Stop the charge, save lives

Simon Read

Simon Read

When financial pressure leads to suicide, we must examine how and why the tragedy happened.

We need to find out what caused the crisis and learn valuable lessons to avoid further unnecessary deaths.

But what happens when we discover the government is responsible for the suicide? 

And then, chillingly, we find out that there have been more suicides, all caused by the same government department.

It may sound like some sort of slick high-concept thriller, but it is happening right now in real time.

And it could be happening to some of your clients.

I am talking about the loan charge, or what the Treasury calls the ‘disguised remuneration loan charge’.

It is a fee that HM Revenue & Customs is charging thousands of people who used a tax avoidance scheme from the late 1990s.

Under the scheme, workers were paid by way of a loan instead of a salary.

The arrangements were intended to avoid tax and national insurance contributions for the employee.

They have now been rightfully banned, but the current crisis for the thousands of workers who used the schemes began in 2016 when then chancellor George Osborne took action in his 2016 Budget.

He outlawed the schemes and brought in the loan charge to recoup tax going back 20 years.

There is no argument that the government was right to crack down on the schemes, but the retrospective nature of the loan charge has proved to be extremely controversial.

That is because it is hitting people who had no idea the government may want to claw tax back from them.

Sure, many of the freelancers, contractors or agency staff who used them may have known exactly what was happening.

I have been freelance for much of my career, but have always been careful to steer clear of anything that even vaguely sniffed of tax avoidance.

And please do not start bleating about Isas or their previous incarnations Tessas or Peps being tax avoidance schemes – they are no such things. 

They were set up by the government to encourage savings. In short, they are government-backed tax planning.

But I can understand why many folk leapt at the chance to get one over the tax authorities.

The problem is, I believe the majority of people were pushed into these schemes and were simply told they were legal.

In short, they were told it would be financially foolish to not take advantage of the opportunity.

You may scoff, but my experience tells me that the majority of folk do not really understand their finances or even like to think too much about them.

If their accountant advises them to do something, they do it; after all, the expert should know.

And while the schemes appeared to be a loophole that the Treasury knew about but did not act upon, it is natural that the experts took this to mean tacit agreement.