26/3/2019 Mel Stride MP, Financial Secretary to the Treasury and Paymaster General. Photographed in the Houses of Parliament this afternoon.
Mel Stride: 'HMRC are not out to bankrupt people' © Charlie Bibby/FT

The UK tax authority has reported the suicide of an individual facing a new “loan charge” to its complaints body for the first time, as the minister responsible for the policy rejected criticism it could lead to mass bankruptcies.

From Friday 5 April, at least 50,000 contractors who avoided national insurance and income tax by using schemes that paid them mostly in loans will face the charge.

It will tax outstanding loans, which HM Revenue & Customs describes as disguised remuneration, from up to 20 years ago in a single financial year. The loan charge has been linked to a number of reported suicides, and has pitted campaigners and scores of MPs against the Treasury.

Mel Stride, financial secretary to the Treasury, told the Financial Times in an interview he was “deeply upset and disturbed” by the death reported by HMRC.

He said it was the first time the tax authority had been given sufficient details about a suicide that allowed it to identify an individual facing the loan charge. Reporting the incident to the Independent Office for Police Conduct, which investigates serious complaints involving HMRC in addition to the police, was standard procedure, Mr Stride said. He added that the tax authority would co-operate fully with any probe.

The IOPC confirmed it had received a recent referral from the tax authority about the death of an individual. “This will be assessed to determine whether an investigation by the IOPC [into HMRC’s conduct] is required,” a spokesperson said.

Mr Stride said it was “not necessarily appropriate and responsible to jump to conclusions” about the cause of the reported suicide.

Separately, the minister described critics’ claims that the charge was unfair as “misconceptions”; an argument also made in the government’s report on the policy published last week.

“HMRC are not out to bankrupt people; they’ve made it very clear that [they] will not see somebody lose their primary residence,” he said. “The best thing [people] can do is come forward and have that conversation [about unpaid tax with HMRC].”

Mr Stride stressed that those earning under £30,000 a year would be given a minimum of seven years to pay their debts, while those earning up to £50,000 a year would be given five years.

“I’m satisfied that HMRC are taking a proportionate and fair and reasonable approach to this,” he said. “For everybody who avoids tax, there’s somebody else who has to pay it, or there’s a public service, like our police and our nurses and doctors and schoolteachers, who have less money to provide those public services.

“So I think at the heart of this, there’s a strong principle of fairness.”

Despite this, professional tax and accounting bodies, prominent lawyers, more than 140 MPs from all political parties, and peers have expressed concern about the charge

Michael Forsyth, chairman of the Lords economic affairs select committee, has publicly criticised Mr Stride for rebuffing four invitations to discuss the loan charge — claiming this was “not an appropriate way for a minister to behave”.

“Lord Forsyth is entitled to his opinion,” Mr Stride said in response. “[But] for the near 20 years of existence of that sub-committee, no Treasury minister has ever appeared before it . . . so it’s a very clear convention.”

Mr Stride said he had some sympathy for those who signed up to loan schemes in cases where they were “substantially misled by unscrupulous promoters”. “If somebody has been duped by a promoter, that’s deeply regrettable,” he said.

But he added that it was ultimately up to individuals to take responsibility for their tax affairs. “You can’t abrogate your responsibility for that to somebody else, and then say, ‘I was badly advised’,” he said. “The vast majority of people would have thought, if it looks too good to be true, it is too good to be true. [More than] 98 per cent of people have never gone anywhere near these schemes.”

The human impact of the loan charge has been severe. A survey by the Loan Charge All Party Parliamentary Group found that about half of the 1,800 affected individuals they spoke to said they were in danger of bankruptcy. Several individuals told the FT they had already sold their homes to pay their bills.

HMRC has said it will not push for bankruptcy but it has previously told the FT that individuals facing the loan charge may be pursued for bankruptcy by other creditors, and individuals may accept it voluntarily.

Mr Stride confirmed that HMRC had recently won its first case against a loan scheme promoter that had not disclosed its activities. But the authority has been vague about the number of loan scheme promoters it is investigating, despite widespread fears it is aggressively pursuing individuals that signed up to the schemes rather than those that marketed them.

HMRC had opened more than 100 investigations into promoters of tax avoidance, Mr Stride said. But the tax authority could not confirm how many of these related to loan schemes.

Additional reporting by Madison Marriage.

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