ATTEMPTS by the HMRC to claw back unpaid taxes have caused “widespread anxiety and distrust”, MPs have warned.
A Treasury sub-committee report accepted it was right for the Government to protect public funds from tax avoidance — but blasted the new “loan charge”.
It is a measure to claw back money from those who used “disguised remuneration schemes” and avoided paying income tax or national insurance.
HMRC estimates about 50,000 have used these schemes over the past two decades. MPs have previously claimed the stress of facing a large unexpected tax bill has driven some to take their own lives.
The schemes worked by setting up an “employee benefit trust”.
A worker’s income would be funnelled abroad and then paid in the form of a loan not designed to be paid off, thereby getting around the usual forms of income tax.
Many in the schemes had them suggested to them by employers, only to find out years later they were illegal.
‘ANXIETY & DISTRUST’
HMRC said such schemes “are tax avoidance measures that seek to avoid income tax and national insurance contributions by paying scheme users their income in the form of loans.
The loans were never intended to be repaid, so they are no different to normal income and are taxable”.
Earlier this month, former Brexit Secretary David Davis claimed four suicides had been linked to the way HMRC has dealt with chasing unpaid taxes relating to the loan charge.
Mr Davis urged the Treasury to consider people’s mental health as it implemented the policy.
Commenting on the report, Treasury sub-committee chair John Mann said HMRC needed to do more to protect vulnerable taxpayers.
The Labour MP added: “One of HMRC’s key responsibilities, as required by Parliament, is to protect public funds from tax avoidance.
“As such, HMRC introduced the loan charge to tackle the use of disguised remuneration schemes, which it describes as an anti-tax avoidance measure.
“Setting aside the policy, HMRC’s administrative approach to the payment of large unexpected tax bills has been sensible.
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“The delay, however, in clarifying payment terms for those wanting to settle their past use of such schemes has caused widespread anxiety and distrust.
“HMRC’s measures to improve its approach to vulnerable taxpayers are welcome, but it must urgently improve the guidance available for those involved in tax disputes.”
The Treasury promises not to make people sell their homes to pay the charge nor make them bankrupt.
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