Economic Affairs Committee Contents

Appendix 5: Examples of representations on the loan charge

Throughout our inquiry, we were provided with representations on the loan charge. We are grateful to those who took the time to inform our inquiry. The following are anonymised illustrative examples of those representations.

Locum social work in health (2004–07)192

Engaged through a recruitment agency and advised to use a Contractor Employee Benefits Trust, based on “QC opinion and being IR35 compliant, and HMRC compliant and registered”.

Contacted in late 2016 by HMRC, and informed that they were in debt for an overdue Accelerated Payment Notice (APN) and penalties. When the witness told HMRC they had no idea of the new legislation, HMRC advised they would resend the letters and give the witness the opportunity to explain their situation in writing, and request to have any penalties removed. This course of action was denied as the 30-day deadline for objection had passed. It took four weeks for the letters to arrive from HMRC to Australia.

“This whole process has caused extreme stress and anxiety, as I have felt completely powerless, marginalised and disregarding in the treatment by HMRC”

IT contractor (2005–10)193

Used an Employee Benefits Trust arrangement between 2005 and 2010, using the scheme as an alternative to the “confusing and poorly understood” IR35 legislation.

The witness challenged one APN (for approximately £16,000). HMRC had sent the APN in error, and withdrew the APN, apologising for the inconvenience to the witness. The witness said “this was after I had sold my then current family home to raise the funds to pay all my APNs, including the one that was withdrawn.”

“They have threatened me with debt collection, taking of personal possessions and CCJs [country court judgments] in pursuit of tax which so far no court has determined is due to them. The employers who are liable for the tax are not being pursued. A retrospective tax grab by HMRC via the 2019 loan charge sets a very dangerous precedent.”

Freelance consultant (2010–14)194

Employee Benefit Trust arrangement suggested by accountant. The scheme’s tax advisers said ‘top barristers’ had confirmed its legality.

Asked by HMRC to pay £80,000 within five years.

“I can only see this making me bankrupt and that will stop me continuing as a contractor, as companies don’t want to deal with bankrupts.”

“How will I find £15,000 extra a year? My income is already down 25% this year. How can an arbitrary limit be applied without understanding that individual’s situation? [HMRC] just don’t care.”

Contractor (2005–07)195

Used a scheme having been told by the scheme operator that it was legitimate and approved by HMRC. This operated by being paid a salary and the remainder of their income as a loan.

HMRC opened an enquiry in 2008, after the witness had repaid the loan and stopped working through the scheme. Following correspondence from 2008–11, the witness heard nothing from HMRC until September 2018. HMRC wrote to the witness, asking for information about the scheme, and suggesting that the loans are outstanding and they will need to pay interest for the years since receiving the loans.

“I had no way of reasonably thinking that HMRC would now, 13 years later, deem there to be tax, interest and potential penalties due.”

I am not a wealthy person, I just about get by, paying my mortgage and supporting my family. I do not have any savings or any means to now pay tax, interest and potentially penalties on income earned 13 years ago. This is causing me severe stress and family anxiety. I might lose my home and job.”

Freelancer (2008–17)196

Entered into a scheme as they were advised it was IR35 compliant and registered with HMRC as a DOTAS scheme. The witness also had a reputable accounting firm give them a second opinion, which advised them the scheme was not breaking any HMRC rules.

HMRC opened enquiries in 2008 and onwards, but have not concluded them. HMRC has not directly informed the witness of the loan charge, who “found out about it by accident” and “only after a lot digging into it did I start to understand the implications at which point I stopped using the scheme straight away.” The scheme remains in operation.

The witness has the option to pay the loan charge or settle for the 10 years on the scheme. The settlement route would still involve paying class 4 National Insurance contributions and interest for the 10 years of the scheme.

“I am facing the real prospect of financial ruin. At the moment things have not become a reality yet but if it does I fear for my wellbeing and my families in particular my two children and partner who rely on my financial support. I am now 51 and if this happens I have no idea how I will support myself in old age. I face the prospect of working till at least 75 to 80.”


192 Written evidence from Anonymous (DFC0065)

193 Written evidence from Anonymous (DFC0063)

194 Written evidence from Anonymous (DFC0011)

195 Written evidence from Anonymous (DFC0032)

196 Written evidence from Anonymous (DFC0083)




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