6 December 2018: In 2016, HMRC were given greater powers to tackle tax avoidance and evasion. A recent report issued by the House of Lords claims that HMRC are undermining the rule of law and justice as they are failing to reach a careful balance between clamping down on tax avoidance and aggressive tax evasion and treating taxpayers fairly.
Those that are being treated unfairly are unrepresented and lower income taxpayers, who are being issued loan charges which were brought into combat "disguised" pay schemes. Under these schemes, workers were paid by way of a loan, an arrangement that was intended to avoid tax and National Insurance contributions for the employee. HMRC are issuing loan charges and from April 2019 they will have the power to demand payment of the issued charges.
For example, a social worker who was made redundant by her local council and was encouraged to join an agency and use a loan scheme. This meant she could re-engaged as a contractor for five years, at the end of the five years, the council told her it would re-employ her as an employee, which it did.
The social worker now faces a loan charge equal to probably a year and a half's salary. Charges she was unaware of and had no representation to explain the legal and tax implications. As a lower income individual she has no means of paying the loan charges. Some would argue that she has fallen victim to such a scheme and it was encouraged by her employer.
The House of Lords are now encouraging HMRC to revisit the loan charges issued and review the individual’s ability to repay, in addition to providing a helpline for those affected.
Please contact one of our professionals if you need advice on this matter or any other. There are options and BRI can help give you the right advice, first time, every time.