HMRC’s suicide tax: the ‘disguised remuneration loan charge’

On Thursday (April 4) last week, MPs gathered at the House of Commons to debate a motion relating to an arguably retrospective tax dubbed the ‘disguised remuneration loan charge’. A good number of MPs from across the UK turned up to contribute to the discussion which, after a couple of hours of moving testimonies, came to a rather abrupt halt when a burst water pipe caused a leak in the public gallery; though, thankfully not before some poignant points were raised by many of those in attendance.

Protesters outside the Houses of Parliament #STOPtheLoanCharge

“A cynical attempt by HM Revenue & Customs to cover up past failures”

Prior to rain closing play, MPs and representatives of varying political persuasions were, for an afternoon at least, united by a common goal: to delay, pending an independent review, a tax that those investigating have branded “a cynical attempt by HM Revenue & Customs to cover up past failures”. Indeed, the Revenue has, since 2016, been targeting around 50,000 UK taxpayers with increasingly threatening letters with hopes of clawing back an estimated £3.2 billion in unpaid taxes (going back as far as twenty years, in some cases), purportedly owed by those who made use of so-called “disguised remuneration tax avoidance schemes”. Just to be clear, because in cases such as these semantics becomes very much of the essence, tax avoidance is a construct invented by the tax authorities to describe real-world behaviours which do not conform to their narrow frame of reference. The offending parties, so to speak, were given until midnight on Friday, April 5 to settle their tax affairs to avoid facing further punitive loan charges. But before we get into the ins and outs, let’s examine what the loan charge is, exactly, and who is being affected by it…

1999 to 2019

In the interest of accuracy, we should start at the beginning which, in this case, means rolling the clocks back to 1999, the year to which many of these tax bills first relate. Through this new loan charge, HMRC is seeking to recover historic unpaid national insurance contributions and income tax which it claims workers avoided paying using the aforementioned “disguised remuneration tax avoidance schemes”. Under these schemes, workers from a wide range of industries and sectors were paid by way of a loan rather than a traditional salary.

Big Brother is watching you… HMRC’s infamous campaign of terror

Although these schemes took many forms, it’s our understanding that a common scenario was that an employer would pay money into what’s called an “umbrella company” which would, in turn, give loans to employees in lieu of pay and, as a result, the employer would avoid (not evade, mind) paying employer national insurance. Similarly, the worker would avoid paying employee national insurance, along with income tax, providing they paid some interest (taken out of the loan which would be paid to them monthly, just like an ordinary salary) which would presumably amount to less than the tax. So, in other words, the umbrella company acted as a middleman between the employer and the employee and, instead of a salary, the employee was granted a loan, received by them in regular instalments, much like a pay cheque.

“Mostly IT and NHS contractors”

HMRC is now claiming that these loans were in fact “disguised” pay (or “remuneration”) and were never intended to be paid back. However – and this is important – many of the workers affected said they were charged substantial administrative fees and, as such, did not benefit financially from the schemes. Moreover, some even claim to have had no knowledge of their enrolment in said schemes and were under the false impression that they were being compensated for their services in the usual manner. Many of those who were aware that they were enrolled in a scheme – “mostly IT and NHS contractors”, according to the Guardian – say they were only acting on the advice of professionals who assured them the schemes were perfectly legally.

“Notwithstanding the trouble with retrospective law in general, 18 years is a very long time to disapprove of something but not say that or act to fix it.”

Additionally, each tax year, the arrangements were laid out, clear as day, in tax returns, and each year HMRC, though not explicitly validating, gave, at the very least, implicit approval by assigning the schemes respective registration numbers and closing out the tax years in question. The Revenue claims it never approved schemes of this nature and always said they “didn’t work”. Although, as Labour MP Nic Dakin pointed out during Thursday’s debate: “Notwithstanding the trouble with retrospective law in general, 18 years is a very long time to disapprove of something but not say that or act to fix it.” What’s more is the fact that, as far as we can tell, little effort has been made by HMRC to go after the employers who, along with umbrella companies, orchestrated and benefited from these schemes.

Meredith McCammond from the Low Incomes Tax Reform Group explained: “Where the employer is offshore or no longer exists, the individual taxpayer will be responsible for reporting the outstanding loans and paying the tax to HMRC via their 2018-2019 tax return. Where the employer is onshore, and is still in existence but is unable to pay, HMRC will issue it with a formal bill for the unpaid tax. Once this bill has been unpaid for 30 days, HMRC will try and collect the tax from the individual directly.” It’s also worth noting that, for some of the workers, their very employment depended on their enrolment in the schemes.

Death and taxes

Now, through a tone-deaf campaign of fear and intimidation, the Revenue is essentially branding law-abiding citizens tax cheats – in some cases, literally driving them to suicide (more on this later) – in a desperate bid to right past wrongs. In a way, it’s a relief that this story is finally getting the right kind of press coverage, though how sad that the imposed financial burden has, at time of publication, cost six (that we know of) people their lives.

Imagine opening a letter from HMRC which demanded, in no uncertain terms, thousands, tens of thousands, or, as was the case for some, hundreds of thousands of pounds in back taxes. And these are not, for the most part, wealthy “financial services” professionals, as the Revenue would have you believe (though even if they were, it wouldn’t change our argument), who are able to pay back the loans or otherwise settle with the Revenue.

They are ordinary people with ordinary salaries and this measure means losing cars, houses, and, for some, wives/husbands over the stress and financial strain of attempting to put these bills to bed. Some of those affected aren’t even working anymore and, having retired from fast-moving industries such as IT, would, by their own admission, have no hope of re-entering the workforce in their advanced years to pay off these frankly ludicrous bills. And yet, the campaign continues with everything reaching something of a head last Friday (April 5), which was the deadline for settlements.

It will be interesting to see how this plays out because never, in recent memory at least, has a tax caused such widespread outrage and, for the victims, such fear, misery and hopelessness.

Death and taxes, indeed…

Real-world consequences

  • “We haven’t got the money. Our lives are on hold. It’s a permanent cloud. It’s the first thing we think of when we wake up and the last thing we think about before we go to sleep.” –Financial Times
  • “I’m 54, have assets of £100,000 and earn less than £50,000 a year. I’ve already lost my partner due to the stress of this and have had suicidal thoughts. This will bankrupt me. All I did was follow advice and do what was the norm at the time. This all happened 10 to 20 years ago, and one of the clients at that time was HMRC.” –Guardian
  • “It [the council] had a farewell party on the Friday, and on the Monday it said ‘if you join this agency and use the scheme, we will re-engage you as a contractor.’ She was re-engaged as a contractor for five years but at the end of the five years, the council told her it would re-employ her as an employee, which it did. She was unaware of what was going on. She now faces a loan charge equal to probably a year and a half’s salary. She has no means of paying it.” –BBC

  • “I too have been innocently caught up in this turmoil, which totally goes against the rule of law. I was forced down this route in order to get paid and put food on the table for my young family, but was comfortable in the knowledge that these declared loans were totally legal, HMRC compliant and QC approved. What confidence has any citizen got in the taxation system if HMRC, can change the law and then introduce retrospection?” –Yorkshire Post
  • “They asked me to bring my passport, looked over my all documents, checked my credit history so I was being properly financially vetted. I asked if there were any issues with the structure and they said no it was all legal and above board. It wasn’t until the wheels started coming off in 2015, when I fully came out of the structure, that my adviser turned around and said to me: ‘You know we said there was no guarantee’. I thought: ‘You absolute liar, you said nothing of the sort’.”–Financial Times

If you’ve been affected by the disguised remuneration loan charge and would like some support or advice, please don’t hesitate to get in touch.

1 thought on “HMRC’s suicide tax: the ‘disguised remuneration loan charge’”

  1. I used an umbrella company that assured me in writing that they were HMRC compliant- Tailored solutions. Now I face a large tax and NI bill that I cant afford to pay back.i am stressed to the hilt.

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ben crampin


Ben’s been here pretty much since the get-go and, as such, has been instrumental in growing the business into what it is today.
He’s passionate about, in his words, ‘helping people and businesses that are just constantly being taken advantage of’ by providing affordable advice and support with an eye to ‘levelling the playing field’.
Ben looks forward to the day when automation will, once and for all, fumigate the fear and confusion caused by oppressive bureaucracy and strongly believes that ‘technology holds the solutions to the problems we’re trying to solve’.
Furthermore, he can see that technology will, in time, provide the scalability required to help a theoretically limitless number of SMEs survive and thrive against the odds.
Ben doesn’t think much of government agencies and he doesn’t suffer fools; two points that aren’t always mutually exclusive.