‘My dad thought he was a criminal – he wasn’t’

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The government has been urged by the daughter of a man who took his life to stop the controversial tax policy which she says played a part in his death.

She has called for the policy, known as the “loan charge”, to be suspended.

More than 200 MPs have also called for a suspension and independent review of the policy, which seeks to recover large sums from freelancers paid via a loan from an offshore trust.

HMRC said anyone concerned about a tax bill should contact them for help.

“Our sympathies are with the family and friends of the individual.

“Our message to anyone concerned about a tax bill is to please come and talk to us and we will help,” Her Majesty’s Revenue and Customs (HMRC) told the BBC.

HMRC estimates around 50,000 people were in the schemes, which it has described since 2010 as “disguised remuneration”.

This is where the agency employing them diverts most of their pay to an offshore trust, then the trust gives them a loan which they typically don’t have to pay back – and on which tax is only payable at around 1-2%.

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Tens of thousands of freelancers and contractors now face a deadline of the end of August, to obtain HMRC’s agreement to a “voluntary” payment for what it says is tax due going back to 1999.

If they fail to do so, they have been told they will have to add up all the loans they have had in the last 20 years and pay a “loan charge” at tax rates of up to 45% by the end of January – a sum that often far exceeds their annual incomes.

MPs of all parties have warned that could bankrupt some and force others to sell their homes.

In total, 151 MPs have joined an All-Party Parliamentary Group (APPG) on the loan charge which highlights their concerns about the effects of HMRC pressure on constituents’ mental health and family lives.

‘Brain turned to mush’

The man who took his life, a consultant engineer in his late sixties, told his family he had been getting just two to three hours sleep per night.

“He wrote about it and said his brain turned to mush,” his daughter, Gayle, told the BBC Today programme.

“I think the loan charge consumed him. That was all he could think about.”

Gayle, who asked the BBC not to publish her family name, added: “He said he’d spent hours and hours and hours thinking how he could get through it and resolve it. And he just couldn’t come up with anything. I just don’t think he could see any light at the end of the tunnel at all.

“As it got to probably the last 12 months of his life he would mention it more often and he became a bit more distant and he wouldn’t commit to doing things with the family or many things because he would say; ‘Not until this tax thing has been sorted out; I can’t even think about that. We need to wait.'”

As he was affected by mental illness, Gayle’s father became convinced he was a criminal and would go to prison. In November last year, he wrote a 13-page letter to his family explaining that he couldn’t resolve his tax affairs and blaming himself.

Asked how she could be sure the loan charge played a role in his death, Gayle, a 35-year-old mother of four, said he had been preoccupied for months with trying to resolve the loan charge and made it clear in his letter to the family.

In the letter, which the BBC has seen, Gayle’s father says it is all his own fault and in the next sentence refers to his involvement in the settlement scheme for the loan charge ahead of legislation due this year.

Gayle said she had decided to speak out because of growing concern that further suicides might take place.

Treasury minister Jesse Norman has said that schemes are highly contrived and has so far resisted calls to suspend the loan charge.

The courts repeatedly rejected HMRC’s case that the loans were taxable. However, in 2017 a Supreme Court decision ruled on another point: that when the pay was diverted, it was a taxable event. That meant the schemes were no longer effective for tax purposes.

The Treasury has said it is too late to go after the promoters of the schemes, many of whom made large profits, or the accountants who recommended them.

At the 2016 Budget, then chancellor George Osborne brought in the loan charge to recoup tax going back 20 years from individuals who had benefited from the schemes.

Last year, thousands of freelancers and agency workers received letters from HMRC telling them they’d been involved in tax avoidance schemes it viewed as “disguised remuneration”, encouraging them to get in touch and settle their affairs voluntarily.

For many freelancers and agency workers it was the first time they had been told their pay arrangements might be problematic.

They were required to add up all their loans from trusts going back to 1999, declare them and make an offer to HMRC to settle the underpaid tax.

If they failed to do so, then in April this year the loan charge would kick in and tax would be payable by the end of January 2020, at the individual’s highest tax rate which can be up to 45%.

The typical sum owing, according to the Loan Charge Action Group – is about £120,000 each.

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Many of the contractors were IT professionals. Others, far from being wealthy “tax dodgers”, were agency nurses, NHS workers, even social workers.

Many of them were assured by their accountants when they entered new pay arrangements in the late 1990s or early 2000s that they were perfectly legal.

Thousands got paid net of tax and fees via payment services companies that they were directed to by the agencies that employed them. Typically, about 18% of their pay would be deducted.

Support available

The MPs say the attraction of the schemes wasn’t lower tax as much as a wish to avoid the hassle and paperwork of running their own limited company.

Others had no choice because their employers, including many public sector employers, insisted on trust-loan arrangements as a condition of employment.

HMRC said: “We know that facing a large tax bill can be stressful, and our teams will make sure that anyone who needs extra help receives support from a named contact who is trained to support people who are anxious or stressed.”

In the summer of 2018 the Loan Charge Action Group (LCAG) wrote to HMRC asking for a dedicated helpline, warning there would be suicides. When HMRC didn’t respond they set up their own helpline – which is staffed by trained counsellors and takes distressed calls every day.

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During the Conservative leadership contest, at hustings in Carlisle on 29 June, Boris Johnson said the policy needed an independent review.

“The real culprits in this matter if I may say so are not so much the individuals themselves who have decided to use the loan charge as a way of minimising their tax exposure. It’s the people who advised them that that was a sensible thing to do.”

“It seems superficially unjust to me that they should then be retrospectively pursued for what they were told was an entirely legal option. It needs a proper independent review.”

However, since Boris Johnson entered 10 Downing Street, there has been no change as the August deadline draws near.

‘Losing hope’

Gayle told the Today programme: “People are losing hope. This is real life and those in a position to halt this are silent. They’ve gone very quiet.

“The Prime Minister would be the obvious first person who is in a position to instruct the Treasury. There is a lot of hope that people would come in and make some changes, make an announcement. But there is silence. Nothing – just nothing.”

Asked why this should be on the top of the Prime Minister’s priority list, she answered:

“Because he can save lives. By halting it he can save lives. I can’t bring my dad back, no-one can and I would hate to think how he would be coping right now if he was still waiting, still dealing with this. I can’t even imagine.”

If you’d like help with any of the issues raised in the interview with Gayle, you can find it via the BBC Action Line here.

For support and more information on emotional distress,click here.