The Horizon scandal has quite rightly produced a massive public backlash and an outcry in the House of Commons with the government suddenly putting some urgency and thought into how to give redress to the hundreds of individuals who were so callously treated by the Post office and a parade of indifferent ministers, with a couple of recent honourable and diligent exceptions.
The Loan Charge has all the ingredients of a repeat of the Horizon scandal. Already ten individuals have taken their own lives as they were relentlessly pursued for massive tax payments which HMRC often never sought to justify, and put in place an arrangement designed deliberately to prevent the individuals concerned from challenging the tax liability at tribunal or in the courts. Furthermore like Horizion where the Post Office labelled honest people as thieves, HMRC has gone out of its way to blacken the individuals as” serial tax avoiders” to prevent them from gaining public sympathy. Just as Fujitsu was never challenged about its role in the money which went astray in the Post Office so the companies who promoted the off payroll schemes which the government are now saying were illegal and caused a tax loss have not been pursued. Even though these firms earned hundreds of millions of pounds from the schemes they operated they have not been asked for one penny by HMRC. Lastly as in the Horizon scandal successive ministers have not held departments and officials to account rather they have acted as the mouthpieces for them.
The embarrassment now being experienced by ministers who were in place when questions were raised about the Post Office Horizon programme and who took no action in the face of mounting evidence that something was wrong, should be a salutary warning to ministers today as the evidence of the damage to individuals, the heavy handed tactics of HMRC officials, the unfairness of the methods being used by HMRC and the chaos within HMRC around the loan charge, becomes apparent.
Basically the loan charge enables HMRC to issue retrospective tax demands as far back as December 2010 despite the failure of HMRC to act at the time when tax would have been due and even though HMRC have never been able to legally prove the tax is due. The tax liability arises because workers used payroll loan arrangements instead of standard wages from which taxes such as PAYE would be deducted. They did so because many employers insisted that they be paid in this way because it suited the employers who was able to avoid paying employers taxation and providing certain rights to workers such as pensions and holiday pay. The promoters of the schemes earned fees of up to 20% and assured users that they were tax compliant and carried no risk. It wasn’t just rich people who used these schemes ordinary workers were forced into them if they wished to get work with contractors and agencies. Some were placed into schemes without even knowing. Government departments including HMRC employed workers who were paid using payroll loan schemes. It seems the industry went unpoliced for years. Workers who clearly were under the supervision direction and control of employers and should have been treated as PAYE employees were not.
The loan charge was introduced in the Finance (No2) Act in 2017 and enabled HMRC to issue retrospective tax demands as far back as 2010 without going through the normal process. Those deemed to have a tax liability were given to 2020 to settle. If they had not done so by that date they would be subject to the loan charge. In thousands of cases this has resulted in individuals who had no choice in how they were paid being branded as “serial tax avoiders”, having tax affairs reopened years after they were closed, and being handed tax bills which HMRC could not and didn’t have to justify and which they couldn’t afford. These sums were then pursued in a most heavy handed and intimidatory manner. To date 10 people have committed suicide under the pressure of the Loan Charge regime.
Meanwhile the employers who insisted that workers use the schemes and the promoters of the schemes who basically misled many of those who in some cases willingly or in other cases reluctantly used them have been left alone by HMRC. Indeed an internal HMRC email confirms that HMRC “cant commit to going after promoters of previous schemes” instead to cover up for their own incompetence and negligence they harass ordinary workers and individuals for tax which other richer companies who mislead those workers and earned hundreds of millions of pounds from their activities should be paying.
HMRC have tried to cover their tracks with misleading answers, official silence, misuse of their discretionary powers and denying individuals the ability to challenge unsubstantiated tax demands in court. This abuse of state and bureaucratic power in a democracy is frightening and should have had ministers jumping to investigate rather than complacently accepting the answers being fed to them. The number of deaths and attempted suicides should themselves have raised questions about the way in which HMRC are using the loan charge.
The loan charge should immediately be repealed. The government should consider a proposal from a group of independent professionals to collect an affordable proportion of the tax HMRC claims is owed which would avoid countless bankruptcies and even more suicides. In the longer run there is a need for a taxpayer Bill of Rights and for Taxpayer Fairness to be enshrined in law.
It should not take another TV documentary along the lines of Mr Jones versus HMRC to get fairness and relief for the tens of thousands of individuals who are currently cowering under the merciless blows from cosh of the taxman today.
HMRC’s Loan Charge has all the ingredients of a repeat of the Horizon scandal, with good honest people being labelled as thieves
