Loan charge - do these people want sympathy?

Semple

Semple

Semple

Soldato
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Came across this article on BBC news this evening:
https://www.bbc.co.uk/news/business-54604132

John is not his real name but he didn't want to be identified. After all, he has spent more than two years keeping his financial worries hidden from his wife.

He is one of an estimated 50,000 people who have been hit by a controversial tax policy known as the loan charge. As a result, he now owes £180,000 to HMRC.

The pressure of the last two years has been enormous. He told BBC Radio 4's File on 4: "It's really tough. I can't tell you the last time I slept and it's difficult. It's just relentless, with no real end in sight."

This substantial tax bill stems from how John was paid when he worked as a contractor for a number of years.

He used a company to manage his admin and also his tax affairs. It promised him he could take home 85% of his earnings and still be compliant with UK tax law.

A number of different companies offered these tax schemes. Workers would be paid a small amount of salary as a standard, taxable income. Then they would receive a larger payment as a loan via an offshore trust.

Only a very small amount of tax was paid on these loans and there was no expectation they would be repaid. The government has closed this loophole and used the loan charge to demand large sums in backdated taxes from the freelancers and contractors who used them.

The policy effectively adds up third-party loans paid since 2010 and taxes them as income. This has meant substantial bills for many workers.
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The story reads as though the guy wants a bit of sympathy. I'd guess that he was a fairly intelligent bloke being a contractor, and would guess that he would have sat in the higher tax bracket, or even the additional tax bracket.

So I do wonder what happened to his intelligence when he thought he'd get away with tax avoidance and paying just 15% tax. Whilst the rest of us have to pay 20%/40%/45% tax on our earnings.

I agree with his point that the government should also go after these companies that promote these tax avoidance schemes, but I do hope he's held to the debt and made to pay it off.

I find it rather laughable that he claims he's not a tax dodger.
 
Semple said:
Came across this article on BBC news this evening:
https://www.bbc.co.uk/news/business-54604132



The story reads as though the guy wants a bit of sympathy. I'd guess that he was a fairly intelligent bloke being a contractor, and would guess that he would have sat in the higher tax bracket, or even the additional tax bracket.

So I do wonder what happened to his intelligence when he thought he'd get away with tax avoidance and paying just 15% tax. Whilst the rest of us have to pay 20%/40%/45% tax on our earnings.

I agree with his point that the government should also go after these companies that promote these tax avoidance schemes, but I do hope he's held to the debt and made to pay it off.

I find it rather laughable that he claims he's not a tax dodger.
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Contractor automatically equals intelligent?

A painter and decorator can be a contractor. A Gardener can be a contractor. (not saying any of those trades require you to be stupid just highlighting that the OP thinks Contractor equals High intellect)

However many people have been sucked into schemes like these often via their accountants.


Also, Tax avoidance is perfectly legal
Tax evasion isnt

Do you have an ISA?


Edit: Not read the article, Just responding to OP
 
I literally read this 2 mins ago, was thinking the exact same thing.

No sympathy whatsoever, he knew exactly what he was doing regardless if it wasn't spelled out to him. Good he got caught and has to pay it back.
 
I find it a difficult one. It isn’t tax avoidance or rather wasn’t.

the difficulty is in recent years the law has changed which has meant the HMRC can go back a much larger number of years and retrospectively decide that while it was legal back then, it isn’t now and apply the new law, imposing fines on top of tax they deem owed and those fines dwarf tax owed.

I’ve had the phone calls from the people pushing these and they push hard. They are skilled sales people and they tricked many people into thinking this was fine.

personally, I couldn’t see how paying less than the minimum tax bracket could be, and as such told the sales person to jog on.

So I am torn personally, yes the person is a muppet and shouldn’t have fallen for the sales pitch, but also to have suddenly 8+ years of tax and then massive fines. Well as you highlight 180k that’s not a small number to come up with.
 
mattyg said:
Contractor automatically equals intelligent?

A painter and decorator can be a contractor. A Gardener can be a contractor. (not saying any of those trades require you to be stupid just highlighting that the OP thinks Contractor equals High intellect)

However many people have been sucked into schemes like these often via their accountants.


Also, Tax avoidance is perfectly legal
Tax evasion isnt

Do you have an ISA?


Edit: Not read the article, Just responding to OP
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I do get your point about trades also being referred to as a contractor. But having read the article, I think it's a safe assumption that this guy was contracting in a professional role.

I never claimed tax avoidance was illegal, just that he surely would have known that something wasn't quite right about the amount of tax that was being paid.

An ISA is completely different, this is a fully documented and supported route of earning interest tax free. In most cases the money going into the ISA has already been subject to tax.
 
Yeah, I think people are missing the point here - this wasn't tax avoidance. It was never legal to not declare your income to avoid paying tax on it :o
 
The only reason he was taking out loans via an offshore trust was because he believed it to be a way of reducing the amount of tax he should be paying. He made the decision to do that and although it may have technically been legal at the time, it was clearly dubious and not exactly morally defensible (tax does fund stuff like schools, hospitals etc.).

As he owes HMRC £180,000 in tax now then he must have been paid a significant amount of money over the period in question. If he's pleading poverty because he blew all the money that he trousered by avoiding paying tax in the first place, I'm struggling to see why he should expect any sympathy. The basic advice that applies for any scam is quoted in the article from the director of the counter avoidance directorate at HMRC:

"The main message is, if it sounds too good to be true, it almost certainly is" Ms Aiston says.

"Somebody telling you that part of your income can come as a loan and that you keep it forever but you won't have to pay any tax on it. That is too good to be true."
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Would have had symphony had 'John' admitted his greed had played a big part in getting him to this point. It does seem a bit heavy handed to back date this to 2010 though.

This is typically of governments/Tax collectors as individuals bloke John are an easy target and a way for authorities to show how they are cracking down on tax avoidance rather then going after multinational corporations.

Mr Badger said:
As he owes HMRC £180,000 in tax now then he must have been paid a significant amount of money over the period in question. If he's pleading poverty because he blew all the money that he trousered by avoiding paying tax in the first place, I'm struggling to see why he should expect any sympathy. :
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I was thinking the same thing he must have been earning a lot money to warrant such a tax bill. Can't help but think if he cut back his lifestyle to a minimum he could get that paid off in a few years.
 
Freddie1980 said:
Would have had symphony had 'John' admitted his greed had played a big part in getting him to this point. It does seem a bit heavy handed to back date this to 2010 though.

This is typically of governments/Tax collectors as individuals bloke John are an easy target and a way for authorities to show how they are cracking down on tax avoidance rather then going after multinational corporations.
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They were going back 20 years originally due to it being tax evasion. But there was an outcry by folk hit by it last year and it was deemed too harsh, so HMRC took a softer stance and reduced it to seven years.

I would imagine anyone that refuses to pay up for the seven years might get hit by the full 20 years with a full HMRC investigation if they were doing this for longer than 7.
 
Likely has a million in property i bet. But we can only speculate at how long he did this for, despite it being a lot of money. Personally don't really care either way when you just take a look at the corporations and pension thieves who get away with a considerably bigger amount.

Just another story that gets thrown onto the, "yeahhhh not surprised" pile.
 
Freddie1980 said:
I was thinking the same thing he must have been earning a lot money to warrant such a tax bill. Can't help but think if he cut back his lifestyle to a minimum he could get that paid off in a few years.
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But he may not be earning so much these days, plus he now be paying TAX on his income :D
 
The saying “If it sounds to good to be true, it probably is” has never been so relevant.

He was greedy, now he’s paying the price and boo hooing all over the shop.

Build a bridge and cry me a river.
 
I think there are two groups of people involved here - those who knew exactly what the score was and what they were getting into but also a group genuinely ignorant to the arrangements they were being signed into (supposedly a small minority never even knew they were being paid like this).

In some ways it seems slightly harsh that the organisations devising and promoting these schemes aren't going to be on the hook for a penny, no matter how much they may have deceived or misled the end users. On the other hand it's always been fairly clear that the tax payer is ultimately responsible for ensuring they pay their tax.

There are more nuances to this as well - some people report having submitted a 'disclosure of tax avoidance scheme', evidently wrongly thinking this straightened things out, which HMRC have sat on for years and years before deciding to take action. I can see why someone who notified HMRC they were doing it and heard nothing for years would be a bit irritated to be landed with a lump sum bill for back taxes.
 
The general public suffer as well. We have had to put up with the three remaining members of Westlife back on our screens in order to pay back taxes they evaded.
 
A friend did something similar when contracting, she told us about it and the wife and I instantly said its dodgy and dont do it, did it anyway. Couple of years later owes the tax man 40 grand, has to pay it over over a period of time.

When its the difference between taking home 7 grand a month and 9 grand a month its damn tempting to people.
 
Kenai said:
I think there are two groups of people involved here - those who knew exactly what the score was and what they were getting into but also a group genuinely ignorant to the arrangements they were being signed into (supposedly a small minority never even knew they were being paid like this).

In some ways it seems slightly harsh that the organisations devising and promoting these schemes aren't going to be on the hook for a penny, no matter how much they may have deceived or misled the end users. On the other hand it's always been fairly clear that the tax payer is ultimately responsible for ensuring they pay their tax.

There are more nuances to this as well - some people report having submitted a 'disclosure of tax avoidance scheme', evidently wrongly thinking this straightened things out, which HMRC have sat on for years and years before deciding to take action. I can see why someone who notified HMRC they were doing it and heard nothing for years would be a bit irritated to be landed with a lump sum bill for back taxes.
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Nothing stopping the individuals suing said company owners is there?
 
I want these tax loop holes to be closed, and going forward I wouldn't be giving anyone any sympathy.
However, I do think retrospectively "punishing" these people isn't acceptable.

That's assuming at it was never illegal and fell under tax avoidance, not evasion (Not that tax avoidance should really exist)
 
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