Last month signalled a new tax year. With it rightly came a ban on Disguised Remuneration (DR) schemes, whereby contractors are given loans as payment by employers.
These loans were never intended to be paid off and were just a way to avoid paying tax and national insurance on their incomes.
Thousands of people took part in this scheme, often after being persuaded to by their employer and without being aware that it wasn’t entirely above board.
Whilst most tax avoidance that we hear about in the news is by wealthy people or large companies, these DR schemes were used by a wide variety of people. Many on low incomes and unaware they were participating in a tax avoidance scheme.
Alongside the ban on the future use of this scheme, the Tory Government have also asked for the money owed in tax back.
Those affected are being hit with massive bills for hundreds of thousands of pounds. They are also asking for money to be paid back from 20 years ago. This policy will disproportionately hit employees and small businesses and will no doubt cause untold financial difficulty and bankruptcies for those affected.
I have been contacted by a number of constituents who are directly, and negatively affected by this change. Shockingly, an employee from HMRC has said that the Government is aware of as many as six people who have committed suicide in connection with these loan charges.
This unnecessarily harsh policy is clearly affecting the mental health of those being hit. A Loan Charge Action Group members’ survey found that 39% of those affected were experiencing thoughts of self-harm or suicide, while 68% reported an impact on their mental health.
As usual this Government is hitting lower earners, implementing changes without proper due care, caution or impact assessments.
This irresponsibility is why I along with 150 other MPs have signed an Early Day Motion in Parliament calling for the Charge to apply only to disguised remuneration loans entered into after the Finance Act 2017 received Royal Assent. I am pleased to note it has good cross-party support.
However, I am disappointed that the Government have ignored calls to halt and review their plans.
Thanks to Labour pressing the Government on this they have at least agreed to a review into the impact of the loan charge, however, reviews take time and for those suffering now a review will be of no comfort at all.
It is clear where the Government stands on this after the Treasury Minister responsible for HMRC refused to attend a parliamentary hearing on this loan charge.
For my constituents and others, I will keep pressing the Government to change their stance on this issue, for a Government that constantly states the best route out of poverty is work, to penalise hard working people who have been exploited by these schemes is the height of hypocrisy and only amplifies how hollow and empty their words are.