A U.K. oversight body has recommended that HM Revenue & Customs investigate the suicide of a taxpayer who faced a loan charge linked to tax avoidance schemes, prompting renewed calls for the charge's suspension.
The Independent Office for Police Conduct (IOPC) said in a statement that it had evaluated a referral about the death of an individual facing an HMRC investigation and determined that the case required further investigation. The statement appeared in a May 3 Financial Times article; the IOPC did not respond to Tax Notes’ request for comment by press time.
The IOPC’s conclusions come shortly after HMRC heard about the suicide of a taxpayer who had used a disguised remuneration tax avoidance scheme and faced a loan charge as a result. HMRC then referred the incident to the IOPC, in line with standard procedure.
The loan charge was introduced in Finance (No. 2) Act 2017 to curb the use of disguised remuneration schemes, which employers used to pay individuals their income through loans, usually paid out via offshore trusts, and to sidestep income tax and National Insurance contributions. Such loans were structured in a way that they would never have to be repaid.
The loan charge applies to all loans dating back to April 6, 1999, if they remained outstanding by April 5, 2019. Since its introduction, the loan charge has been harshly criticized, as thousands of contractors now face massive liabilities, as well as potential bankruptcy and home property losses. In some cases, individuals are suffering from depression, have family problems, or either have died by suicide or are contemplating it, according to members of Parliament and campaigners.
HM Treasury reviewed the loan charge, publishing a March 26 report in its defense. That prompted the Loan Charge All-Party Parliamentary Group (APPG), an informal cross-party group that has no official status within Parliament, to publish its own report on April 3, calling for a six-month delay in the loan charge’s implementation — a call that HM Treasury flatly rejected.
The IOPC also said HMRC is the right body to determine if its contact with the individual in question was appropriate, given the individual’s vulnerable circumstances. There is little evidence that suggests HMRC was aware of any threat to the individual’s life, so an IOPC investigation into the matter is not required, the IOPC said.
HMRC is treating the case seriously, the IOPC added, noting that it would review HMRC’s final investigation report and recommending that HMRC re-refer the case if it uncovers evidence of related conduct issues among its staff.
“As the IOPC says, we are taking this matter very seriously and are carefully reviewing the case,” an HMRC spokesman told Tax Notes. “We are committed to treating all our customers with respect and consideration, and that especially applies to vulnerable people.”
However, Ruth Cadbury, vice chair of the Loan Charge APPG, pushed for an independent investigation into the loan charge, saying it is troubling that Chancellor of the Exchequer Philip Hammond denied that there was a link between the loan charge and suicides during his April 24 testimony in front of the House of Commons Treasury Committee.
“It is right that there is an investigation into the suicide reported to the IOPC,” Cadbury said in an APPG statement emailed to Tax Notes May 3. “However, this should be conducted by someone outside . . . HMRC and government, or we fear it could be another whitewash, like the recent Treasury report into the loan charge.”
Now that the IOPC has recommended an investigation into the suicide, the government should immediately suspend the loan charge, Ross Thomson, another APPG vice chair, added.
In Hot Water
Separately, Hammond’s Treasury Committee testimony came under fire after he expressed concerns about the APPG’s secretariat, the Loan Charge Action Group, a campaign group created to raise awareness of the loan charge’s effects on individuals. Hammond had said the secretariat includes people who have admitted that they were involved in promoting disguised remuneration tax avoidance schemes.
However, Ed Davey, chair of the APPG, immediately refuted the allegation in an April 26 letter to Treasury Committee Chair Nicky Morgan. “The chancellor’s statement is simply false and needs correcting as a matter of urgency,” Davey wrote. “I would be grateful if you could seek a correction from the chancellor or for evidence to back up his claim regarding this very worrying and misleading statement.”
A spokesman for the APPG confirmed that Morgan has written to Hammond to follow up. An HM Treasury spokesman declined to add anything further to Hammond’s comments.