooking the accountants, agencies, and companies who were largely responsible for the original payment of these loans to unwitting staff members.
We are up against the deadline on Friday to settle these cases. Those who don’t settle with the HMRC before today’s deadline are expected to pay huge amounts of taxes at the beginning of next year. But in fact, many people simply can’t do this, as HMRC has often failed to provide the documentation required to settle. Staggeringly, a recent survey by the All Party Parliamentary Group on the Loan Charge revealed that nearly a third of those effected have never received any contact from HMRC to notify them of the need to pay.
In other words: HMRC advises the public to settle their payments, then provides no means for them to do so. HMRC have said that they wish to support people affected by this charge. But taking assets away from those on low incomes, particularly retired people, whose only asset is their house- would seem to me to be the very opposite of this.
We have already had cases of suicide which are directly connected to this matter, and many more could be considering taking their own lives to avoid payment, because they simply cannot afford such a tax. It is clear that we must act now. We must keep putting pressure on HMRC and the government to ensure that these people aren’t cut of their savings and assets. We must protect these people from this unfair charge.