The loan charge scandal: the Treasury U-turn destroying the lives of hardworking families


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You probably haven’t heard of the loan charge. I hadn’t until a couple of months ago, when I told listeners to my LBC radio show that I would soon be interviewing Mel Stride, the financial secretary to the Treasury. Following this, I was bombarded by texts and emails from something called the Loan Charge Action Group and its many, many sympathisers. I then became acquainted with what might be the next storm to hit the government.

The messages, many of them emotional and some borderline aggressive, told the same story: hundreds of what politicians like to call ‘hardworking families’ were facing unpayable and unjust tax bills as a result of a Treasury U-turn on what previously had been a perfectly legal tax scheme. Freelancers and contractors had been allowed to be paid through an employee benefit trust; the payment was via ‘loans’ that were never repaid. An odd arrangement, to be sure, but it was once accepted and promoted as a legitimate way for the self-employed to reduce income tax. Now, it has been declared a form of tax evasion, and the authorities are seeking to claw back 20 years of what are being regarded as missed payments.

What’s going on? How could this be justified? When I put questions to Mr Stride in my studio, I found him decent and affable, but he provided answers that were entirely unconvincing. It’s not at all clear that the government expected its sudden tax demands to have such an effect. Many self-employed traders are now looking for answers from those who advised them to use these vehicles, based on written guarantees from HMRC that they were legal. But the authorities don’t care if anyone was wrongly advised: they want the money.

And they want it whether or not their targets have it. We’re not talking about a cabal of the rich and famous. Sarah from Maidstone, a locum GP, rang in to my show to say HMRC had demanded £120,000 from her and that she would have to sell her house. This in spite of the NHS requiring her to be on the books of an agency. Mark in Windsor told me he had already had to pay £180,000 and his family were now living in a two–bedroom council flat. Simon in Wealdstone was also facing demands for more than £95,000. He told HMRC that he had been unemployed for a year back in 2001, but had no evidence to prove it. It said it would charge him the average of all the other years, so this poor man was being charged back tax for a year during which he hadn’t even worked. Readers more au fait with the law than I am will no doubt know that we are required to keep financial records for only seven years. Not 20.

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