Loan charge letters sent to taxpayers

HMRC has written to more taxpayers affected by the loan charge to tell them that large tax bills remain outstanding with daily interest charges.

Sara White, Editor, Accountancy Daily

MPs on the Loan Charge APPG have written to Chancellor Jeremy Hunt expressing concern about the tone of the letters and asking him to intervene to negotiate a resolution with taxpayers.

The letter stated: ‘We are writing to express our serious concern at the wave of demands in the form of discovery assessments issued by HMRC to many people they believe are liable for the loan charge.

‘These demands, that have come without warning, are for very significant and life-changing (and in most cases clearly unaffordable) sums.

‘On top of this, people are facing punitive daily interest additions and penalties, which is making the sums even more unaffordable.’

The loan charge is a mechanism to recover disputed income tax and National Insurance contributions from people who were involved in disguised remuneration packages which were structured to pay lower taxes than PAYE employees. Many taxpayers signed up to the schemes when HMRC had not flagged them as tax avoidance schemes.

It is now four years since HMRC was given the powers to chase up taxpayers and it is still sending out discovery assessments, often without prior warning.

‘HMRC have had four years to issue these discovery assessments, based on what was detailed within the 2018/19 tax returns, yet they are charging backdated interest, which is unfair’.

‘HMRC are only delivering these discovery assessments days before their ability to raise such an assessment expires. In some instances the letter is dated 5 April 2023 which is the final date for HMRC to make a discovery.’

They added that ‘people were advised to use these schemes including by chartered accountants and accredited tax advisers. It is also the case that HMRC failed to warn them not to use these arrangements at the time’.

There has been widespread criticism over the tax authority’s failure to tackle the promoters and sellers of these schemes, who have managed to avoid any action with individual taxpayers bearing the burden of the tax liability.

‘HMRC should have sought any disputed tax from agencies/employers and failed to do so, so to seek these astronomical demands now is totally unfair. HMRC claim they are seeking tax from the employers first and the discovery assessments refer to the employer (usually the scheme operator) being liable, but then they state that where they cannot recover from the employer, HMRC will seek recovery from the individual,’ the letter stated.

MPs also expressed concern about the emotional impact of HMRC’s actions.

‘We are deeply concerned at the distress expressed in numerous emails we have received since the discovery assessments arrived, including several people reporting suicidal thoughts or actual suicidal intent.

‘We are also concerned because the level of these demands mean that many people will have no choice but to sell their home. HMRC have continually given the misleading impression that people will not lose their homes, yet in reality are well aware that this will be inevitable for some.’