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Loan charge investigation: Zahawi must “act directly,” says APPG letter; suicide notes still considered link to HMRC misconduct

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SPECIAL REPORT

A ninth suicide has been confirmed in relation to disguised remuneration (DR) schemes, some of which are now subject to the retrospective Loan Charge. A letter from the Financial Secretary to the Treasury has confirmed the news at a time when the Chancellor of the Exchequer is dealing with questions over his own tax affairs related to a suggested tax avoidance scheme, but of a very different kind.

MPs Sammy Wilson, Greg Smith and Baroness Kramer who head up the All-Party Parliamentary Loan Charge & Taxpayer Fairness Group have written a personalised letter to Nadhim Zahawi, the Chancellor of the Exchequer, requesting he take immediate action to ease HMRC’s unrealistic payment demand policy.

This is not the first time that the APPG has informed successive Chancellors and Treasury Ministers of the serious suicide risk from the Loan Charge and the overall current approach of the Government and HMRC to people who were mis-sold these schemes by professional advisers, including chartered accountants and tax advisers.

Baroness Kramer, who was one of the APPG members to pen the letter to the Chancellor of the Exchequer, has consistently fought the corner for freelancers

“This is tragic news and utterly devasting for the family concerned. However, it was alas entirely predictable and was also avoidable,” said the MPs in their letter to Zahawi.

“We have recently undertaken a call for evidence and are deeply concerned at how many respondents – 15% of all who responded – have reported suicidal thoughts or intent,” said the letter, dated 29 July 2022.

The letter reminded the Chancellor and his team that the APPG has made several references to the known suicide risk but so far “all of those concerns have fallen on deaf ears.”

None of the recommendations made in the Treasury-commissioned Morse Review has changed the situation for tens of thousands of those affected, the letter explained, so to refer to that in this context is “meaningless”.

Impact Assessment “flawed and negligent”

The impact assessment done by the Treasury in 2017 has already been shown to be deeply flawed, according to the APPG group. It stated that the package of measures including the Loan Charge “is not expected to have a material impact on family formation, stability or breakdown,” which following evidence of suicide letters now proves is not the case.

The fact that there have now been nine suicides of people facing HMRC action shows that this impact assessment was not only flawed but negligent.

What is probably most disappointing is that the APPG members have made it known that HMRC staff “have known all along that some people, particularly those on lower incomes, simply cannot pay and that bankruptcies would be inevitable.

There needs to be an investigation therefore into how Parliament was misled by an impact assessment that ignored the likely consequences of this very controversial policy and overall approach.

Rt Hon Lucy Frazer QC MP, Financial Secretary to the Treasury

The letter from Lucy Frazer states:

“HMRC has referred nine cases to the IOPC where a taxpayer has sadly taken their life and had used a DR scheme. Eight investigations have concluded there was no evidence of misconduct by any HMRC officer; one investigation is ongoing.

The Government takes this matter seriously, which is why HMRC is taking forward organisational learning from the eight concluded investigations to continue to learn and make improvements to the support that HMRC provides to taxpayers who need extra help and empathetically manage these sensitive cases.”

HMRC officers investigated for misconduct

However, the letter says this misses the point and “deliberately so” as well as ignoring the fact, as revealed by FOI responses, that in at least some of these cases, HMRC actually themselves were asked by the IOPC to investigate rather than the IOPC investigating themselves.

The Independent Office of Police Conduct’s remit is to look at whether any misconduct on the part of (in this case) HMRC officers was a factor in the suicide.

They do not look at whether or not a government policy has been a factor in a suicide.

From the evidence we have been sent, including one of the suicide notes of one of the nine people, the Loan Charge was clearly a factor, indeed according to that family, was the reason their loved one took his own life.

Loan charge mentioned in suicide notes

Suicide notes from Loan Charge victims were noted as far back as the APPG’s Loan Charge Inquiry published (page 65) in April 2019.

The Loan Charge itself was specifically mentioned in the suicide note: This is testimony from the family:

The letter spoke of the love he had for his family but what he mostly referred to was himself. He wrote about being at the end of his tether with the Loan Charge matter…It was clearly written by a man who had been broken by the Loan Charge process. I believe that the entire Loan Charge situation, the build up to date, the false hopes of an end, for an answer, just consumed him.

The family were in no doubt – as with two other families of suicides victims that have been in contact with the APPG – that the threat of the Loan Charge was the main reason their loved one took their own life.

“There can be no doubt that the Loan Charge, as a policy, has led to suicides and that more suicides are a real possibility. We, therefore, urge you, as the Chancellor of the Exchequer, to show some leadership on this issue, as well as some much-needed compassion and common sense,” said the APPG letter to the Chancellor of the Exchequer.

Next steps

The APPG members said that there also needs to be an acceptance on the part of the Treasury that there must be a resolution, a genuinely affordable settlement opportunity, such as the one proposed by the group of tax professionals earlier this year.

Such a resolution is clearly not only in the interest of those impacted and their families, but also the Treasury and HMRC, who know that this mess of their making will only get worse as HMRC enforce this cruel and reckless policy.

The APPG suggests that Zahawi engages “directly” and not to pass on our letter to the current Financial Secretary to the Treasury who members say “has done nothing to address these concerns and has not even responded to the group of tax professionals who proposed a resolution to end this whole Scandal.”

The Loan Charge is not only a disastrous policy, that has now led to several people taking their own lives, it is also a failed policy on every level. It was supposed to stamp out the promotion, mis-selling and use of ‘disguised renumeration’ schemes, yet the reality is that the usage of such schemes has actually increased.

The letter mentioned in its final words that the Loan Charge is a “wholly unrealistic” as well as “punitive policy” that will not bring in anything like the sums HMRC have predicted.

As HMRC know, people simply cannot pay what is being demanded of them, so it is actually futile to pursue people for such punitive, unaffordable sums. We hope that at last you will agree that this whole scandal must be addressed so that further tragedies are avoided.

Zahawi personal tax affairs under the microscope

Not all disguised tax schemes are the same and as such should not be painted with the same brush by HMRC or the media.

For example, several news reports have emerged this summer about Zahawi’s personal tax affairs and as a result, the Chancellor has been under pressure to explain the source of £26m of unsecured loans reported by his family property firm in 2018. He has since explained the transfer of shares to an offshore account connected with a Zahawi family trust, which the media have reported on.

According to an FT report in July, HMRC is “allegedly investigating Zahawi” after being passed information by the National Crime Agency, which looked into the MP’s finances in 2020 but did not take any action, according to a report in the Independent newspaper.

Dan Neidle, Founder, Tax Policy Associates Ltd.

Following these news reports, Dan Neidle, Founder, Tax Policy Associates Ltd. has since published on Twitter what he says are letters from The Chancellor of the Exchequer, Nadhim Zahawi, drafted by “expensive lawyers”, to people investigating his tax affairs, including Neidle in relation to his Blog.

Neidel said in a Twitter post: “The letters are designed to intimidate, and say they are confidential and can’t be published. One was sent to me. I am publishing it.”

To read Neidle’s report, go here.

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