Loan Charge crisis rumbles on with uncovering of new notices

The Loan Charge scandal has been engulfed by further condemnation, with the uncovering of the highly controversial s.684 notices yesterday by Sky News [20 February 2024] as politicians round on the crisis and call for a full investigation on the matter.

According to the Loan Charge Action Group (LCAG), an s.684 is notice of a tax liability transfer, transferring liability for tax from employer to employee in this case, for use of contractor payroll loan schemes. 

HMRC has discretion to transfer liability in certain cases, but FOI responses from HMRC to various requests shows it understands the controversy of the problem as the organisation has “discreetly” sent out 3,000 of these notices [correct at time of writing] to individuals.

From 1 November 2022 to 28 January 2024, the HMRC Counter-Avoidance directorate issued around 1,480 letters to exercise the discretion under s684(7A)(b) ITEPA 2003 in loan-related cases.

Receipt of the notice – which can’t be appealed, only judicially reviewed – means that HMRC will then issue demands for tax it thinks is due, says the LCAG.

The DUP’s Sammy Wilson has called the issues stemming from the recent loan charge debate “bureaucracy out of control” in an exclusive interview with Recruiter, as he and other MPs called on those affected to rise up and demand a public inquiry.

That call was heeded in late January by Labour’s Shadow Chancellor Rachel Reeves, who said on the Iain Dale radio show on LBC that the party would commit to an independent review on the loan charge if Labour wins the next general election.

The LCAG has written to Reeves about the review and asked her to ensure that the s.684s will also fall under this remit.

Wilson, MP for East Antrim – and a proponent of the loan charge debate alongside Sir Mike Penning, Conservative MP for Hemel Hempstead, Marion Fellows, Scottish National Party MP for Motherwell and Wishaw, and Greg Smith, Conservative MP for Buckingham – said the issue was a “national scandal” that has all the hallmarks of another “Horizon thing [the British Post Office scandal]”.

“Then maybe at some stage in the future, public awareness will be increased because somebody will actually say, here’s another story which needs to have a public airing, and we’ll do something like they did on the post office,” he told Recruiter.

“Get public ire raised! It’s surprising how quickly the gun started moving when millions of people became aware of what the post office had done to individuals and they made [Mr Bates vs The Post Office]. Politicians start to get fearful then.

“It’s the only way you’re going to get any movement and hopefully we’ll finally get a minister who’s got the balls to do their job.”

The loan charge has been linked to 10 suicides so far and a number of other suicide attempts, while government has resisted pressure to overturn the policy or start an inquiry into a matter that has affected tens of thousands of people. 

Overall, the Conservative government stand by the review conducted by Lord Morse in 2019, which introduced a raft of reforms to ease the financial burden on those affected.

However, critics of the loan charge have rounded on financial secretary to the Treasury, Nigel Huddleston, imploring him to effect change on a matter that has affected ordinary working people like recruiters, IT consultants and nurses, to name a few.

Liberal Democrat MP for Bath, Wera Hobhouse, said to Recruiter that Huddleston mentioned for people to get in touch with HMRC but “they are the very body that is at the heart of the problem.” 

Hobhouse said the organisation has used “aggressive tactics to intimidate people” when those individuals have tried to rectify their problems with HMRC.

“Those are sort of attitudes and cultures that one has had who has been particularly exposed during the Post Office scandal, but they seem to sort of be going right through the government itself,” she said. “That’s just not acceptable.”

Wilson went a step further, calling for a new treasury minister who would recognise, understand, and take steps to rectify the problem.

“We have found so far that [treasury] ministers have simply come along and taken the HMRC line,” he said. 

“In fact, some of them refused to meet the [Loan Charge] APPG group. And I think that’s the first thing – we want a receptive financial secretary, and somebody who actually recognises that this policy is wrong. 

“It’s damaging to the government; it’s going to have very long-term consequences and I think we’re heading for another Post Office scandal.

“As a country, we need a minister who is prepared to challenge the behaviour of HMRC and recognise that the way in which they’re pursuing the loan charge at present is extremely damaging – any minister faced with a policy that has caused 10 people to commit suicide really should have alarm bells ringing in their head.”

The SNP’s Chris Stephens, MP for Glasgow South-West, told Recruiter: “The SNP support the aims of the Loan Charge in principle, but we have also been clear that its blanket implementation has been unjust and risks punishing ordinary workers.”

Stephens said the party has been calling for a “full independent review” since 2020, but the government has rejected each call. 

He said it is “deeply unfair that tens of thousands of people – including contractors and freelancers – are being unfairly penalised, and potentially pushed into unmanageable debt”, and called on those struggling to get in touch with the APPG or their local MP.

The LCAG also reiterated that individuals need to take professional advice and contact their own MP. 

• Conservative MP for Haltemprice and Howden David Davis and Plaid Cymru MP for Arfon Hywel Williams were both contacted but each declined to the opportunity to comment.

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