Engagement special - reader letters on Loan Charge - Money
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FT Money’s inbox has been overflowing with hundreds of emails, letters and tweets sent by people affected by the loan charge. A new measure that comes in from April, this will tax income from up to 20 years ago in one tax year, hitting 50,000 to 100,000 contractors. Those impacted say the measure is retrospective and unfair and will lead to mass bankruptcies.

The range of people who contacted us included IT contractors, oil and gas workers, engineers, pilots, council workers, social workers and nurses. They included individuals who have worked for a host of FTSE 100 companies and several government departments. Many of the letters tell of how people entered schemes with no idea that HM Revenue & Customs (HMRC) considered them tax avoidance “disguised remuneration” vehicles.

Most people who contacted us requested anonymity, with several saying they feared reprisal from HMRC if they identified themselves publicly. Unfortunately, due to the sheer volume of letters, we can only print a small selection.

Almost every letter FT Money received spoke of the personal distress that living under the shadow of the loan charge was causing for them and their immediate family.

“I blame myself for this mess and I can’t apologise enough to my wife who now suffers along with me. I ask myself how did I get into this mess? I’m educated, logical and very risk averse. I would never do anything illegal or that would result in so much uncertainty.”

a 54-year-old one man facing a bill of more than £300,000

Most people said their mental health had worsened while several others said they had developed stress related heart problems and other ailments. The strain on personal relationships was a recurrent theme.

“Six months ago my partner moved out of our family home. He said that he could no longer live with us because he brought us all down every day with the black cloud of depression and guilt which has hung over him and us for the past two years. He said that the stress of life and dealing with the threat of HMRC had become intolerable and at least if he lived on his own he would no longer inflict his mood swings on us and generally withdrawing from family life.”


The woman adds that letters from HMRC, often couched in the jargon of county court claims, elicit panic about the threat of losing the family home. “We took the huge file of letters to show our MP. She said that she would contact HMRC so that it would back off, as she could see that my partner was struggling mentally. She even asked if she could contact his doctor so that a note be made, but still the letters come.”

Several business owners spoke of the heavy impact the loan charge would have on them and their staff. A signage business owner who employs a dozen people told FT Money he is facing liabilities of about £450,000 because of advice taken from his accountant. Most of the loans he previously drew were reinvested back into the business and corporation tax was paid, he writes.

“The fear is when the retrospective charge comes into effect the business will cease to exist. HMRC has been very aggressive, phoning the business and on one occasion turning up at the offices unannounced demanding large amounts of monies in front of our staff,” he said.

“This has now started to effect my wellbeing, with pressure from the business impacting my health, stress, pain, my marriage. My wife is very supportive but seeing her suffer with sleepless nights, [is] very hard to deal with.”

Many of the people affected are close to retirement or already retired, limiting their opportunities to earn. Several only found out about the loan charge late last year.

With the knowledge of the loan charge, our lives have been thrown into turmoil with an anticipated retrospective bill circa £100,000.

At 61 and 68, in 2018 [my partner and I] went from being retired looking forward to the travelling, to the possibility of losing our entire life savings, through no fault of our own.


A pilot says: “I face compulsory retirement at age 65 in just over two years. This situation puts me in a difficult position. I have a family with twin girls aged eight and a boy aged 12. As an airline captain, my job is stressful enough. I do not need this additional stress at 38,000 feet with 200 people behind me.”

Though HMRC has publicly stated that nobody will need to sell their home to pay for the loan charge, we received several letters from people who have done just that.

One father of grown-up children, currently at university, did not want to be named because he had not told them of his financial problems. He says: “I have downsized the family home to release cash for a certificate of tax deposit of £84,000 to mitigate interest which relentlessly climbs during the prolonged periods it takes to resolve these issues. I have retired earlier than I otherwise might as there is little point in earning during 2018-19 due to the effective rate of tax when HMRC include their claim in my 2018-19 tax return.”

Another man who faces a bill of £113,000 writes: “The daily stress led to me being signed off work for a prolonged period and being prescribed antidepressants. Unfortunately, despite the medication and as the stress and anxiety continued I attempted suicide in October 2016. I was hospitalised for a number of days and received counselling in the weeks that followed. This all proved too much for the family and I separated from my wife in 2018 and sold the family home to liquidate assets to pay this repugnant loan charge.”

Many of the letters described how people entered schemes on the advice of accountants, advisers and in some cases employers. One man who followed his accountant’s advice back in 2006 to enter a loan scheme describes his panic a couple of years later when he received a tax inquiry notice into his 2006-07 employment. He remembers: “I called HMRC immediately and they advised me not to worry, as they select a number of random tax returns to investigate each year and I would be contacted further should there be any issues. Armed with this advice, by HMRC, I continued to work under these schemes thinking everything was all right. I even chased HMRC up again some four years later when all the noises surrounding disguised remuneration were being made, only to be told yet again, don’t worry.”

Since then, he has been served with five accelerated payment notices (APNs). These require the recipient to pay disputed tax associated with avoidance schemes within 90 days, with no right to appeal. He also now facing the loan charge.

An oil and gas worker of 30 years, who received nine APNs in January 2016 totalling £110,000, told FT Money of the struggle to pay them within the 90 days.

“I had to use the rest of my life savings, liquidate my remaining Isa shareholding, take out a large dividend payment from my limited company, remortgage my house and take a small loan to cover those amounts payable. It has completely wiped me out financially. I no longer have any savings.”

oil and gas worker

He is also now facing the loan charge. “Not a day goes by that I cannot think about what this has done to me and my family,” he adds. “And all this having done nothing illegal.”

A number of letters were from people who no longer live in the UK, including several Australians who came to live and work in the UK for a period and have since moved back home. Many of them say they were put into these schemes by recruitment agencies.

One Australian national writes: “The recruitment company I used provided me everything I needed to know about working in the UK, from how to get a national insurance number, to opening a bank account, to what structure to use for contract work. I followed their advice and it seemed sufficient — after all — they specialised in helping Australians to get on their feet in London.”

He adds his personal circumstances have been transformed since being in the UK in his twenties. “We now have children and a mortgage and certainly aren’t in a position to pay the tens of thousands of pounds that HMRC are demanding (we don’t actually know what the specific amount is as they’ve never been able to get around to calculating a settlement figure).”

An Australian social worker who also used a recruitment agency to find work in the UK when he lived here between 2004 and 2007, describes receiving a call from HMRC “out of the blue” in 2016, telling him he was late paying a five-figure APN.

“I had no idea what an APN was or that it was based on legislation enacted five years after I left the UK. I believe HMRC has significantly overstepped the mark for fair and transparent process in managing any inquiries and in the process levying a new charge based on retrospective legislation. They have failed to take account of their own flawed process, delays and unclear guidance on compliant and non-compliant tax arrangements.”


Several people expressed anger at HMRC that they were not warned to exit schemes immediately.

“I was given poor advice by professionals who used the HMRC Dotas [disclosure of tax avoidance scheme] to hoodwink and sell their scheme products to freelance victims like myself,” says one person. “Why wasn’t I told as soon as possible in 2008 that I was under inquiry? They had my self-assessment tax return, they knew the payroll scheme was registered under Dotas. They had simply to inform all users of these schemes immediately, not wait over five years.”

The wife of a contractor writes: “My husband used a scheme from 1999-2006. HMRC opened a tax inquiry in 2006 saying: ‘[We] will get back to you.’ They never did. We saw none of the communications on the web as we had no reason to go looking for them. Neither did we have an accountant who HMRC claim most people would have been told by. HMRC has done nothing to inform us. Under the loan charge we owe at least £75,000, and £10,000 is interest because they never got back to us.”

Hundreds of people spoke of their desperation at the prospect of going bankrupt, with many saying that their local MP was unsympathetic to their plight.

“How can I be expected to sign up to a settlement ‘opportunity’ which will ruin us financially?” asks a father of two children, both under five. “The only viable option is bankruptcy, which at 37 is a horrendous prospect.”

However, some readers not facing the loan charge expressed little sympathy.

“Employees who have taken advantage of disguised remuneration schemes should be responsible for the repayment of all of the tax and national insurance avoided regardless of timescale involved,” says one FT Money reader. “This is equitable towards the majority of taxpayers who pay their taxes.”

Nevertheless, he added: “The companies perpetrating these schemes should be pursued remorselessly.”

HMRC says it is cracking down hard on promoters of tax avoidance schemes. Since the formation of its fraud investigation service in April 2016, it says more than 20 individuals have been convicted for promoting and marketing tax avoidance schemes offences and have received custodial sentences totalling 100 years. It added that promotion of avoidance schemes, while not criminal, can sometimes be fraudulent in nature, crossing the line into evasion.

HMRC maintains it has always considered these schemes tax avoidance.

“It is not normal, or indeed reasonable, to be paid in loans that are unlikely ever to be repaid,” HMRC says. “Most people would have been able to see from their payslips that the money they were received was not being taxed.”

HMRC adds that it has undertaken “extensive compliance activity” against disguised remuneration schemes, including opening thousands of inquiries and agreeing settlements with scheme users. However, it acknowledges there may have been delays in investigating disguised remuneration schemes in some cases.

“It is true that some customers did not hear from HMRC for several years while we investigated schemes. This was because of HMRC’s traditional approach to investigations which was to work a lead case with the promoter/agent who would agree to keep their clients informed of progress. This seems to have allowed some promoters to block some of HMRC’s communication efforts and give an ‘all is well’” message to clients which was incorrect.”


The tax authority has since changed its policy, and now seeks to obtain information from each scheme user it identifies and communicate with them directly.

HMRC is urging anyone affected by the loan charge to contact them. It says it is committed to offering flexible payment arrangements and providing vulnerable individuals with extra support. Individuals earning less than £50,000 or £30,000 a year will automatically be given five and seven years respectively to pay. Bankruptcies will be considered the very last resort, the authority says.

“HMRC will not force anyone to sell their main home to pay their disguised remuneration debts,” it says. “However, other creditors may pursue bankruptcy action or customers themselves may choose to declare bankruptcy given their personal circumstances. In the event that a person went bankrupt, it would be for the insolvency practitioner, not HMRC, to agree the best way forward.”

The tax authority added that it was not clear that the examples of individuals receiving APNs were related to the loan charge and that any instances of enforcement action, such as visiting offices, were not related to the loan charge since it has not yet come into effect.

This article has been amended since original publication to clarify HMRC figures on the conviction of promoters of tax avoidance schemes

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